9 US Tax Rules for Nonresidents Filing Form 1040NR for US source income.

• Nonresidents pay not capital gains taxes on the purchase and sale of US publicly traded stocks.
• Nonresidents (absent a treaty provision with their home country that reduces the rate) must pay 30% interest on interest income (other than from US banks, Treasury Bonds and the Portfolio interest exception mentioned below) paid from the US.
• Nonresidents (absent a treaty provision that reduces the tax) must pay a 30% tax on US source dividends.
• There are no restrictions on nonresidents owning US real estate, corporations and businesses.
• If a nonresident has an operating business in the US operating as a partnership, sole proprietorship or through an LLC, they pay the same income tax rate on that income as a tax resident of the US,
• Nonresidents pay the same income tax rates as tax residents on rental income from  US  real estate (if they make the proper election on their tax return).  The profit from the sale of US real estate is taxed at the same reduced capital gain tax rate as paid by a US tax resident.
• Nonresidents making loans to US business can avoid paying any tax on the interest they receive from the US borrower by structuring the loan and its related documents to comply with the Portfolio Interest rules.
• A business operated by a nonresident can be held to have a US tax situs and be required to file US tax returns for keeping inventory in the US, or even having an agent represent it in the US.
• In most countries in the world if a nonresident must pay US income taxes on its US source income, those taxes can be claimed as a credit against any tax in their home country on that income.

If you need help as a nonresident planning for your US activities or possible US sourced income including filing all required tax returns please email us at ddnelson@gmail.com.   Thank You. Don D. Nelson, Tax Attorney at Law.  All conversations and communications with us are protected by attorney client privilege.

US TAX REPORTING REQUIREMENTS FOR NONRESIDENTS

By Don D. Nelson, International Tax Attorney

Over 35 years experience in US International Taxation

Nonresidents of the US must still file US tax returns to report their US source income even though they do not live in the United States.  They do get some benefits though. They do not have to report or pay tax on US Treasury Interest  and interest paid by banks and savings and loans.

Nonresidents file form 1040NR and if the income is sourced within a state (not passive intangible income) they may have to file a state tax return.  What types of income are taxable and require filing a US tax return?

• Rental Income
• Income Earned while working in the US
• Pension income from the US
• Dividend and Royalty Income
• Sale of US real property or other assets located in the USA.

Capital gains from the sale of US publicly traded corporations are exempt from taxation 

The US has tax treaties with many countries in which the nonresident may be a citizen which reduce or exempt US withholding on certain types of income.  It is important you review these treaties to determine if there might be a tax saving benefit.  The IRS generally will not correct your return if you fail to take the favorable treaty provisions into account on your tax return.

This is a complex area of taxation and guidance is essential. We can help. Email us with questions at ddnelson@gmail.com.