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Tax Treaties

Some countries have agreements with the United States that exempt tax residents of the country from some or all taxes in the United States. These agreements are known as tax treaties. Not all countries have a tax treaty with the United States. Tax treaties apply to various types of income, such as wages earned from employment, gift aid received by students enrolled in an academic program, and copyright royalties.

Each country's tax treaty establishes the following:
  1. How an individual can establish tax residency to claim exemption from withholding,
  2. How long an individual can claim exemption from withholding,
  3. What types of income an individual can claim exemption from withholding,
  4. How much income an individual can exempt from withholding, and
  5. If an individual can continue to claim exemption from withholding after becoming a U.S. resident alien.
There are no standard eligibility rules that apply to all tax treaties; residents of one country cannot compare the eligibility rules of their tax treaty to the eligibility rules of a tax treaty for another country.

Although WVU and WVU Research Corporation generally attempt to offer tax treaty benefits to our students and employees, we are not required to do so. The decision to offer tax treaty benefits when income is received, and for how long tax treaty benefits will be offered, rests solely with WVU Tax Services. An individual who does not receive tax treaty benefits through WVU or WVU Research Corporation may claim any benefits for which they believe they are eligible when filing their income tax return. A list of some, but not all, situations in which an employee will not be offered tax treaty benefits can be found below.

Income that is exempted from tax withholding due to a tax treaty will be reported on Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding. This applies regardless of the type or amount of income exempted and regardless of the individual's tax status (i.e., nonresident alien or resident alien). See Form 1042-S Information for additional details on Form 1042-S.

In order to verify that an individual continues to be eligible for tax treaty benefits, Tax Services will request updated tax treaty forms at the start of each calendar year. This applies for tax treaty benefits for both employment wages and taxable gift aid. Failure to submit the required forms when requested by Tax Services may result in tax withholding from the income an individual receives. Taxes withheld due to an individual failing to respond to Tax Services' request cannot be refunded by WVU.

Income Covered by Tax Treaties

Each tax treaty covers specific types of income. For students and employees at WVU and WVU Research Corporation, the primary types of income covered by a tax treaty will be wages earned from employment and gift aid (e.g., scholarships and fellowships) received by students. Not all tax treaties cover all types of income. Some tax treaties will only cover gift aid. Other tax treaties will only cover employment wages. If an individual receives income from multiple sources, they must complete a tax treaty with each payor.

A tax treaty that covers wages will either exempt a specific amount of wages received in the calendar year (for example, the first $5,000 in wages received after the tax treaty is signed) or all wages received in a specific period of time (for example, all wages earned in the first three years from the date the employee enters the United States).

A tax treaty that covers gift aid received by a student will reduce the tax rate on taxable gift aid to 0%. See Taxable Gift Aid for additional information on what income is considered gift aid and when this gift aid is considered taxable.

Determining Tax Treaty Eligibility

New employees of WVU and WVU Research Corporation will have their tax treaty eligibility determined at the time they complete their new hire payroll processing. If Tax Services determines that a new employee is eligible to claim tax treaty benefits, the employee will be provided the required documents to complete so that tax treaty benefits are applied beginning with their first payroll payments.

Existing employees will be eligible to request tax treaty benefits for the next calendar year by completing the Foreign National Information Annual Update. This form will be sent to all employees before the end of each calendar year. An employee who requests tax treaty benefits on this form will be reviewed by Tax Services for tax treaty eligibility. Employees who are tax treaty eligible will then be sent the required documents to complete and return.

A student that receives taxable gift aid will be contacted by Tax Services to determine their eligibility for tax treaty benefits. Tax treaty benefits cannot be offered to a student with taxable gift aid unless the student has provided Tax Services with either a U.S. Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN). Students will have the opportunity to provide this number to Tax Services each time they are determined to have received taxable gift aid, prior to Tax Services posting tax charges to the student's account.

A vendor receiving income for services provided as an independent contractor will be assessed for tax treaty benefits when registering with Tax Services for entry into the WVU/WVU Research Corporation vendor payment system. If Tax Services determines that a vendor is eligible to claim tax treaty benefits, the vendor will be provided the required documents to complete so that tax treaty benefits are applied to payments issued by WVU.

A vendor receiving royalty payments will be required to provide a U.S. taxpayer identification number (either Social Security number or ITIN) to receive tax treaty benefits. Vendors will have the opportunity to provide their taxpayer identification number to Tax Services at the time they are registering for entry into the WVU/WVU Research Corporation vendor payment system. A vendor that receives a taxpayer identification number after their initial entry into the system can contact Tax Services for assistance updating their vendor record and to determine if they are eligible for tax treaty benefits.

Forms to Complete for Claiming Tax Treaty Benefits

The forms that must be completed to claim tax treaty benefits depend on the type of income an individual is receiving and the individual's tax status.
  • A nonresident alien receiving treaty benefits on employment income will complete Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual.
  • A nonresident alien receiving treaty benefits on royalties or taxable gift aid will complete Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).
  • A resident alien receiving treaty benefits on employment income will complete Form W-9, Request for Taxpayer Identification Number and Certification.
For individuals that are eligible to claim tax treaty benefits, Tax Services will prepare the appropriate form(s) and provide them to the individual to sign. 

Tax Treaty Benefits Not Offered

In certain situations, WVU and WVU Research Corporation will not recognize tax treaty benefit claims from an individual. In general, Tax Services will only reject tax treaty benefit claims if an employee may potentially violate a retrospective loss, a two-year limit clause, or a prospective loss clause, or if the individual intends to apply for U.S. lawful permanent residence (a "green card"), even if the individual has not yet applied for U.S. lawful permanent residence.
  • A retrospective loss clause means that an individual will lose all tax treaty benefits if they earn more than a specified amount in a calendar year. This amount varies based on the tax treaty and the type of income being earned.
  • A two-year limit clause means that an individual will lose all tax treaty benefits if they are physically present in the United States for greater than two years, even if the individual ceases working prior to the end of the two-year period. The two-year limit clause is most commonly present in tax treaties applying to teachers and researchers.
  • A prospective loss clause means that an individual will not be eligible for tax treaty benefits if they are invited for a period exceeding two years. A prospective loss clause is most commonly present in tax treaties applying to teachers and researchers.
WVU and WVU Research Corporation choosing not to recognize an individual's tax treaty benefit claims does not mean the individual loses their tax treaty benefits. An individual may attempt to claim on their tax return any tax treaty benefits they did not receive through WVU or WVU Research Corporation. However, the individual will be responsible for any potential back taxes, penalties, and interest if they later violate the terms of the tax treaty.

Based on the conditions outlined above, WVU and WVU Research Corporation will not recognize the following tax treaty benefit claims:
  • Canadian tax treaty for students in F-1 status (retrospective loss clause);
  • Indian tax treaty for teachers and researchers in J-1 or H-1B status (two-year limit clause);
  • Dutch tax treaty for teachers and researchers in J-1 or H-1B status (two-year limit clause);
  • Polish tax treaty for teachers and researchers in J-1 or H-1B status (prospective loss clause); and
  • All tax treaties for employees who have or intend to apply for U.S. lawful permanent residence, regardless of the employee's current nonimmigrant status.
The list above is not comprehensive. WVU and WVU Research Corporation may choose not to recognize other tax treaty benefit claims based on a review of an individual's specific circumstances.