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Tax Treaty

A tax treaty is an agreement between two countries to resolve issues involving double taxation of various types of income. Tax treaties generally determine which country can tax certain items of income. If the country can tax the income, the treaty can also specify how much tax can be applied against the income. Under these treaties U.S. citizens who are residents of foreign countries can receive some tax benefits, but generally are not exempt from paying tax on most items of income for U.S. tax purposes.