Form 8833 Instructions for a Treaty-Based Position

Form 8833, Treaty-Based Return Position Disclosure, is a required attachment to a tax return for those who assert that a U.S. tax treaty changes or overrules a part of the Internal Revenue Code (IRC). This action, known as taking a treaty-based return position, results in a reduction of the filer’s U.S. tax liability. The form serves as a formal declaration to the Internal Revenue Service (IRS), explaining the legal basis for the position taken.

This disclosure is mandated under IRC Section 6114 and applies when a treaty offers a more favorable tax outcome, such as lower rates on income or exemptions for specific earnings. The form is also used by dual-resident taxpayers who, under a treaty, choose to be treated as a resident of a foreign country for tax purposes.

Determining if You Need to File Form 8833

A taxpayer must file Form 8833 when taking a treaty-based return position, which occurs whenever a U.S. tax treaty is used to override a provision of U.S. tax law and lower the tax on a return. A common example is a resident of a treaty country claiming a reduced rate of U.S. tax on income like dividends or royalties. Another instance is a foreign student or researcher in the U.S. who claims an exemption for income earned from personal services under a specific treaty article.

Regulations also list certain positions that must be reported, such as a claim that a U.S. permanent establishment of a foreign corporation does not exist. This also includes instances where a treaty allows different treatment of income for a foreign partner in a U.S. partnership.

However, the IRS provides several waivers where filing Form 8833 is not necessary. A primary exception applies to individuals claiming a reduced rate of withholding tax on U.S. source income, such as interest and dividends. This waiver is valid only if the income was paid by an independent withholding agent who has properly filed the required forms, like Form 1042-S, with the IRS.

Disclosure is also not required for claiming treaty benefits on certain other types of income, including:

• Pensions, annuities, or social security
• Income from dependent personal services
• Scholarships or grants

You should consult the relevant IRS regulations to confirm if a specific treaty position is exempt from disclosure.

Information and Documentation to Prepare

To complete Form 8833, you must gather several pieces of information. The first is your U.S. Taxpayer Identification Number (TIN), which can be a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).

You must identify the specific tax treaty being invoked and the country it is with. The U.S. maintains income tax treaties with numerous countries, and their texts are available on the IRS website.

From the treaty, you will need to pinpoint the exact article(s) that provide the legal basis for your tax position. The form also requires you to list the Internal Revenue Code provision that is being modified by the treaty.

You will also need to prepare a clear, factual summary explaining the basis for your claim. This summary must include the nature and estimated amount of the income involved.

How to Complete Form 8833

The top of the form requires basic identifying details, including your name, U.S. TIN, and address. You must also check the appropriate box to indicate whether you are disclosing a position for a standard treaty claim or a dual-resident taxpayer claim under IRC Section 7701(b).

Part I of the form asks for the name of the treaty country and the specific article number(s) of the treaty you are relying on. This is also where you will list the specific Internal Revenue Code section(s) that are being modified by the treaty.

The most detailed part of the form requires a full explanation of the treaty-based position. This explanation should be a concise summary of the relevant facts, a statement of the treaty provision being invoked, and an argument for why that provision applies to your situation to reduce U.S. tax. You must also include a reasonable estimate of the amount of income for which the benefit is claimed.

Dual-Resident Taxpayers

Part III is a specialized section that applies only to dual-resident taxpayers, who are considered residents of both the United States and a treaty country. If you are using a treaty’s tie-breaker rule to be treated as a resident of the foreign country for tax purposes, you must complete this section.

It is important for certain dual-residents to understand the implications of this choice. If a dual-resident who is also a U.S. long-term resident makes this claim, the IRS treats it as a termination of U.S. residency for tax purposes, which can trigger an exit tax and require filing Form 8854.

Filing the Form and Potential Penalties

Form 8833 is not submitted by itself; it must be attached to the taxpayer’s annual tax return for the year the treaty position is taken. For non-resident individuals, this is Form 1040-NR, while foreign corporations attach it to Form 1120-F. Even if a tax return is not otherwise required, one must be filed to make the treaty disclosure.

The deadline for filing Form 8833 is the same as the due date for the tax return to which it is attached, including any approved extensions.

A separate Form 8833 must be filed for each distinct treaty-based position taken. However, multiple payments of the same type of income from the same source can be aggregated on a single form.

Failure to file Form 8833 when required can lead to penalties. For individual taxpayers, this penalty is $1,000 per failure, and for C corporations, the penalty is $10,000 for each instance of non-compliance.