Belgium – USA F-1 & J-1 Tax Treaty (Students, Trainees, Students and Researchers)
Article 19 of the Belgium – USA Tax Treaty provides rules for United States taxation of visiting students, business trainees, teachers and researchers. Persons who meet the tests of the Article will be exempt from tax in the USA with respect to designated classes of income.
Paragraph 1 addresses payments received by a student or business trainee, while paragraph 2 addresses teachers and researchers temporarily present in the host country.
Paragraph 1 Subparagraph (a) addresses the situation where a student or business trainee that is a resident of Belgium who receives certain payments other than for personal services, while present in the United States.
Several conditions must be satisfied for such an individual to be exempt from US taxation.
First, the student or business trainee must have been a resident or citizen of Belgium, either at the time of his arrival in the USA or immediately before their arrival in the United States
Second, the purpose of the visit must be the full-time education or full-time training of the visitor. Thus, if the visitor comes principally to work in the USA but also is a part-time student, he would not be entitled to the benefits of this Article, even with respect to any payments he may receive from abroad for his maintenance or education, and regardless of whether or not he is in a degree program.
Whether a student is to be considered full-time will be determined by the rules of the educational institution at which he is studying. The IRS exemption in subparagraph (a) applies to payments received by the student or business trainee for the purpose of his maintenance, education or training that arise outside the United States.
A payment will be considered to arise outside the United States if the payer is located outside the United States. Thus, if an employer from Belgium sends an employee to the USA for training, the payments the trainee receives from abroad from his employer for his maintenance or training while he is present in the USA will be exempt from tax in the USA.
Subparagraph (1) (b) also provides a limited exemption for remuneration from personal services rendered in the USA with a view to supplementing the resources available to him for such purposes to the extent of $9,000 United States dollars (or its equivalent in euro) per taxable year.
The competent authorities are instructed to adjust this amount every five years, if necessary, to take into account changes in the amount of the U.S. standard deduction and personal exemption and the Belgian basic allowance.
In the case of a business trainee, the benefits of paragraph 1 will extend only for a period of two (2) years from the time that the visitor first arrives in the USA. If, however, a trainee remains in the host country for a third year, thus losing the benefits of the Article, he would not retroactively lose the benefits of the Article for the first two years.
Supbaragraph 1(c) defines the term “business trainee” as a person who is in the US temporarily for the purpose of securing training that is necessary to qualify to pursue a profession or professional specialty. Moreover, a business trainee also includes an individual who is employed or under contract with a resident of the other Contracting State and is temporarily present in the host State for the primary purpose of receiving technical, professional, or business experience from a person other than his employer or a person related to its employer.
Thus, a business trainee might include a lawyer employed by a law firm in Belgium who works for two years as a stagiare in an unrelated law firm in the USA.
However, the term would not include a manager who normally is employed by a parent company in Belgium who is sent to the USA to run a factory owned by a subsidiary of the parent company.
Paragraph 2 provides an exemption from United States taxation for teachers and researchers. Under paragraph 2 an individual who is a resident of Belgium at the beginning of his visit to the USA and who is temporarily present in the USA for the purpose of teaching or carrying on research at a school, college, university or other educational or research institution is exempt from US taxation for a period not exceeding 2 years from the person’s arrival.
***Disclaimer: This communication is not intended as tax advice, and no tax accountant -client relationship results**