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United States - Overview and introduction

United States - Overview and introduction

Taxation of international executives

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United States

United States

In the United States (US), residents are generally taxed on their worldwide compensation regardless of where or for whom the services are performed. Compensation includes cash remuneration and the fair market value of property or services received. Special exclusions may apply to the foreign earned income of a citizen or resident for services performed in a country/territory other than the United States.

Non-residents are subject to US tax on income from US sources. US-source income that is not effectively connected with a US trade or business (generally investment income) is taxed on a gross basis at a flat 30-percent rate, unless a treaty provides for a lower rate. A non-resident engaged in a trade or business within the United States during the taxable year is taxed on the income effectively connected with the US trade or business, less allowable deductions, at the same graduated rates that apply to the income of citizens and residents. Generally, income effectively connected with a US trade or business includes compensation for personal services performed in the United States.

A foreign national who changes from US resident status to non-resident status or vice versa during a year (a dual-status taxpayer) is subject to US tax as if the year were divided into two separate periods, one of residence and one of non-residence. The dual-status foreign national is generally subject to tax on worldwide income for the period of residence, and only on US-source income for the period of non-residence.

Under domestic law, if a non-resident is in the United States for 90 days or less during a calendar year, performs services for a foreign employer that is not engaged in a US trade or business, and earns 3,000 US dollars (USD) or less for such US services, the compensation is treated as foreign source and is not subject to US tax. Most treaties provide broader exemptions from US tax for earned income, allowing a higher, or no, limit if the non-resident is present in the United States for no more than 183 days during a 12-month period, provided certain requirements are met.

Federal income tax rates range from 10 percent to 37 percent.

The official United States currency is the United States Dollar (USD).

For the purposes of this publication, the host country/territory refers to the country/territory to which the employee is assigned. The home country/territory refers to the country/territory where the assignee lives when they are not on assignment.

This publication reflects United States law as it was in effect at 1 January 2019. Note that certain thresholds and benefits are adjusted annually for inflation.

Footnote

1For purposes of this publication, the term "non-resident" is understood to mean a person who is neither a citizen nor resident of the United States.

© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.KPMG International Cooperative (“KPMG International”) is a Swiss entity.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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