General Instructions

Section references are to the Internal Revenue Code unless otherwise noted.

If you are a “resident of a treaty country,” you must know the terms of the tax treaty between the United States and the treaty country to properly complete Form 8233.

Purpose of Form

In general, section 1441 requires 30% income tax withholding on compensation for independent personal services (defined later). Sections 1441, 3401, and 3402 require withholding, sometimes at 30% and sometimes at graduated rates, on compensation for dependent personal services (defined later). However, some payments may be exempt from withholding because of a tax treaty or because the payments are not more than your personal exemption amount (defined later). Complete and give Form 8233 to your withholding agent if some or all of your compensation is exempt from withholding.

You can use Form 8233 to claim a tax treaty withholding exemption for noncompensatory scholarship or fellowship income only if you also are claiming a tax treaty withholding exemption for compensation for personal services (including compensatory scholarship or fellowship income) received from the same withholding agent.

Do not use Form 8233 if you have an office in the United States regularly available to you for performing personal services.

Additional information.   You can download the complete text of most U.S. tax treaties at IRS.gov. Enter “tax treaties” in the search box. Technical explanations for many of those treaties are also available on that site. Also, see Pub. 901, U.S. Tax Treaties, for a quick reference guide to the provisions of U.S. tax treaties. You can get any of the forms or publications referred to in these instructions by calling 1-800-TAX-FORM (1-800-829-3676) or by downloading them from www.irs.gov/formspubs.

Giving Form 8233 to the Withholding Agent

You must complete Form 8233:

  • For each tax year (be sure to specify the tax year in the space provided above Part I of the form),

  • For each withholding agent, and

  • For each type of income. However, you can use one Form 8233 to claim a tax treaty withholding exemption for both compensation for personal services (including compensatory scholarship or fellowship income) and noncompensatory scholarship or fellowship income received from the same withholding agent.

Give the form to the withholding agent. The withholding agent's responsibilities are discussed in the Part IV instructions.

Example.

A nonresident alien is primarily present in the United States as a professor, but also is occasionally invited to lecture at another educational institution. These lectures are not connected with his teaching obligations but are in the nature of self-employment. For each tax year, the professor must complete two Forms 8233 and give one to each withholding agent to claim tax treaty benefits on the separate items of income.

Definitions

Nonresident Alien

If you are an alien individual (that is, an individual who is not a U.S. citizen), specific rules apply to determine if you are a resident alien or a nonresident alien for tax purposes. Generally, you are a resident alien if you meet either the “green card test” or the “substantial presence test” for the calendar year. Any person not meeting either test is generally a nonresident alien. Additionally, an alien individual who qualifies as a “resident of a treaty country” (defined later) or a bona fide resident of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa is a nonresident alien individual.

For more information on the tests used to determine resident alien or nonresident alien status, see Pub. 519, U.S. Tax Guide for Aliens.

Even though a nonresident alien individual married to a U.S. citizen or resident alien may choose to be treated as a resident alien for certain purposes (for example, filing a joint income tax return), such individual is still treated as a nonresident alien for withholding tax purposes on all income except wages.

U.S. Person

For purposes of this form, a U.S. person is a U.S. citizen or resident alien.

Tax Treaty Withholding Exemption

This term refers to an exemption from withholding permitted by IRS regulations under section 1441 that is based on a tax treaty benefit. See Resident of a Treaty Country next for requirements for claiming a tax treaty benefit on this form.

See the instructions for line 4 for additional information for determining residence for purposes of claiming a tax treaty withholding exemption on this form.

Resident of a Treaty Country

An alien individual may claim to be a resident of a treaty country if he or she qualifies as a resident of that country under the terms of the residency article of the tax treaty between the United States and that country. See Nonresident Alien, earlier.

A nonresident alien may claim a tax treaty benefit on this form only if that individual is the beneficial owner of the income and meets the residency requirement and all other requirements for benefits under the terms of the 
tax treaty.

Compensation for Independent Personal Services

Independent personal services are services performed as an independent contractor in the United States by a nonresident alien who is self-employed rather than an employee. Compensation for such services includes payments for contract labor; payments for professional services, such as fees to an attorney, physician, or accountant, if the payments are made directly to the person performing the services; consulting fees; honoraria paid to visiting professors, teachers, researchers, scientists, and prominent speakers; and generally, payments for performances by public entertainers.

Business profits.   Certain treaties do not have an independent personal services article. Payments for independent personal services may be covered under the business profits article of an applicable income tax treaty. If you are eligible to claim exemption from withholding on this type of income, complete and give Form 8233 to the withholding agent.

Public entertainers.   Special restrictions on exemption from or reduction of withholding apply to nonresident alien public entertainers (such as actors, musicians, artists, and athletes). Generally, Form 8233 cannot be accepted because the exemption may be based on factors that cannot be determined until after the end of the year. These individuals are subject to 30% withholding from gross income paid for personal services performed unless a reduced rate of withholding is applied for using Form 13930, Application for Central Withholding Agreement. In addition, many tax treaties contain separate articles that apply to public entertainers. If present, these articles take precedence over the “independent personal services” and “dependent personal services” articles of the treaties.

Required Withholding Form

For compensation you receive for independent personal services, complete Form 8233 to claim a tax treaty withholding exemption for part or all of that income and/or to claim the daily personal exemption amount.

Compensation for Dependent Personal Services

Dependent personal services are services performed as an employee in the United States by a nonresident alien. Dependent personal services include compensatory scholarship or fellowship income (defined later). Compensation for such services includes wages, salaries, fees, bonuses, commissions, and similar designations for amounts paid to an employee.

Required Withholding Form(s)

Complete Form 8233 for compensation you receive for dependent personal services only if you are claiming a tax treaty withholding exemption for part or all of that income. Do not use Form 8233 to claim the daily personal exemption amount. For compensation for which you are not claiming a tax treaty withholding exemption, use Form W-4, Employee's Withholding Allowance Certificate.

Completing Form W-4.   You should complete Form W-4 as follows:

Line 2.

You are required to enter a social security number (SSN) on line 2 of Form W-4. If you do not have an SSN but are eligible to get one, you should apply for it. Get Form SS-5, Application for a Social Security Card, online at www.socialsecurity.gov, from your local Social Security Administration (SSA) office, or by calling the SSA at 1-800-772-1213.

You cannot enter an individual taxpayer identification number (ITIN) on line 2 of Form W-4.

Line 3.

Check the single box regardless of your actual marital status.

Line 5.

In most cases, you should claim one withholding allowance. However, if you are a resident of Canada, Mexico, or South Korea; a student from India; or a U.S. national; you may be able to claim additional withholding allowances for your spouse and children. See Pub. 519 for more information.

If you are completing Form W-4 for more than one withholding agent (for example, you have more than one employer), figure the total number of allowances you are entitled to claim (see the previous paragraph) and claim no more than that amount on all Forms W-4 combined. Your withholding usually will be most accurate when all allowances are claimed on the Form W-4 for the highest-paying job and zero allowances are claimed on the others.

Line 6.

Write “nonresident alien” or “NRA” above the dotted line on line 6. If you would like to have an additional amount withheld, enter the amount on  
line 6.

Line 7.

Do not claim that you are exempt from withholding on line 7 of Form W-4 (even if you meet both of the conditions listed on that line).

Compensatory Scholarship or Fellowship Income

In general, scholarship or fellowship income is compensatory to the extent it represents payment for past, present, or future services (for example, teaching or research) performed by a nonresident alien as an employee and the performance of those services is a condition for receiving the scholarship or fellowship (or tuition reduction).

Example.

XYZ University awards a scholarship to N, a nonresident alien student. The only condition of the scholarship is that N attends classes and maintains a minimum level of academic performance. The scholarship income is not compensatory because N is not required to perform services as an employee as a condition for receiving the scholarship.

Required Withholding Form(s)

Compensatory scholarship or fellowship income is considered to be dependent personal services income. Therefore, complete Form 8233 for this income only if you are claiming a tax treaty withholding exemption for part or all of that income. Do not complete Form 8233 to claim the daily personal exemption amount.

For any part of this compensatory income for which you are not claiming a tax treaty withholding exemption, use Form W-4. See Completing Form W-4, earlier.

Noncompensatory Scholarship or Fellowship Income

Noncompensatory scholarship or fellowship income is scholarship or fellowship income that is not compensatory scholarship or fellowship income (defined earlier).

In most cases, the taxable portion of noncompensatory scholarship or fellowship income (defined later) paid to a nonresident alien is subject to withholding at a rate of 30% (in most cases, the rate is 14% for a nonresident alien temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa).

Taxable portion of noncompensatory scholarship or fellowship income.   If you were a degree candidate, the amount of this type of income that you used for expenses other than tuition and course-related expenses (fees, books, supplies, and equipment) is taxable in most cases. For example, in most cases amounts used for room, board, and travel are taxable. If you were not a degree candidate, the full amount of the scholarship or fellowship income is taxable in most cases.

Required Withholding Form

In most cases, you should complete Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to claim a tax treaty withholding exemption for this type of income. No Form W-8BEN is required unless a treaty benefit is being claimed.

Exception.   If you are receiving both compensation for personal services (including compensatory scholarship or fellowship income) and noncompensatory scholarship or fellowship income from the same withholding agent, you may use one Form 8233 for both types of income. However, this exception applies only if you are claiming a tax treaty withholding exemption for both types of income.

Alternate withholding election.   A withholding agent may elect to withhold on the taxable portion of noncompensatory scholarship or fellowship income of a nonresident alien temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa as if it were compensatory scholarship or fellowship income (provided the nonresident alien is not claiming treaty benefits with respect to that income). The withholding agent makes this election by requesting that the nonresident alien complete Form W-4 using the instructions in Rev. Proc. 88-24, 1988-1 C.B. 800. Indian students also should see Rev. Proc. 93-20, 1993-1 C.B. 528.

Withholding Agent

Any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding or that can disburse or make payments of an amount subject to withholding is a withholding agent. The withholding agent may be an individual, corporation, partnership, trust, association, or any other entity, including (but not limited to) any foreign intermediary, foreign partnership, and U.S. branch of certain foreign banks and insurance companies. In most cases, the person who pays (or causes to be paid) the amount subject to withholding to the nonresident alien individual (or to his or her agent) must withhold.

Beneficial Owner

For payments other than those for which a reduced rate of withholding is claimed under an income tax treaty, the beneficial owner of income is in most cases the person who is required under U.S. tax principles to include the income in gross income on a tax return. A person is not a beneficial owner of income, however, to the extent that person is receiving the income as a nominee, agent, or custodian, or to the extent the person is a conduit whose participation in a transaction is disregarded. In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income.

Avoid Common Errors

To ensure that your Form 8233 is promptly accepted, be sure that you:

  • Answer all applicable questions completely.

  • Specify the tax year for which this form will be effective in the space provided above Part I of the form.

  • Enter your complete name, addresses, and identifying number(s) in Part I.

  • Have attached the required statement described in the line 10 instructions if you are a foreign student, trainee, professor/teacher, or researcher.

  • Are not trying to claim tax treaty benefits for a country with which the United States does not have a ratified tax treaty.

  • Are not trying to claim tax treaty benefits that do not exist in your treaty.

  • Complete lines 11 through 14 in sufficient detail to allow the IRS to determine the tax treaty benefit you are claiming.

  • Claim the proper number of personal exemptions on line 15.

  • Complete the required certification in Part III.


More Online Instructions