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What Is Form 8833? A Guide for Expats

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What You Need to Know About The Form 8833

When a taxpayer elects to take a position that overrules or modifies any provisions of the Internal Revenue Code that results in a reduction of US taxes based on the article provisions of a treaty with another country, the taxpayer is required to file Form 8833 to disclose the treaty country, the applicable articles of the treaty that apply, the applicable sections of the Internal Revenue Code (IRC) and an explanation of the position taken.

Form 8833- Claiming A Treaty Exemption on Your Tax Return

If you claim treaty benefits that override or modify any provision of the Internal Revenue Code (IRC), and by claiming these benefits your tax is, or might be, reduced, you must attach a fully completed Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) , to your tax return (i.e. Form 1040NR, Form 1040NR-EZ, Form 1120-F, etc.).

You must file a U.S. tax return and Form 8833 if you claim the following treaty benefits:

  • A reduction or modification in the taxation of gain or loss from the disposition of a U.S. real property interest based on a treaty.
  • A change to the source of an item of income or a deduction based on a treaty.
  • A credit for a specific foreign tax for which foreign tax credit would not be allowed by the Internal Revenue Code.

Exceptions To Filing Form 8833

You do not have to file Form 8833 for any of the following situations:

  • You claim a reduced rate of withholding tax under a treaty on interest, dividends, rent, royalties, or other fixed or determinable annual or periodic income ordinarily subject to the 30% rate.
  • You claim a treaty exemption that reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable scholarship and fellowship grants.
  • You claim a reduction or modification of taxation of income under an International Social Security Agreement or a Diplomatic or Consular Agreement.
  • You are a partner in a partnership or a beneficiary of an estate or trust and the partnership, estate, or trust reports the required information on its return.
  • The payments or items of income that are otherwise required to be disclosed total no more than $10,000.

What Information Is Required On The Form 8833

Form 8833 should be attached to your tax return every year that the treaty provision applies to you. A separate Form 8833 is required for each treaty-based return position taken. Specific information must be disclosed on Form 8833, including:

  • The treaty country;
  • Article(s) in the treaty that apply to the tax modification or reduction;
  • Internal Revenue Code provision(s) overruled or modified by the treaty-based position; and
  • Finally, an explanation of the treaty-based return position taken. This must include a brief summary of the facts on which the position is based. Also, list the nature and amount (or a reasonable estimate) of gross receipts, each separate gross payment, each separate gross income item, or other item (as applicable) for which the treaty benefit is claimed.

Most treaties include an article that limits treaty benefits to residents of either country (in most cases, the treaty safe harbor provision will prevent US taxpayers from claiming a treaty article provision that will reduce or modify a provision of the US tax code).

If you are a foreign person and are subject to a mandatory 30% withholding rate on income received from US sources, Form W8BEN should be prepared and provided to the payor of the income.

Penalty for failure to provide required information on Form 8833

Failure to disclose a treaty-based return position may result in a penalty of $1,000 ($10,000 in the case of a C corporation).

However, the IRS may abate the penalty if you can offer reasonable cause for failing to file Form 8833.