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University of Connecticut Payroll Department

Taxation of Foreign Students

Foreign nationals who enter the United States for the primary purpose of attending an educational institution are issued either an F-1, J-1, M-1, or Q-1 visa. At the University of Connecticut, our foreign national students will arrive in either an F-1 or J-1 student status. The immigration status will be denoted on the I-94 arrival/departure card. Foreign students are authorized to work on campus incident to their status and receive remuneration for personal services, which is considered compensation. The compensation received will be subject to both federal and Connecticut state income taxes. In order to determine how and at what rate taxes will be applied, the Payroll Department must first determine tax residency.

Step 1

In order for a student to be considered a non-resident for tax purposes they must NOT pass the substantial presence test. The substantial presence test is used to determine tax residency by counting an individual’s days of presence in the United States. Students in F-1 and J-1 student statuses are considered “exempt” from the substantial presence test as they do not count days of presence in the United States for the first 5 calendar years. Please note that the 5 year period is not consecutive and even 1 day of presence as an “exempt” individual causes the entire calendar year to be counted. If you were once present in a dependant F-2 status, this time also counts towards the 5 calendar year student exemption. In the 6th calendar year of presence, as long as the foreign national student is present in the US for 183 days in the sixth year, the individual will be considered a tax resident for that calendar year.

Step 2

If it is determined that the foreign student is a non-resident for tax purposes, the Payroll Department will then verify tax treaty eligibility. The United States has income tax treaties with many foreign countries. Under these treaties, residents (not necessarily citizens) of the foreign country are taxed at a reduced rate, or may even be exempt from federal taxes. Each treaty is different. If it is determined, based on information provided by the foreign national student, that he/she is eligible for tax treaty benefits, the appropriate Internal Revenue Service form 8233 (Exemption from withholding on Compensation for Independent Personal Services of a Non-Resident Alien Individual) will be completed for the foreign national student’s signature. The federal tax exemption will begin with the next payroll cycle, and continue until the terms of the tax treaty agreement have been met. Once the full exemption has been met, the standard non-resident graduated withholding rate will be applied. The standard rate is single (even if married), 1 withholding allowance, and the letters NRA written next to box 6. If the foreign national student is not eligible for a tax treaty benefit, the standard non-resident graduated withholding rate will be applied upon first payment.

For a general summary of tax treaties please click on the link below.

Tax Treaties for Foreign National Students
COUNTRY ARTICLE # EXEMPTION TIME LIMIT IMPORTANT NOTES
Bangladesh 21.1 $8,000.00 No Limit
Belgium 19 $9,000.00 No Limit
China 20.C $5,000.00 Reasonable Period
Cyprus 21.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Czech Republic 21.1 $5,000.00 5 elapsed years
Egypt 23.1 $3,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Estonia 20.1 $5,000.00 5 elapsed years
France 21.1 $5,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Germany 20.4 $9,000.00 4 elapsed years Benefit is lost retroactively if period is exceeded.
Iceland 22.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Indonesia 19.1 $2,000.00 5 elapsed years
Israel 24.1 $3,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Korea 21.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Lativa 20.1 $5,000.00 5 elapsed years
Lithuania 20.1 $5,000.00 5 elapsed years
Morocco 18.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Netherlands 22.1 $2,000.00 Reasonable Period
Norway 16.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Pakistan XIII(1) $5,000.00 No limit Benefit ends when individual becomes a tax resident since there is no savings clause exception.
Philippines 22.1 $3,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Poland 18.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Portugal 23.1 $5,000.00 5 elapsed years
Romania 20.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Slovak Republic 21.1 $5,000.00 5 elapsed years
Slovenia 20.1 $5,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Spain 22.1 $5,000.00 5 elapsed years Benfit includes the personal allowance exemption amount. Therefore the benefit must be reduced.
Thailand 22.1 $3,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Trinidad 19.1 $2,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Tunisia 20 $4,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.
Venezuela 21.1 $5,000.00 5 taxable years Years are increased by the reasonable period required to complete post-graduate education.

Additional Information

Please note that the State of Connecticut does not recognize federal tax treaties. Students will be taxed in accordance with their CTW4 form election.

If it is determined that the foreign national student is a tax resident, the student will NOT be subject o the IRS prescribed standard non-resident withholding rate. The student may fill out the federal W-4 in a manner best suited for their personal situation. The federal W-4 form offers instructions, or the following IRS on-line withholding calculator can also provide assistance.

Upon arrival at the University of Connecticut, foreign national student employees must contact Karla Desjardins to setup an appointment for assistance completing the necessary withholding forms.