Many non-U.S. residents are confused about whether they need an ITIN Number if their home country does not have a tax treaty with the United States.

A common myth about ITIN and U.S. Tax Treaties is: “No tax treaty = no need for an ITIN.”
This is not true.

While tax treaties help reduce U.S. withholding tax rates, an ITIN serves a broader purpose: it is required for filing U.S. tax returns, claiming refunds, and staying compliant with IRS rules — even if your country has no treaty.

Let’s break this down with examples.

What Is Withholding Tax?

When foreign individuals earn money from U.S. sources, the IRS requires payers (employers, brokers, buyers) to withhold tax at the source.

  • The default rate is 30% for nonresidents.

  • With a tax treaty, this rate may drop (for example, to 10% or 15%).

  • With or without a treaty, you need an ITIN to:

    • File a U.S. tax return

    • Claim a refund if too much was withheld

    • Report U.S. income legally

Treaty vs. No Treaty: Why ITIN Still Matters

✅ Countries With a U.S. Tax Treaty (Example: Mexico)

  • A Mexican investor receives $1,000 in U.S. dividends.

  • Default withholding: 30% = $300.

  • Under the U.S.–Mexico tax treaty, the rate drops to 10–15%.

  • With an ITIN, the investor claims this reduced rate, saving $150–200 instantly.

 In treaty countries, ITIN = reduced tax upfront + refunds if overpaid.

❌ Countries Without a U.S. Tax Treaty (Example: Brazil)

  • A Brazilian investor also earns $1,000 in U.S. dividends.

  • No treaty means withholding stays at 30% = $300.

  • But with an ITIN, the investor can:

    • File a Form 1040-NR to reconcile taxes

    • Claim refunds in special cases (e.g., property sales under FIRPTA)

    • Prove compliance for U.S. tax purposes

 In non-treaty countries, ITIN = refunds + compliance, even if no reduced rate applies.

Country Examples

Mexico (Treaty Country)

  • Has a full tax treaty with the U.S.

  • ITIN allows reduced rates on dividends (10–15%), interest (10%), and royalties (10%).

  • Mexicans benefit both upfront (lower withholding) and at year-end (refunds if excess withheld).

Brazil (No Treaty)

  • No U.S.–Brazil tax treaty.

  • Brazilians face flat 30% withholding on U.S. income.

  • ITIN is still needed to:

    • File U.S. tax returns

    • Reclaim excess FIRPTA withholding when selling U.S. property

    • Report business or freelance income legally

UAE (No Treaty)

  • No U.S.–UAE treaty.

  • A UAE resident selling U.S. property worth $500,000 will face 15% = $75,000 FIRPTA withholding.

  • With an ITIN, they can file a U.S. return to show the actual gain was lower (say $50,000), and claim back most of the $75,000 withheld.

India (Treaty Country)

  • India has a treaty with the U.S.

  • Indian students may get exemptions on scholarships, and investors may get reduced dividend tax rates.

  • ITIN allows them to apply these treaty benefits.

Nigeria (No Treaty)

  • Nigeria has no U.S. tax treaty.

  • Nigerian freelancers working with U.S. companies face the 30% default withholding.

  • ITIN is necessary to file returns and attempt to reclaim refunds where overwithholding occurs.

When You Need an ITIN (With or Without Treaty)

  • Filing a U.S. tax return (Form 1040 or 1040-NR)

  • Selling U.S. property under FIRPTA

  • Claiming refunds for excess withholding

  • Being listed as a spouse or dependent on a U.S. taxpayer’s return

  • Reporting U.S. freelance, rental, or investment income

  • Claiming tax treaty benefits (if your country has one)

Common Misunderstanding

Many clients say: “I don’t need an ITIN because my country has no treaty.”

  • Reality: A treaty lowers your taxes, but an ITIN gives you access to file, claim refunds, and stay compliant.

  • Without an ITIN, you risk losing money to the IRS forever, since you cannot legally reclaim overpaid withholding.

Final Thoughts

  • With treaty countries (like Mexico, India, UK): ITIN helps you claim reduced withholding rates and refunds.

  • Without treaty countries (like Brazil, UAE, Nigeria): ITIN helps you file returns, reclaim excess FIRPTA withholding, and stay compliant.

Whether your country has a treaty or not, an ITIN is still essential if you have U.S. tax obligations.

At House of Bookkeepers (IRS-Certified Acceptance Agent), we help applicants worldwide apply for ITINs securely, without mailing passports to the U.S., and guide them on refunds and compliance.

📍 Learn more: houseofbookkeepers.com