The United States of America has a very complex set of tax rules that govern the tax treatment of income
and operations of its residents abroad, as well as the tax treatment of income and operations of foreign residents
in the United States.
These rules address the tax treatment of income of individuals, partnerships and corporations, US & foreign.
Who is Considered to be a tax resident of the United States?
- US citizens and resident aliens are subject to tax on their worldwide income
- Nonresidents are subject to US tax on income that is sourced to the US
An individual is considered to be a resident of the United States if the individual meets any one of three tests:
- United States Citizen
- Admission as a Lawful Permanent Resident (i.e., "green card" test); or
- "Substantial Presence" in the United States
Foreign Tax Credit
While the U.S. taxes the worldwide income of its residents, it has a foreign tax credit regime to relieve double taxation.
U.S. tax residents are generally entitled to a foreign tax credit with respect to income taxes paid to foreign jurisdictions
on income sourced outside the U.S.
Income Tax Treaties
The United States has income tax treaties with more than 50 countries. These treaties are intended to
facilitate international investments and trade, resolve conflicts between tax jurisdictions and provide relief from double taxation.