Tax info for nonresident aliens in the US

[davebytheway]

I've been looking at the tax information on the boards in the last couple of weeks, trying to find information on taxes on gambling for nonresident aliens within the US. Since I couldn't find anything here, I thought I'd post what I found out elsewhere. After all, this is my first post, and I want to set a high tone for content, so I can gradually lower it in the future... [img]/images/graemlins/tongue.gif[/img]

From the IRS (Income note 28) "In general, nonresident aliens are subject to NRA withholding at 30% on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U.S. trade or business and is not exempted by treaty."

3 things to note:

1) This applies to winnings in the US. Other documents refer to US sources. The only examples I found refer to B&M casinos within US territory. I have no idea if online, offshore poker rooms fall into this category; one for a tax advisor I guess... [img]/images/graemlins/confused.gif[/img]

2) The rule refers to winnings, NOT net winnings. Unlike US residents and Canadian citizens, other nonresident aliens cannot offset gambling losses against winnings (the net winnings rule is shown for US residents elsewhere, and for Canadian citizens it is specifically stated in Income Note 28). I have seen this rule stated elsewhere in other IRS documents. This of course leaves all nonresident poker players screwed [img]/images/graemlins/frown.gif[/img], unless:

3) Certain citizens do not have to pay taxes on gambling winnings in the US, due to tax treaties. From Income Note 28: "Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom."

So good news for me as a UK citizen. [img]/images/graemlins/grin.gif[/img]

Anyway, I hope someone finds this useful. Note that people use this advice at their own risk and I take no responsibility for any problems faced by someone using it and blahblahblah....

[Rudbaeck]

[ QUOTE ]
1) This applies to winnings in the US. Other documents refer to US sources. The only examples I found refer to B&M casinos within US territory. I have no idea if online, offshore poker rooms fall into this category; one for a tax advisor I guess... [img]/images/graemlins/confused.gif[/img][/i]

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Shockingly enough US laws only apply on US territory. And as far as I know none of the online poker rooms are actually set up in the US, they mostly operate out of whatever banana republic they favour the most.

It seems common to also set up their banking department in yet another country. (Prima is licensed in the Kawhanake Territoris in Canada, but I've gotten all checks from them from Lebanon.)

As UK citizens don't have to pay taxes on casino winnings it's pretty safe to assume you are spotless.

If you, dear reader, is from some country with draconic taxes on gambling I warmly recommend Swiss banking if you are a huge winner and don't actually need the money right now. Swiss banks will close shortly after Hell freezes over.

[fluff]

[ QUOTE ]
3) Certain citizens do not have to pay taxes on gambling winnings in the US, due to tax treaties. From Income Note 28: "Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom."


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Sweet jumping jimminy! This is the BEST post I've read here, and it's going to save me a rediculous amount of money!

Any further comments on how to apply this tax exemption if one is elligible? Ie. is there paper work involved or do I just not claim the winnings? (I imagine the first case is true). Also how does this apply to monies already witheld, such as B&M tourney winnings?

Thanks a bunch for the post!

[davebytheway]

You're welcome

For money won online, I'm simply not going to show it in my tax return (not that I file a tax return anyway, since I work for an international organisation). As far as I understand it, you would only need to file in order to claim back withheld taxes (e.g. from a B&M casino tournament). However, you're probably best checking with a tax consultant...

For monies already withheld: Income Code 28 (not Income Note 28 as I mistakenly called it in the original post) refers to the need for a W-8BEN form - this is the one you use to claim reduced withholding taxes under a tax treaty (e.g. when you set up a brokerage account). You can download this form from the IRS website.

"Claimants must give you a Form W-8BEN (with a valid U.S. TIN) to claim treaty benefits on gambling income that is not effectively connected with a U.S. trade or business."

"Expedited TIN
Regulations generally provide that a taxpayer identifying number (TIN) must be furnished on a Form W-8BEN or Form 8233 (Fill-in PDF) in order for a foreign individual to obtain the benefit of reduced withholding under an income tax treaty. The U.S. Treasury Department and the IRS have recently become aware, however, of certain unusual cases where an unexpected payment to a nonresident alien individual claiming treaty benefits arises on short notice. In general, a foreign individual receiving such an unexpected payment currently may be unable to obtain a TIN prior to payment. In such a case, unless the foreign individual already has a TIN, the withholding agent would be required to withhold tax at the 30 percent rate, rather than the treaty rate, and the foreign individual would be required to file for a refund in order to obtain the benefits of the income tax treaty. To alleviate this filing burden on foreign individuals, IRS is putting in place administrative procedures that will allow certain withholding agents, who also are acceptance agents and who make unexpected payments to foreign individuals, to apply for and obtain an individual taxpayer identification number (ITIN) for such individuals on an expedited basis."