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US1.3.1ÌýÌýÌýÌý Income tax

This document discusses Federal Income Tax.

US citizens and residents are taxable on their world-wide income and gains.

Tax treaties have relatively little impact on this exposure to Federal Income tax on world-wide income. Every comprehensive bi-lateral tax treaty to which the US is a party contains a provision known as the 'Saving Clause'. This provides that the US may tax its citizens and residents as if the treaty in question 'had not come into effect'. Immediately following the Saving Clause in the text of a treaty is a short paragraph which lists which provisions in that treaty are not subject to the Saving Clause override. For more on the Saving Clause see Rhoades & Langer 42.06.

In the US/UK Tax Treaty, the Saving Clause is contained in Article 1(4), and the limited number of exceptions to that provision are listed in Article 1(5). The US/UK treaty is available in Rhoades & Langer Appendix A, UNIK.

Often an exception to the Saving Clause will only cover specific parts of an Article in the treaty, rather than the