Unique Treaty Provisions (continued)

People's Republic of China

The U.S. tax treaty with the People's Republic of China has provisions that are available to both nonresident and resident aliens. It states that a scholar is exempt from tax on earned income for three years. After two years, a scholar will become a resident alien for tax purposes, but is still entitled to one more year of tax benefits under the treaty.

Most countries' scholars can receive more than one two-year exemption by waiting three years after their current exemption to return to the United States. Chinese scholars are only allowed three years of treaty benefits during their lifetime.

A student from the People's Republic of China is also entitled to the $5,000 exemption each year for the amount of time reasonably necessary to complete education or training. Students will become resident aliens for tax purposes after five years, but would still be entitled to the treaty benefit as long as they remain students.