Treaty-Based Return Position Disclosure

Treaty-Based Return Position Disclosure

A Treaty-Based Return Position Disclosure is a requirement for certain taxpayers to disclose their position in claiming tax treaty benefits on their income tax returns. This disclosure is necessary when a taxpayer is relying on a tax treaty between their country of residence and the United States to reduce or eliminate their tax liability on certain types of income, such as dividends, interest, or royalties.

This disclosure involves providing specific information about the treaty provisions relied upon, the nature of the income, and the reasons for claiming the treaty benefit. Failure to make this disclosure can result in penalties or disallowance of the treaty benefits. For example, if a foreign national receives U.S.-sourced income and claims a reduced withholding tax rate under a tax treaty, they must disclose this position to comply with IRS requirements.