|
INCOME TAX TREATY BETWEEN THE UNION OF
SOVIET SOCIALIST REPUBLICS AND THE UNITED STATES
January 1, 1976
Article VI--Exemptions
1. Special exemptions.
Income derived by an individual who is a resident of one of the Contracting States
shall be exempt from tax in the other Contracting State as provided in subparagraphs
(a) through (f).
(a) Governmental employees.
(1) An individual receiving remuneration from government funds of the Contracting
State of which the individual is a citizen for labor or personal services performed
as an employee of governmental agencies or institutions of that Contracting State
in the discharge of governmental functions shall not be subject to tax on such remuneration
in that other Contracting State.
(2) Labor or personal services performed by a citizen of one of the Contracting
States shall be treated by the other Contracting State as performed in the discharge
of governmental functions if such labor or personal services would be treated under
the internal laws of the first Contracting State as so performed. However, it is
understood that persons engaged in commercial activity, such as employees or representatives
of commercial organizations of the USA and employees or representatives of the foreign
trade organizations of the USSR, shall not be considered in the USSR and USA respectively
as engaged in the discharge of governmental functions.
(3) The provisions of this Convention shall not affect the fiscal privileges of
diplomatic and consular officials under the general rules of international law or
under special agreements.
(b) Participants in programs of intergovernmental cooperation.
An individual who is a resident of one of the Contracting States and who is temporarily
present in the other Contracting States under an exchange program provided for by
agreements between the governments of the Contracting States on cooperation in various
fields of science and technology shall not be subject to tax in that other Contracting
State on remuneration received from sources within either Contracting State.
(c) Teachers and researchers.
(1) An individual who is a resident of one of the Contracting States and who is
temporarily present in the other Contracting State at the invitation of a governmental
agency or institution or an educational or scientific research institution in that
other Contracting State for the primary purpose of teaching, engaging in research,
or participating in scientific, technical or professional conferences shall not
be subject to tax in that other Contracting State on his income from teaching or
research or participating in such conferences.
(2) Subparagraph (1) shall not apply to income from research if such research is
undertaken primarily for the benefit of a private person or commercial enterprise
of the USA or a foreign trade organization of the USSR. However, subparagraph (1)
shall apply in all cases where research is conducted on the basis of intergovernmental
agreements on cooperation.
(d) Students.
An individual who is a resident of one of the Contracting States and who is temporarily
present in the other Contracting State for the primary purpose of studying at an
educational or scientific research institution or for the purpose of acquiring a
profession or a specialty shall be exempt from taxes in the other Contracting State
on a stipend, scholarship, or other substitute type of allowance, necessary to provide
for ordinary living expenses.
(e) Trainees and specialists.
An individual who is a resident of one of the Contracting States, who is temporarily
present in the other Contracting State for the primary purpose of acquiring technical,
professional, or commercial experience or performing technical services, and who
is an employee of, or under contract with, a resident of the first mentioned Contracting
State, shall not be subject to tax in that other Contracting State on remuneration
received from abroad. Also, such individual shall not be subject to tax in that
other Contracting State on amounts received from sources within that other Contracting
State which are necessary to provide for ordinary living expenses.
(f) Duration of exemptions.
The exemptions provided for under subparagraphs (b), (c), (d), and (e) of this article
shall extend only for such period of time as is required to effectuate the purpose
of the visit, but in no case shall such period of time exceed:
(1) One year in the case of subparagraphs (b) (Participants in programs of intergovernmental
cooperation) and (e) (Trainees and specialists);
(2) Two years in the case of subparagraph (c) (Teachers and researchers); and
(3) Five years in the case of subparagraph (d) (Students).
If an individual qualifies for exemption under more than one of subparagraphs (b),
(c), (d), and (e), the provisions of that subparagraph which is most favorable to
him shall apply. However, in no case shall an individual have the cumulative benefits
of subparagraphs (b), (c), (d), and (e) for more than five taxable years from the
date of his arrival in the other Contracting State.
2. General exemptions.
Income derived by an individual who is a resident of one of the Contracting States
from the performance of personal services in the other Contracting State, which
is not exempt from tax in accordance with paragraph 1 of this article, may be taxed
in that other Contracting State, but only if the individual is present in that other
Contracting State for a period aggregating more than 183 days in the taxable year.
Treasury Department Technical Explanation
of the Convention
Article VI: Exemptions for Individuals
[Overview]
This article contains most of the exemptions which are granted by the Convention
to individuals. The exemptions correspond to the exemptions for individuals that
are granted in our existing conventions, except that a few of the exemptions are
broader than the comparable exemptions in the existing conventions. In addition,
the comparable exemptions in our existing conventions are usually contained in several
articles instead of in one article. None of the exemptions contained in this article
are available to an individual who is a citizen of the taxing State, because of
the operation of Article VII (Saving Clause for Citizens).
Governmental employees
Subparagraph (a) of paragraph 1 of this article exempts from taxation by one of
the Contracting States remuneration paid by the other Contracting State to an individual
who is a citizen of that other Contracting State for labor or personal services
performed as an employee of a governmental agency or institution of such other State
in the discharge of governmental functions. Subdivision (2) of subparagraph (a)
states further that labor or personal services shall be considered as performed
in the discharge of governmental functions if so treated by the law of the State
of which the individual is a citizen, but the subdivision makes clear that individuals
who are engaged in commercial activities are not considered to be engaged in the
discharge of governmental functions.
While most citizens of the Soviet Union work indirectly for the Soviet government,
most would not qualify for exemption from tax in the United States under subparagraph
(a) because they do not work directly for a governmental agency or institution of
the Soviet Union, and many of those who do would still not be entitled to exemption
under subparagraph (a) because they are engaged in commercial activity. For example,
employees of Aeroflot, the commercial passenger airline operated by the Soviet government,
would not be entitled to exemption under subparagraph (a) even if they were directly
employed by a Soviet governmental agency or institution. Normally, therefore, a
Soviet citizen would have to work for a Soviet government ministry in order to qualify
for the exemption. The determination whether a particular activity is a "commercial
activity" would be made, for purposes of ascertaining whether an individual resident
of the Soviet Union qualified under subparagraph (a) for exemption from tax, in
accordance with the principles set forth in Rev. Rul. 66-73, 1966-1 C.B. 174. See
the last paragraph of the commentary under Article II (Definitions), above.
Subdivision (3) of subparagraph (a) makes clear that the fiscal privileges granted
to diplomatic and consular officials under the general rules of international law
or under special agreements are not affected by the Convention.
Participants in programs of intergovernmental cooperation
Subparagraphs (b) and (f)(1) of paragraph 1 provide that a resident of one Contracting
State who is temporarily present in the other Contracting State under an exchange
program provided for by an agreement between the national governments of the Contracting
States on cooperation in various fields of science and technology shall not be subject
to tax in such other State on remuneration received from sources within either State,
for a period not exceeding one year. If the individual's visit as a participant
in such a program exceeds one year, the exemption applies to the income received
by the individual before the expiration of such one-year period. However, the remuneration
must be received in connection with the individual's participation in such exchange
program. The exemption in this subparagraph differs somewhat from comparable exemptions
that are included in our recent income tax conventions. Those conventions generally
provide that residents of one State who are temporarily present in the other State
for up to one year for the primary purpose of training, research or study as a participant
in a program sponsored by that State, shall be exempt from tax by that State on
up to $10,000 in income from personal services in respect of such training, research,
or study. See, for example, Article 16(3) of our convention with Norway.
The exemption granted by subparagraph (b) of paragraph 1 of this article of the
Convention, however, applies only if the individual who is a resident of one State
is present in the other State pursuant to an intergovernmental agreement on cooperation
(of which thirteen are now in effect between the United States and the Soviet Union),
whereas under our recent conventions an individual can qualify for exemption in
certain situations where no such agreement exists. On the other hand, the exemption
granted by subparagraph (b) is broader than the comparable exemption in our recent
conventions in that the exemption can apply where an individual who is a resident
of one State participates in a program sponsored by a private organization in the
other State rather than a government agency of that State, so long as the program
is conducted pursuant to an international cooperation agreement. In addition, the
exemption granted by subparagraph (b) is somewhat broader in that there is no dollar
limitation on the amount of the exemption.
Teachers and researchers
Subparagraphs (c) and (f)(2) of paragraph 1 provide that an individual who is a
resident of one of the Contracting States and who is temporarily present in the
other Contracting State at the invitation of a governmental agency or institution
or an educational or scientific research institution in that other State for the
primary purpose of teaching, engaging in research, or participating in scientific,
technical or professional conferences is exempt from tax in that other State on
his remuneration from such activities for a period not exceeding two years. If the
individual's visit as a teacher or researcher exceeds a period of two years, the
exemption still applies to the income received by the individual before the expiration
of such two-year period. Similar results are reached under our recent income tax
conventions. In the case of researchers, the exemption granted by subparagraph (e)
does not apply to income from research undertaken primarily for the benefit of a
private person, including a commercial enterprise in the case of the United States,
and a foreign trading organization in the case of the Soviet Union. Nevertheless,
income from research conducted pursuant to an intergovernmental agreement on cooperation
would still be exempt, regardless of the beneficiary of the research.
Pursuant to the exchange of letters between the Soviet Union and the United States,
it is agreed that the exemption accorded researchers and teachers shall extend to
journalists and correspondents with respect to compensation received from abroad
for periods not exceeding two years. For this purpose it is not necessary that the
correspondents be invited by the host state, and it does not matter whether they
are employed by a private person or commercial enterprise. Such an exemption is
not contained in any of our existing income tax conventions, but it was agreed to
in this case for two reasons. First, both the United States and the Soviet Union
retain income tax jurisdiction over their nonresident citizens, unlike most other
countries. Second, the Soviet Union exempts foreign correspondents working in the
Soviet Union from Soviet income tax only if a particular correspondent's country
of citizenship also exempts Soviet correspondents working in that country from its
income tax, and most foreign countries with correspondents working in the Soviet
Union have granted such an exemption to Soviet correspondents under their internal
law. Therefore, an individual resident of the United States who works as a correspondent
in the Soviet Union will be exempt from Soviet income tax for two years by reason
of the Convention, in the same manner as correspondents from third countries are
now exempt.
Students
Under subparagraphs (d) and (f)(3) of paragraph 1, stipends, scholarships, and other
substitute types of allowances (including gifts and grants) received by a resident
of one of the Contracting States who is temporarily present in the other Contracting
State for the primary purpose of study at an educational or scientific research
institution or securing training for qualification in a profession or specialty
shall be exempt from taxation in such other Contracting State for a period not exceeding
5 years. If the individual's visit as a student exceeds a period of 5 years, the
exemption still applies to the amounts received by the individual before the expiration
of such 5-year period. Similar results are reached under our recent income tax conventions.
However, the exemption only applies to such amounts as are necessary to provide
for the individual's ordinary living expenses (including tuition payments). Pursuant
to an exchange of letters, it was agreed that the amount exempted under subparagraph
(d) will not exceed, and will generally be less than, $10,000, or its equivalent
in rubles) for any taxable year and will be determined for students on a case-by-case
basis.
It is intended that where a resident of the Soviet Union qualifies for exemption
under subparagraph (d) of paragraph 1, and under section 117 of the Internal Revenue
Code, the more favorable exemption is to be applied, but not both at the same time.
For example, an individual who received a fellowship grant of $12,000 would not
be entitled to the exemption of $3,600 which is granted by sections 117(a) and (b)(2)(B)
of the Internal Revenue Code, in addition to the exemption of $10,000 (or such lesser
amount as may be applicable) under the Convention.
Trainees and specialists
Subparagraph (e) of paragraph 1 grants an exemption to an individual who is a resident
of one State and who is temporarily present in the other State for the primary purpose
of acquiring technical, professional, or commercial experience or for the primary
purpose of performing technical services, provided that the individual is an employee
of, or under contract with, a resident of the first State. However, the exemption
is limited to remuneration received from abroad from the resident of the first State
of which the individual is an employee or with which he is under contract, and to
amounts which are necessary to provide for ordinary living expenses, and which are
received from sources within the State where the individual acquires such experience
or performs technical services. In addition, it was agreed in the exchange of letters
that the exemption for amounts necessary to provide for ordinary living expenses
may not exceed $10,000 or its equivalent in rubles.
The exemption in subparagraph (e) is limited by subparagraph (f)(i) to a period
of one year, although an individual who remained more than one year would still
qualify for the exemption during the first year of his presence in the other State.
The exemption granted in subparagraph (e) to trainees and specialists is somewhat
broader than the comparable exemption in our existing treaties. Not only is the
$10,000 limit on the exemption for living expenses greater than the similar exemption
in our recent treaties (which is usually limited to $5,000), but the exemption is
granted to individuals who perform technical services in the other State as well
as trainees who are there for the primary purpose of acquiring experience. The exemption
for individuals performing technical services is expected primarily to benefit U.S.
technicians who assist in the installation and operation of U.S. equipment in the
Soviet Union.
Duration of exemptions
Subparagraph (f) of paragraph 1 provides that the exemptions in subparagraphs (b)
through (e) are limited to the time required to effectuate the purpose of the visit,
but may in no case be longer than the periods specified. If an individual qualifies
for exemption under more than one of these provisions, the provision most favorable
to him shall be considered to apply. In no case, however, shall the cumulative benefit
of periods of exemption under such paragraph exceed 5 years from the date of the
individual's arrival.
Other individuals
Paragraph 2 of this article provides that, except for the exemptions specified above
in paragraph 1, income derived by an individual resident of one State from the performance
of personal services in the other State, may be taxed in that other State only if
the individual is present in that other State for a period aggregating more than
183 days in the taxable year. This paragraph applies to the salary of any individual
who works as an employee, and any self-employed individual (including a member of
a partnership) who performs professional services rather than commercial services
covered by the rules in paragraph 1 of Article IV (Representation). For this purpose
the term "professional services" includes independent, scientific, literary, artistic,
educational or teaching activities, as well as the independent activities of physicians,
lawyers, engineers, architects, dentists and accountants, to the extent that any
such activities are not specifically covered by subparagraph (b) through (e) of
paragraph 1 of this article.
The exemption granted by paragraph 2 is somewhat broader than the comparable exemption
in our existing income tax conventions. Although most other conventions require
(as does paragraph 2 of this article) that an individual resident of one State must
be present in the other State for less than 183 days during a year in order for
his income from the performance of personal services to be exempt from tax in that
other State, certain additional tests must usually be satisfied where the individual
works either as an employee or where he is self-employed.
INCOME TAX TREATY BETWEEN THE UNION OF SOVIET SOCIALIST
REPUBLICS AND THE UNITED STATES
Article VI--Teachers and Researchers
Revenue Procedure 93-22
I am a resident _______________________________(Insert the name of the C.I.S. member).
I am not a United States citizen. I have not been lawfully accorded the privilege
of residing permanently in the United States as an immigrant. I understand that
the period during which I claim this exemption, will not count toward satisfaction
of any U.S. residency requirement which may be imposed upon me should I seek to
become a citizen of the United States.
I have accepted an invitation by a governmental agency or institution in the United
States, or by an educational or scientific research institution in the United States,
to come to the United States for the purpose of teaching, engaging in research,
or participating in scientific, technical, or professional conferences at ___________________________
(insert the name of the governmental agency or institution, educational or scientific
institution, or organization sponsoring a professional conference), which is a governmental
agency or institution, an educational or scientific institution, or an organization
sponsoring a professional conference. I will receive compensation for my teaching,
research, or conference activities.
The teaching, research, or conference compensation received during the entire taxable
year (or during the period from ____________ to __________) qualifies for exemption
from withholding of federal tax under the tax treaty between the United States and
the Union of Soviet Socialist Republics. I have not previously claimed an income
tax exemption under that treaty for income received as a teacher, researcher, conference
participant, or student before the date of my arrival in the United States.
Any research I perform will not be undertaken primarily for the benefit of a private
person or commercial enterprise of the United States or a foreign trade organization
of the Union of Soviet Socialist Republics, unless the research is conducted on
the basis of intergovernmental agreements on cooperation.
I arrived in the United States on _____________________ (insert the date of your
last arrival in the United States before beginning the teaching, research, or conference
services for which exemption is claimed). The treaty exemption is available only
for compensation received during a period of two years beginning on that date.
_________________________________
Signature
C.I.S. Members are Armenia, Azerbaijan,
Belarus, Georgia, Kyrgyzstan, Maldive, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.
|
