Taxation
of Nonresident Aliens
International
Tax Gap Series
Each year, thousands of nonresident aliens
are gainfully employed
in the United States. Thousands more own rental property or earn interest or dividends from U.S.
investments. This article discusses the tax filing requirements for nonresident
aliens.
First
step: Determining Alien Tax Status
If you are an alien (not a U.S. citizen), you are considered a
nonresident alien unless
you meet one of two tests: the green card test (綠卡測試) or the substantial presence test (居住測試) for the calendar year (January
1 – December 31). If you do not
meet either the Green Card Test or the Substantial Presence Test, then
you are a nonresident alien.
See Determining Alien Tax Status for more details.
If you meet either test, you are considered a U.S. resident alien and are generally taxed in the same
way as U.S. citizens. This means that your
worldwide income is subject to U.S. tax and must be reported on your U.S.
tax return (Form 1040, U.S. Individual Income Tax Return; Form 1040A, U.S.
Individual Income Tax Return or Form 1040EZ, Income Tax Return for Single and
Joint Filers with No Dependents).
Filing
Requirements for Nonresident Aliens
Nonresident aliens are generally subject to
U.S. income tax only on their U.S. source income (美國來源收入). They are subject to two different tax rates, one for effectively
connected income (有關聯的收入) (ECI), and one for fixed or determinable, annual, or periodic (固定、可審定、年度或定期性) (FDAP) income.
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ECI
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FDAP
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ECI is earned in
the U.S. from the operation of a business in the U.S. or is personal
service income earned in the U.S. (such as wages or self-employment income). It is taxed
for a nonresident at the same graduated rates as for a U.S. person.
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FDAP income is passive
income such as interest,
dividends, rents or
royalties. This income is taxed at a flat 30% rate, unless a tax treaty specifies a lower
rate.
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Nonresident
aliens MUST file and pay any tax due
using Form 1040NR, U.S.
Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return
for Certain Nonresident Aliens with No Dependents.
Tax
Treaties (租稅協定)
The United States has income tax treaties
with a number of foreign countries. For nonresident aliens, these treaties can
often reduce or eliminate U.S. tax on various types of personal services and other income, such as
pensions, interest, dividends, royalties, and
capital gains. Each individual
treaty must be reviewed to determine whether specific types of income are
exempt from U.S. tax or taxed at a reduced rate. More details can be found in
Publication 901, U.S. Tax Treaties.
Refer to the Nonresident Aliens page for
more details on extensions of time to file, where to file, etc.
