Taxation of Employees of Foreign Governments
International Tax Attorneys Ainer & Fraker, LLP (800) 775-7612 discuss Tax Issues Pertaining to Employees of Foreign Governments
Wages Paid to Employees of Foreign Governments
If you are an employee of a foreign government (including foreign municipalities) your wages are exempt from U.S. income tax by:
- A provision in a tax treaty or consular convention between the United States and their country, or
- Meeting the requirements of U.S. tax law
Employees of international organizations can only exempt their wages from U.S. income tax by meeting the requirements of U.S. tax law.
This exemption applies only to pay received for services performed for a foreign government or international organization. Other U.S. income received by persons who qualify for this exemption may be fully taxable or given favorable treatment under an applicable tax treaty provision.
Exemption Under Tax Treaty
If you are from a country that has a tax treaty with the United States, you should first look at the treaty to see if there is a provision that exempts your income. The income of U.S. citizens and resident aliens working for foreign governments usually is not exempt. However, in a few instances, the income of a U.S. citizen with dual citizenship may qualify. Often the exemption is limited to the income of persons who also are nationals of the foreign country involved.
Exemption Under Tax Treaty — Resident Aliens From France
If you are a U.S. resident receiving wages and pensions for governmental services performed for the government of France, you are allowed a credit for taxes paid to France on this income.
Exemption Under U.S. Tax Law
Employees of foreign governments who do not qualify under a tax treaty provision and employees of international organizations may qualify for exemption by meeting the following requirements of U.S. tax law:
- Employees of Foreign Governments
- If you are not a U.S. citizen, or if you are a U.S. citizen but also a citizen of the Philippines, and you work for a foreign government in the United States, your foreign government salary is exempt from U.S. tax if you perform services similar to those performed by U.S. Government employees in that foreign country and that foreign government grants an equivalent exemption.
- To qualify for the exemption under U.S. tax law, the U.S. Department of State must certify to the U.S. Department of the Treasury that the foreign government for which you perform services in the United States grants an exemption to the employees of the Government of the United States performing services in such foreign country similar to those you perform in the United States. However, see the Aliens Who Keep Immigrant Status section below for a special rule that may affect your qualification for this exemption.
CAUTION. The exemption under U.S. tax law applies only to current employees and not to former employees. Pensions received by former employees living in this country do not qualify for exemption.