Tax Treaty Case Law around the Globe 2021

S. 200I. Introduction

This case returns to the scope of treaty exemptions for researchers and specifically to the distinction between exempt grants or allowances and ordinary wages. United States courts have been regularly called on the matter in recent years. The issue in this case was whether remuneration in the form of wages might be eligible for exemption from US taxation under Article 18 of the Convention for the Avoidance of Double Taxation between the United States and the Russian Federation (US-Russia Treaty) providing special provisions for students, trainees, and researchers. The payments that the petitioner received for his research were classified and reported as “wages” on a Form W-2 by a research institution and not as a “grant” or an “allowance” for which a Form 1099 is generally issued.

II. Facts of the Case

The petitioner in this case, Vitaly Nikolaevich Baturin (Mr Baturin), a Russian citizen, was offered and accepted a position of a research scientist at the Thomas Jefferson National Accelerator Facility (Jefferson Lab) operated by Jefferson Science Associates, LLC (JSA). Jefferson Lab researches the structure of matter in the universe. Mr Baturin’s role was to help to co...