The Treasury Explanation for this treaty notes that it does apply to social security taxes. See Section VIII below. State Taxes Tax treaties may apply indirectly to state income taxes because of the interrelationship between federal income and the income that is taxable for state tax purposes. Each state s tax laws must be reviewed to determine whether treaty- exempt income is exempt from state income taxes as well. C. Persons Covered 1.
Tax treaties apply to persons who are residents of one or both of the tax treaty countries.
The determination of residency for treaty purposes considers first a person s tax liability under the internal laws of the respective tax treaty country. Tax treaty definitions of residency make it clear that a person whose tax liability is only on income sourced in the treaty country is not treated as a resident for treaty purposes. The period during which a person must be a resident of the treaty country in order to claim treaty benefits varies with the treaty article under which the person is claiming benefits. Most treaty articles conferring treaty benefits on students, trainees, teachers, and researchers make it clear that the person must be a resident of the treaty country at the beginning of the visit. Most other articles require the person claiming treaty benefits to be a resident of the treaty country throughout the benefit period.