Treaty Agreement Taxation

Many U.S. states tax the income of their people. Some states comply with the provisions of U.S. tax treaties and some states do not comply. Therefore, you should consult with the tax authorities of the state in which you live to find out whether that state taxes personal income and, if so, whether the tax applies to one of your income or whether your income tax agreement applies in the state where you live. The United States has tax agreements with a number of countries. Under these contracts, residents (not necessarily citizens) are taxed at a reduced rate from abroad or are exempt from U.S. tax on certain income items they receive from sources within the United States. These reduced rates and exemptions vary by country and for certain income items. Under the same treaties, U.S. residents or citizens are taxed at a reduced rate on certain income from foreign sources or are exempt from foreign taxes. Most income tax agreements contain what is known as a “savings clause,” which prevents a U.S.

citizen or resident from using the provisions of a tax treaty to avoid taxing U.S. source income. If the contract does not cover a certain type of income or if there is no contract between your country and the United States, you will have to pay income taxes in the same way and at the same rates as those indicated in the instructions for the applicable U.S. tax return. Many U.S. member states have collected tax revenues collected in their countries. Therefore, you should consult with the tax authorities of the state from which you receive income to find out if a public tax applies to any of your income. Some U.S. states do not comply with the provisions of tax treaties. This page contains links to tax agreements between the United States and certain countries. More information on tax treaties is also available on the Ministry of Finance`s “Tax Contract Documents” page.

See Table 3 of the tables of the tax treaty on the general entry into force of each treaty and protocol. NOTE: The exemption/reduction in Iceland under the current agreements can only be achieved if the Director of Internal Revenue requests an exemption/reduction on Form 5.42.