Non-U.S. persons must pay U.S. tax on certain kinds of income they receive from U.S. sources. Typically, the income is taxed at a flat rate of 30%. The only way for this tax to be alleviated is if an income tax treaty exists between the U.S. and another country and that treaty authorizes a lower rate of tax.

You might be wondering how the United States collects this tax. For example, the non-U.S. person might decide not to pay it, thus thumbing his nose at the government. In that case, does the U.S. government dispatch secret service agents to all four corners of the globe to track down the tax evader, who may owe only a small amount of tax? Of course not. The U.S. knows all too well that it would be a waste of time and resources to take on the role of a bounty hunter. Read More