Non-resident alien

A Non-Resident Alien (NRA) is a person who is not a citizen, not a national, and does not meet the residency requirements of a country for tax purposes. Essentially, they are foreigners who earn income in a country where they neither reside nor hold citizenship.

Key Points:

1. Limited Tax Liability: NRAs are taxed only on income earned within that country. Income from outside the country is generally not taxed there.
2. Difference from Residents:
3. Residents pay tax on worldwide income.
4. Non-resident aliens pay tax only on domestic-sourced income.

Common Examples:

1. Foreign employees working temporarily in another country
2. International students earning part-time income
3. Foreign investors receiving interest or dividends

Example:

A Japanese citizen works in the US for only 3 months in a year. They are treated as a Non-Resident Alien for US tax purposes and are taxed only on income earned in the US. Their income from Japan is not taxed in the US.