Services for Foreign Government
Pay for services performed as an employee of a foreign government, without regard to citizenship, residence, or where services are performed is not considered to be wages for purposes of withholding U.S. federal income taxes. These include services performed by ambassadors, other diplomatic and consular officers and employees, and nondiplomatic representatives. However, pay for services performed for a U.S. or Puerto Rican corporation owned by a foreign government is considered wages for purposes of withholding U.S. federal income taxes at the graduated rates.
Pay for services performed as an employee of a foreign government may also be exempt from gross income and reporting on the U.S. federal income tax return of such an employee if the conditions are met as described in IRC section 893. Please refer to Employees of Foreign Governments or International Organizations .For U.S. citizens the pay received for services performed as an employee of a foreign government is includible in their gross income and is reportable on their U.S. federal income tax returns, even though the pay may not be subject to withholding of U.S. federal income taxes.
For U.S. citizens the income paid for services rendered to a foreign government is reportable as self-employment income on their U.S. federal income tax returns, and is subject to self-employment tax to the extent such services are performed within the United States.
Services for International Organization
Subject to the provisions of section 1 of the International Organizations Immunities Act, remuneration paid for services performed within or without the United States by an employee for an international organization as defined in section 7701(a)(18) is excepted from wages and hence is not subject to withholding of U.S. federal income taxes. The term “employee” as used in the preceding sentence includes not only an employee who is a citizen or resident of the United States but also an employee who is a nonresident alien individual. The term “employee” also includes an officer. An organization designated by the President through appropriate Executive order as entitled to enjoy the privileges, exemptions, and immunities provided in the International Organizations Immunities Act may enjoy the benefits of the exclusion from wages with respect to remuneration paid for services performed for such organization prior to the date of the issuance of such Executive order, if (i) the Executive order does not provide otherwise and (ii) the organization is a public international organization in which the United States participates, pursuant to a treaty or under the authority of an Act of Congress authorizing such participation or making an appropriation for such participation, at the time such services are performed.
For U.S. citizens the income paid for services rendered to an international organization is reportable as self-employment income on their U.S. federal income tax returns, and is subject to self-employment tax to the extent such services are performed within the United States.
IRC Section 7701(a)(18) provides as follows:
"Sec. 7701. Definitions. (a) When used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof--
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"(18) International organization. The term ‘international organization’ means a public international organization entitled to enjoy privileges, exemptions, and immunities as an international organization under the International Organizations Immunities Act (22 U.S.C. 288-288f)." (e.g. United Nations, World Health Organization, World Food Program, etc.)
(3) Section 1 of the International Organizations Immunities Act provides as follows:
"Section 1. [International Organizations Immunities Act.] For the purposes of this title [International Organizations Immunities Act], the term ‘international organization’ means a public international organization in which the United States participates pursuant to any treaty or under the authority of any Act of Congress authorizing such participation or making an appropriation for such participation, and which shall have been designated by the President through appropriate Executive order as being entitled to enjoy the privileges, exemptions, and immunities herein provided. The President shall be authorized, in the light of the functions performed by any such international organization, by appropriate Executive order to withhold or withdraw from any such organization or its officers or employees any of the privileges, exemptions, and immunities provided for in this title (including the amendments made by this title) or to condition or limit the enjoyment by any such organization or its officers or employees of any such privilege, exemption, or immunity. The President shall be authorized, if in his judgment such action should be justified by reason of the abuse by an international organization or its officers and employees of the privileges, exemptions, and immunities herein provided or for any other reason, at any time to revoke the designation of any international organization under this section, whereupon the international organization in question shall cease to be classed as an international organization for the purposes of this title.” [Reg. §31.3401(a)(5)-1.]
References/Related Topics
Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.
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