Good morning,

Here is my question : I'm a Belgium citizen who would like to do a post doctoral stay in Vermont.

I'll receive a National Science Foundation Grant during my stay in Vermont.

Will I have to pay any taxes on this grant?

Thanks a lot for your help.

Dr Faust:

If you are considered to be a researcher during your stay in Vermont, then, under Article 19 of the U.S.-Belgium Tax Treaty, you are exempt from income taxes for twenty-four consecutive months starting on the date of your arrival.

Under U.S. tax law, you are exempt from FICA (Social Security and Medicare) taxes for the first two calendar years of your stay due to your J-1 visa. The FICA tax exemption ends on 1 January of the third calendar year of your stay, even though the income tax exemption may continue until the third anniversary of your arrival. This income tax exemption applies to BOTH federal and state income taxes.

Depending on your arrival date and marital status, you may file as a resident alien, non-resident alien or a dual-status alien in that third year.

Thanks a lot ! That's a great news! A last question : Will I have to pay taxes in USA and then ask for a refund?

Not if you properly coordinate with the college or university at which you you will do the research. If that college/university understands the situation correctly, they will pay you and NOT withhold any of the taxes, thus making the filing of a tax return unnecessary.

I really appreciated you help ! (Especially because of this good news!)

A last question : in the treaty , article 19 : A student or business trainee within the meaning of subparagraph a) shall be exempt from tax in the Contracting State in which the individual is temporarily present with respect to income from personal services in an aggregate amount equal to $9,000 or its equivalent in euro annually. The competent authorities shall, every five years, adjust the amount provided in this subparagraph to the extent necessary to take into account changes in the U.S. personal exemption and standard deduction and the Belgian basic allowance (quotité exemptée/belastingvrije som).


My fellowship is $34 000/year. So, is it still exempted of taxes?

Dr Faust:

You ae NEITHER a student nor a business trainee. The sub-paragraph that you cited is Subparagraph 1 of Article 19, which does not apply to you!

Subparagraph 2 (below) applies to you. As you can see, there is no income limitation for you.

2. An individual who is a resident of a Contracting State at the beginning of his visit to the other Contracting State and who is temporarily present in the other Contracting State for the purpose of teaching or carrying on research at a school, college, university or other educational or research institution shall be exempt from tax in the other Contracting State for a period not exceeding two years from the date of the individual's arrival in that other State on the remuneration received in consideration of teaching or carrying on research. This paragraph shall not apply to income from research if such research is undertaken not in the public interest but primarily for the private benefit of a specific person or persons.

I will work in the US under a J-1 and that'ts the first time I find a clear reply about that, Thanks!

However, I have another question:
Yous say "exempt from income taxes for twenty-four consecutive months starting on the date of your arrival", but the visa specialist of my host institution sait that it was 2 calendar years. Here is a part of his mail:

"In general, a J visa holder is exempt from State and Federal US taxes for the first two years of their visit. Keep in mind that this exemption is based on calendar year and not the amount of time one is physically present in the US. Therefore, if you begin your appointment in mid-November of 2009, this may leave you with time where you are not exempt from the taxes (Jan. 1, 2011-November, 2011). If you want to know more about this and if your country has a tax treaty with the US, you can contact our payroll administrator, *****. She can be reached at ***** or by email at: ********

In some cases, people have to pay back taxes if they go over the two year exemption, but again, this depends on the treaty between your country and the US. It may be worth checking on all of this with **** if you have any concerns. Some of our visitors have decided to change their visit dates because of the tax treaties and the implications. This is strictly up to you, but I thought I would inform you of the tax issues and let you find out more from ***** if you would like to know more. If you felt it was worth changing your dates, we can discuss that further. It may or may not be an issue for you. Let me know what you think... "

Is that the case for Belgium? I ask that because I will start on November!

Thanks!

The tax exemption for J-1 teachers/scholars/researchers is determined in each case by the tax treaty!

For Belgium, as noted in the red citation above, the two years starts "for a period not exceeding two years from the date of the individual's arrival".

In some cases, the two years IS two calendar years, but that is NOT how the Belgium treaty is worded. It is two years from the date you get off the plane!

As for paying back taxes for exceeding the two-year period, that retroactive tax provision IS in some tax treaties. It used to be in the German treaty, but that changed recently. I know there is a retroactive tax provision in the India tax treaty, and I am sure it exists in other treaties as well, but NOT the Belgium treaty.

Hi seb007,

I'm not sure about the Belgium-USA tax treaty, but the German-USA tax treaty doesn't make the income tax free. It just means you pay taxes on it in your home country (germany) for the first two years. Like I said, I'm not sure about Belgium, but make sure you check that.

Lots of people treat the tax treaty as making income in the US under J1 visa and the treaty tax free everywhere, but in most cases it isn't (unless your income is tax-free in your home country because it is a special kind of income, for example some kinds of scholarships in Germany. But only certain ones qualify for that, and at least in Germany, NSF ones don't qualify). So make sure you find out how that works for Belgium, or you can get in trouble back home for not filling a tax return and paying taxes.

I have a question for the Atlanta Tax Expert.
I arrived in the states in August 5th 2009. I just received a form that I will be Tax Exempt until August 4th 2011. But according to what I've read in your previous answers, I might be eligible to be tax exempt until the 3rd anniversary of my arrival in the US (which would be August 2012). My current VISA expires May 2012.
Can you please comment on this?
Thanks,
Charlotte

Charlotte Hurst:

Home country?

Also Belgium and J1 visa.
Thanks,
Charlotte

Charlotte:

The form is correct. Your tax-exempt status is good for only TWO years from date of arrival; see the extract from the technical explanation of the U.S.-Belgium Tax Treaty:

Paragraph 2

Paragraph 2 provides an exemption from host State taxation for teachers and researchers. Under paragraph 2 an individual who is a resident of a Contracting State at the beginning of his visit to the other Contracting State (i.e., host State), and who is temporarily present in the host State for the purpose of teaching or carrying on research at a school, college, university or other educational or research institution is exempt from host Sate taxation for a period not exceeding 2 years from the person's arrival in the host State on the person's remuneration received in consideration of teaching or carrying on research. However, the benefits of paragraph 2 do not apply to income from research if such research is undertaken primarily for the private benefit of a specific person or persons.

Note that your FICA (Social Security and Medicare) taxes exemption has ALREADY expired. That exemption is governed by U.S. tax law and was good only for 2009 and 2010. On 1 January 2011, you became liable for FICA (Social Security and Medicare) taxes, and you have the legal obligation to notify your employer of this fact if they have not started deducting these taxes from your pay.