In the United States, residents are generally taxed on their worldwide compensation regardless of where or for whom the services are performed. Compensation includes cash remuneration and the fair market value of property or services received. Special exclusions may apply to the foreign earned income of a citizen or resident for services performed in a country other than the United States.
Non-residents1 are subject to U.S. tax on income from U.S. sources. U.S . source income that is not effectively connected with a U.S. trade or business (generally investment income) is taxed on a gross basis at a flat 30 percent rate, unless a treaty provides for a lower rate. A non-resident engaged in a trade or business within the United States during the taxable year is taxed on the income effectively connected with the U.S. trade or business, less allowable deductions, at the same graduated rates that apply to the income of citizens and residents. Generally, income effectively connected with a U.S. trade or business includes compensation for personal services performed in the United States.
A foreign national who changes from U.S. resident status to non-resident status or vice versa during a year (a dual-status taxpayer) is subject to U.S. tax as if the year were divided into two separate periods, one of residence and one of non-residence. The dual-status foreign national is generally subject to tax on worldwide income for the period of residence, and only on U.S . source income for the period of non-residence.
Under domestic law, if a non-resident is in the United States for 90 days or less during a calendar year, performs services for a foreign employer that is not engaged in a U.S. trade or business, and earns USD3,000 or less for such U.S. services, the compensation is treated as foreign source and is not subject to U.S. tax. Most treaties provide broader exemptions from U.S. tax for earned income, allowing a higher, or no, limit if the nonresident is present in the United States for no more than 183 days during a 12-month period, provided certain requirements are met.
The federal income tax rates range from 10 percent to 39.6 percent.
The official United States currency is the United States Dollar (USD).
For the purposes of this publication, the host country refers to the country to which the employee is assigned. The home country refers to the country where the assignee lives when he or she is not on assignment.
This publication reflects United States law as it was in effect at 31 December 2015.
1For purposes of this publication, the term "non-resident" is understood to mean a person who is neither a citizen nor resident of the United States.
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