Taxes

Exceptions to the substantial presence test (SPT)

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Exceptions to the substantial presence test. The code enumerates several exceptions to this general rule. In particular the following.

Commuters from Canada and Mexico

Article 7701, dealing with Canadian and Mexican commuters who regularly commute from their country to the United States for work reasons, establishes that for these subjects the days spent in the United States are not considered for the purposes of the substantial presence test.

The regulations in article 301.7701 state that, for the exception to be applied, it is required that the person commute for a percentage of more than 75% of the working days of the entire period of the assignment. Let’s assume a Mr Rossi, Mexican, who lives in Tijuana where he works for the company.

Let’s assume a Mr Rossi, Mexican, who lives in Tijuana where he works for the company.

Rossi is assigned to the American headquarters in San Diego for the period 1 February / 1 June. In the assignment, it is established that the same will definitively return to the Mexican headquarters from 2 June. In the four months of office, Mr Rossi will commute between his home and the US headquarters every day. Except for a week when he will work in the Mexican office.

Of the 87 working days of the assignment, 82 will therefore have passed in the United States, thus satisfying the percentage of more than 75% required by the article of the regulation (82 days out of 87 are equal to 94%).

It follows that for the purposes of the substantial presence test, Mr Rossi will not calculate the days he commuted from Mexico to the United States for work reasons.

Persons in transit in the USA for other destinations

Those who are in transit in the United States between two foreign destinations and are physically present for less than 24 hours on US soil.

Think of the case of an Italian citizen from Rome who is in transit in Dallas to go to Mexico.

The exception does not apply, however, in the event that the individual conducts a business (for example a meeting at the airport) during the layover between one destination and another.

Both the code and the regulation do not provide an adequate explanation of what is meant by a business meeting. And indeed, to date, it is not clear whether the foreign citizen who accepts a work call during his layover in an American airport should consider the call as a business meeting and, therefore, calculate that day at the end of the SP test.

Members of the crew of means of transport

Exceptions to the Substantial Presence Test are members of the crew of a foreign aircraft or ship involved in the transport of passengers to and from the United States.

Those who are in the USA for health reasons

Those who are unable to leave the United States due to their health conditions are also excluded.

Consider the case of an Italian citizen present in the United States, for work reasons, who, following a serious car accident, is unable to leave the country on the day set for his return to Italy.

The exception does not apply if the subject is aware of their health conditions before embarking for the United States. Regardless of his intention to seek medical assistance once he arrives in America.

Exempt subjects

Exempt subjects by virtue of the particular activity they carry out in the United States:

-Diplomats, members of international organizations and their family members present in the United States temporarily or with a permanent employment contract. In possession of an A or G visa. Consider the case of an Italian citizen who works at the United Nations in New York on a permanent contract;

-Professors, students and trainees who help maintain “the United States’ position of supremacy in science teaching”. These are persons who are temporarily present in the United States and have an F, J, M or Q visa;

-Athletes are participating in a charity event. The exception applies only to the days in which the athlete competes, while it does not apply to the days of promotion of the event or training.

SPT and nonresident alien

However, a foreign citizen who satisfies the SPT can be considered nonresident alien in the event that:

-It is present in the United States for less than 183 days in the current calendar year;

-You prove that you have your own tax home in a foreign country.

The regulation in art. 301.7701 establishes that by tax home is meant the place where a person regularly carries out his work.

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