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US1.4.1ÌýÌýÌýÌý Income tax

This document refers to Federal Income Tax.

A non-resident alien individual (NRA) is taxable, at different rates, on two categories of US source income. These are:

1. Ìý

   •ÌýÌýÌýÌý income not connected with a US business (§871(a))

2. Ìý

   •ÌýÌýÌýÌý income connected with a US business ('effectively connected income') (§871(b))

Income not connected with a US business is taxed at a flat rate of 30% (or lower tax treaty rate where applicable).

Broadly, this category consists of fixed or determinable annual or periodical gains, profits, and income. For example:

1. Ìý

   •ÌýÌýÌýÌý interest

2. Ìý

   •ÌýÌýÌýÌý dividends

3. Ìý

   •ÌýÌýÌýÌý rents (but see election below under effectively connected income)

4. Ìý

   •ÌýÌýÌýÌý annuities

5. Ìý

   •ÌýÌýÌýÌý a portion of US Social Security retirement benefits

6. Ìý

   •ÌýÌýÌýÌý US source capital gains arising from the disposal of personal/ non-business property (see below)

For further detail on the taxation of each of these elements see Rhoades & Langer Chapter 25.

Note that US source capital gains arising from the disposal of personal/