Resident Alien claim China-US tax treaty benefits?
Hi, I am a citizen of People's Republic of China and currently studying in the states as a F1 student. This is my sixth year in the states. I just recently married to an American citizen. We filed my green card application in early June, 2007. We are expecting to adjust my status to permanent resident in September or October of 2007. My question is will I still be eligible to claim US-China income tax treaty benefits on the fellowship I receive, based on the exception to the "saving clause" in the paragraph 2 of the protocol 1?
Protocol 1 paragraph2 states as this in the US-China Income Tax Convention: 2. Notwithstanding any provision of the Agreement, the United States may tax its citizens. Except as provided in paragraph 2 of Article 8, paragraph 2 of Article 17, and Articles 18, 19, 20 (Students and Trainees), 22, 23, 24 and 26 of this Agreement, the United States may tax its residents.
On the IRS website, it also says:
Nonresident Alien Who Becomes a Resident Alien
Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate U.S. tax on income from a scholarship or fellowship grant. A student (including a trainee or business apprentice) or researcher who has become a resident alien for U.S. tax purposes may be able to claim benefits under a tax treaty that apply to reduce or eliminate U.S. tax on scholarship or fellowship grant income. Most treaties contain a provision known as a "saving clause." Exceptions specified in the saving clause may permit an exemption from tax to continue for scholarship or fellowship grant income even after the recipient has otherwise become a U.S. resident alien for tax purposes. In this situation, the individual must give you a Form W-9 (PDF) to claim his treaty exemption and an attachment that includes all the following information:
The individual's name
The individual's U.S. Taxpayer Identification Number (TIN)
A statement that the individual is a resident alien under
The green card test
The substantial presence test, or
The residency article of a tax treaty
The tax treaty under which the individual is claiming a benefit
The article number of the tax treaty under which the individual is claiming a benefit, and a description of the article
A statement that the individual is relying upon an exception to the saving clause of the tax treaty to claim the benefit
Example: Article 20 of the U.S.-China income tax treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present in the United States. Under the Internal Revenue Code, a student may become a resident alien for tax purposes if his or her stay in the United States exceeds 5 calendar years. However, the treaty allows the provisions of Article 20 to continue to apply even after the Chinese student becomes a resident alien of the United States.
Therefore, Can I still claim tax exemption on my fellowship after I receive my green card? The IRS website also says that "some exceptions to the saving clause apply to all resident aliens (for example, under the US-China treaty); others apply only to resident aliens who are not lawful permanent residents of the United States (green card holders)." This means I could use the exception no matter how I became a resident alien (green card or substantial presence test), right? Thank you very much for your help!!
Yuan
