Is W-8BEN the Tax Withholding Form For non-resident Alien ?

Question

A non-resident alien ( i.e. not a U.S. person) living in and a citizen of Greece will soon draw a pension from an American company based on his work in the U.S a number of years ago. The treaty between the US and Greece provides that there is no US tax due on any income under $10,000 a year. Since the pension will be under $10,000, presumably there is no tax due. If that is true, then there should be no withholding from his pension check. Ordinarily, I would say use a W4P to exclude have any deduction for income tax. However, based on my search of the U.S Treasury/IRS web site, it appears that this person should use form W-8BEN and use lines 9 and 10 "to claim a 0% rate of withholding". Do I have that correct?

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A.G. Kalman · Accepted Answer

You are looking at the wrong treaty article. You are looking at Article X that deals with compensation for personal services. You want Article XI that deals with private pensions. As the individual is not a US citizen, US National or US Resident Alien, Article XI states that any pension paid by the US to a resident of Greece for services rendered previously in the US is not taxable by the US. Use the W-8BEN to claim exemption, but quote Article XI.

Arnie Goetchius · Answer

Thanks for the correction. I will cite Article XI.

cballard · Answer

The $10,000 amount in the US-Greece Tax Treaty only applies to amounts earned for personal services. There's a different section of the treaty that deals with pension distributions. The provisions of that section say that private pensions derived from within the US by an individual who is a resident of Greece shall be exempt from taxation by the US. W-8BEN is the proper form to claim a reduced withholding rate under the terms of the treaty.

--Chris

Is W-8BEN the Tax Withholding Form For non-resident Alien ?

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