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Nonresident aliens – sourcing of income

 

A nonresident alien (NRA) generally is subject to U.S. income tax only on income from U.S. sources. The general rules for determining the source of income that apply to most NRAs are summarized below:

See Chapter Two of Publication 519, U.S. Tax Guide for Aliens for additional details.

Summary of source rules for income of nonresident aliens

Item of incomeFactor determining source

Salaries, wages, other compensation

Where services performed

Business income: Personal servicesWhere services performed
Business income: Sale of inventory -purchasedWhere sold

Business income: Sale of inventory -produced

Where produced (Allocation may be necessary)

Interest

Residence of payer

Dividends

Status of payor: Whether a U.S. or foreign corporation *

Rents

Location of property

Royalties:

Natural resources

Location of property

Royalties: Patents, copyrights, etc.

Where property is used

Sale of real property

Location of property

Sale of personal property

Seller's tax home (but see Personal Property, in Chapter 2 of Publication 519, for exceptions)

Pensions

Where services were performed that earned the pension

Scholarships - FellowshipsGenerally, the residence of the payer

Sale of natural resources

Allocation based on fair market value of product at export terminal. For more information, see IRC section 1.863–1(b) of the regulations.

Related

*Exceptions: A portion of a dividend paid by a foreign corporation is U.S. source income if at least 25% of the corporation's gross income was effectively connected with a U.S. trade or business for the three tax years before the year in which the dividends are declared.