US tax treaties and AI training income: how the mechanism works

What a tax treaty does

The IRS page on tax treaties explains that the United States has income tax treaties with a number of countries, under which "residents (not necessarily citizens) of foreign countries may be eligible to be taxed at a reduced rate or exempt from U.S. income taxes on certain items of income they receive from sources within the United States". It adds that the rates and exemptions "vary among countries and specific items of income".

Three details in that sentence matter for a remote contractor doing AI training work:

• Residence, not citizenship. A treaty follows where you are resident for tax purposes. The IRS says residency for treaty purposes is determined by the applicable treaty.
• US source income. Treaties deal with income from sources within the United States. Whether your pay is US source is covered in why US platforms withhold tax from non-US contractors.
• Item by item. A treaty treats different kinds of income differently, so you look for the article that covers your kind of income.

If the treaty does not cover a kind of income, or there is no treaty with your country, the IRS says the income is taxed under the ordinary rules for nonresidents.

How double taxation relief is framed

The IRS says treaty provisions are generally reciprocal, so they apply in both directions. It also advises examining the specific articles to see whether you are entitled to a tax credit, a tax exemption, a reduced rate of tax, or another treaty benefit or safeguard. How your own country taxes the same income, and what relief it gives, is a question for its rules and its tax authority, not the IRS.

Which article can apply to contractor pay

Publication 515 describes two patterns for independent contractors' pay for services performed in the United States. Under some treaties it is treated as business income under the business profits provisions. Under others it is exempt only if the contractor is present in the United States temporarily (usually not more than 183 days) and is a resident of the treaty country. The IRS tax treaty tables include a table on compensation for personal services performed in the United States that is exempt under treaties, with the article in each treaty cited.

How a treaty claim is made

The claim is made to the payer, before payment:

• Form W-8BEN, Part II. The instructions say you identify the country where you claim treaty residence on line 9, and that claiming certain treaty benefits requires a US taxpayer identification number or a foreign tax identification number.
• Form 8233. The IRS says Form 8233 is used by nonresident individuals to claim exemption from withholding on compensation for personal services because of a treaty, and Publication 515 says it is the form for a claim based on business profits or independent personal services provisions.

W-9 vs W-8BEN walks through the W-8BEN at a high level.

Reading your own treaty

The IRS keeps the full texts at United States income tax treaties, A to Z, with technical explanations for many of them. The page also notes that some US states do not honour treaty provisions.

For how platforms on this site handle tax in practice, see how you actually get paid.

Everything here describes how the IRS explains these rules; it is not tax advice. Check your own situation with a tax professional who knows both US rules and those of the country you live in.

Labeling Jobs does not give financial or tax advice.