How Tax Treaties Reduce Withholding
The US has tax treaties with more than 60 countries. These treaties can reduce or eliminate federal income tax withholding on wages, scholarships, and other income for residents of the treaty country. The treaty applies based on the employee's country of tax residence — not citizenship or visa type.
Without a treaty, nonresident aliens are taxed at graduated rates on effectively connected income (wages) and 30% on fixed, determinable, annual, or periodical (FDAP) income (scholarships, interest, dividends).
Common Treaty Countries and Wage Provisions
| Country | Article | Wage Exemption | Time Limit | Notes |
|---|---|---|---|---|
| China (PRC) | Article 20 | Full exemption | 5 years | Applies to students/trainees; most widely used |
| India | No student article | None for wages | N/A | India treaty does not have an Article 20-type provision; no wage exemption for students |
| South Korea | Article 21 | Full exemption | 5 years | Similar to China; students/trainees |
| Germany | Article 20 | Full exemption | 4 years | Students and business apprentices |
| France | Article 21 | Full exemption | 5 years | Students/trainees; teaching/research exemption also available |
| Canada | Article XXI | Full exemption | No limit | Student and apprentice exemption; other conditions apply |
| UK | Article 20 | Full exemption | 2 years | Students only; shorter window than most |
| Japan | Article 20 | Full exemption | 5 years | Students/business apprentices |
| Mexico | Article 20 | Full exemption | 5 years | Students/trainees |
| Netherlands | Article 20 | Full exemption | 5 years | Students/apprentices |
The India Exception
Indian students frequently ask about treaty benefits, and payroll teams sometimes incorrectly believe they apply. The US-India tax treaty does not contain a student/trainee wage exemption comparable to the China Article 20 provision. Indian F-1 students are taxed at standard NRA rates on wages. The treaty does contain other provisions (reduced rates on interest, dividends) but not the wage exemption that most students are asking about.
Teaching and Research Exemptions
Some treaties have separate provisions for teachers, professors, and researchers distinct from the student article. A postdoctoral researcher from Germany might qualify under the research exemption rather than (or in addition to) the student article. These provisions often have different time limits and conditions. The NRA Tax Wizard evaluates both types when applicable.
Tax Treaty vs. Tax Residency
A critical point: once an employee becomes a US resident alien (through the green card test or substantial presence test), treaty provisions for students and temporary workers generally no longer apply. The employee must now file a W-4 and be taxed as a US person. Treaties still apply for other purposes (e.g., reduced dividend withholding for investments) but the employment-specific student article provisions do not.
Always Verify the Current Treaty
Treaties change, and some have been suspended. Always verify the current treaty text at IRS.gov Publication 515 or the IRS Tax Treaties page. The table above reflects general provisions as of early 2026 but should not substitute for checking the current treaty text for specific determinations.