Many "foreign" individuals
invest in the U.S. without fully comprehending their tax consequences. A non-resident
alien for U.S. tax purposes is a non-U.S. resident and a non-U.S. citizen. In most cases,
with proper tax planning, taxes can be minimized or even avoided.
foreign taxpayer is taxed on his or her U.S. source income at a flat rate of 30%, unless
there is a lower treaty rate available. U.S.-source income includes, rents, wages,
dividends, interest, royalties, licenses and other ordinary income payments (called
"fixed or determinable, annual or periodic" payments). The sourcing rules are
complex and often depend on where the non-resident alien is physically present when
earning the income or the location of the person or entity paying the funds.
Gains (profits) from the sale or stocks and securities or any other non-real estate
asset by a non-resident alien is generally not taxable to a foreign taxpayer. Gains from
the sale of real estate located in the U.S. is always a taxpayer event, whether the asset
is held directly by the individual or by certain U.S. corporations or partnership. The tax
is enforced through withholding rules.
A gift by a non-resident alien to a U.S.
taxpayer (a U.S. resident or citizen) is usually non-taxable to the non-resident alien or
the U.S. recipient, unless the gifts involves U.S. real property or tangible personal
property located within the U.S. Although the gift is non-taxable to either the donor
(giver) or donee (recipient), there are gift-tax reporting rules that may apply.
Generally, gifts totaling less than $100,000 per calendar year made by an non-resident
alien are not reportable.
For more information on the U.S. tax
consequences for non-resident aliens, see the Tax Prophet's section on Foreign Taxpayers.
The Tax Prophet