Tax
Tax treaty
A tax treaty is a bilateral agreement between two countries that allocates taxing rights over cross-border income and reduces double taxation. US treaties commonly lower withholding rates on dividends, interest and royalties, and set the threshold at which business profits become taxable in the other country.
In plain terms: An agreement between two countries about who gets to tax what.
Why it matters
Whether your country has a US treaty, and what it says, changes the arithmetic of running a US company from abroad. Treaty benefits are not automatic: you generally claim them by providing Form W-8BEN or W-8BEN-E, and sometimes by filing a return.
Common misunderstanding
Assuming a treaty exists. Many countries with significant founder populations have no US income tax treaty at all.
Read the full guideInternational foundersRelated terms
Source: IRS — US tax treaties. This is a definition, not tax or legal advice — verify against the primary source before acting.