1. Tax obligation for Non-residents

Individuals who are not citizens or residents of the U.S. are taxed generally only on their income from U.S. sources. Form 1040-NR is typically used to report this income.

2. Tax Treaties

Residents of countries with tax treaties with the U.S. may receive more favourable U.S. tax treatment than residents of non-treaty countries. If you take the position that any U.S. tax is overruled or otherwise reduced by a U.S. treaty, you generally must disclose that position on Form 8833 and attach it to your tax return. For more information on tax treaties see IRS Publication 901.

3. Resident or Non-Resident

IRS Publication 519 is a guide for non-residents. You are a resident of the U.S. if you hold a green card or meet the 'substantial presence' test. Under the 'substantial presence' test, an individual who spends a certain number of days in the U.S. during a calendar year will generally be considered a resident.

4. Withholding Tax

The U.S. imposes a 30% withholding tax on certain non-business income paid to a non-resident from U.S. sources, including interest, dividends, rental income, annuity income, etc. Generally, the U.S. payor of such income must withhold the tax. Special exceptions from taxation do apply.

The 30% withholding tax does not apply if the non-resident has income effectively connected with a U.S. trade or business. Income is taxed in the same manor as a U.S. person. A non-resident will be considered to be in a U.S. trade or business if he or she conducts relatively continuous business activities from a fixed location in the U.S. Some foreign source income will also be considered 'effectively connected.'