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

Tax Treaty Benefits Not Offered