US Green Card holders
U.S. permanent residents, also known as Green Card holders are taxed in a way similar to U.S. citizens, but there are some differences. The most notable difference is that green card holders may sometimes elect to be treated as non-residents for US tax purposes if they live in a country that has a comprehensive tax treaty with the United States, and have little or no ties to the United States other than the permanent residency document, i.e. the Green Card. This is because most U.S. tax treaties contain a tie-breaker rule that can be applied specifically to U.S. Green Card holders.
Therefore, a Green Card holder who resides in a tax treaty country may elect under the treaty to be treated as a non-resident for U.S. tax purposes and avoid the requirement to declare their worldwide income to the U.S. Internal Revenue Service (IRS). Click here for a list of countries that have an income tax treaty with the United States.
The fact that a U.S. permanent resident lives in a treaty country does not automatically relieve him from the requirement to file a tax return and declare worldwide income. A tax treaty position has to be disclosed to the IRS by annually filing Form 8833 “Treaty-Based Return Position Disclosure under Section 6114 or 7701(b)”. Individuals who fail to properly disclose a position under a tax treaty may be subject to a penalty of $1,000. Furthermore, the treaty benefit may be denied if the form is not timely filed.
If you as a U.S. permanent resident and you need help with your U.S. tax compliance requirements, or you believe that you may benefit from declaring yourself as a non-resident for U.S. tax purposes, we would be glad to discuss.
Please click here to complete our information request form and one of our U.S. tax specialists will be in touch with you shortly.