Russian Students. Federal Tax Exemption based on the US-Russia Tax Treaty

By Alex Oware on 06/24/2015 10:00 PM

You are eligible for exemption under Russian treaty Article 18 if you are in the U.S. for studying, training or doing research as the recipient of a non-service grant or "other similar payment." An "other similar payment," according to the IRS, must have the same characteristics as a grant or allowance, namely not require services to be performed as a condition of receiving the payment.

Therefore, this article does not provide an exemption for compensation received for services performed.

Many Russians have claimed this treaty exemption who were not eligible for it, but received refunds simply because the IRS has not had adequate resources to audit these returns. However,  the IRS has now become very aware of the problem.

The IRS can audit your return and impose interest and penalties on adjustments for up to 3 years after the due date or filing date, whichever is later.

To every tax law in the US, there are some exceptions that need to be considered by taxpayers. You can not claim an exemption under Article 18 if the following applies to you...

  • The exemption does not apply to compensation for research work primarily for private benefit
  • It does not apply to payments from the National Institutes of Health under its Visiting Associate Program and Visiting Scientist Program

The exemption  shall apply only for such period of time as is ordinarily necessary to complete the study, training or research, except that no exemption for training or research shall extend for a period exceeding five years.

***Disclaimer: I am a tax accountant and a CPA , but I am not your accountant or advocate (Unless you have signed up to my services). This communication is not intended as tax advice, and no tax accountant -client relationship results**