“Treaty benefits” refer to tax benefits available under an income tax treaty between the U.S. and another country. These treaties are in place to prevent double taxation and set the U.S. withholding tax rate on certain types of income — typically dividends, interest, or capital gains.
A few key points:
- Treaty benefits only apply if your country has a tax treaty with the U.S. Each treaty has its own rules and rates. (The IRS publishes the full list of treaty countries.)
- Treaty benefits apply only to certain income types; For example:
- Dividends
- Interest
- Royalties
Claiming treaty benefits does not mean you owe U.S. tax. It simply tells the IRS whether a treaty rate could apply if withholding ever becomes relevant.
In practice: Most venture fund investors do not fill out the treaty section unless a tax advisor tells them they qualify. The form can be submitted without claiming treaty benefits.
If you’re unsure: It’s best to review the official IRS instructions or consult a tax advisor, since eligibility depends on your specific circumstances and jurisdiction.