Question

Oscar is a resident of Country B. Country B does not have a tax treaty with the USA. Oscar is an employee of a private company in country B and his employer sends him to the USA in order to do certain work needed to be done in the USA.
Here are his days of presence in the US:
• September 1, 2018, until April 15, 2019. During this time he made $200,000.
• January 1, 2019 until June 30, 2020. During this time he made $55,000.
• He does not return to the USA after this time.
Other facts:
• During each of 2018-2020 he had $155,000 of country B source interest income (would be subjected to the ordinary income tax rate here in the US if taxed here).
• The tax rates in country B are lower than of the USA by a substantial amount.
• The amounts earned that are US source earnings will not be taxed in country B at the same time.

a. Describe his tax status here in the USA and what taxes he would have to pay here. I am not interested in the computation of tax, but what income is subjected to US tax and what type of US taxes he would be subjected to on that income.

b. Assume that country B does have a tax treaty with the US that uses the terms of the 2016 US Model tax treaty. Discuss how this changes things.

Answer 1

a) As Oscar is the resident of country B and earns some income in USA he is subject to tax at his resident place only, howsoever if any amount of income earned in USA having no treaty with country B will be taxed in USA but the interest income(the source of earning is at country B) will not be taxed in USA.

If the treaty does not cover a particular kind of income, or if there is no treaty between your country and the United States, you must pay tax on the income in the same way and at the same rates shown in the instructions for Form 1040NR, U.S. Nonresident Alien Income Tax Return.

b) if the treaty is assumed  Under these same treaties, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries. Under these same treaties, residents or citizens of the United States are taxed at a reduced rate, or are exempt from foreign taxes, on certain items of income they receive from sources within foreign countries.