§ 520.113 - Compensation for labor or personal services.

(a) Article XI of the convention adopts the principle that compensation for labor or personal services, including compensation realized in the practice of the liberal professions, is subject to tax only in the contracting State in which such services are rendered. Hence, in general such compensation derived by nonresident alien individuals residing in Sweden for services rendered in the United States is subject to Federal income tax. Such general rule is, however, subject to the following exceptions under the provisions of Article XI:

(1) Such nonresident alien individual is not subject to Federal income tax upon compensation for labor or personal services performed within the United States if the following conditions prescribed by subparagraph (2) (i) and (ii) of this paragraph are met.

(2) He is temporarily present in the United States for a period or periods:

(i) Not exceeding 180 days during the taxable year and his compensation is received for labor or personal services performed as an employee of, or under contract with, a resident of Sweden or a Swedish corporation or other entity; or

(ii) Not exceeding 90 days during the taxable year and the compensation received for such services does not exceed $3,000 in the aggregate for such taxable year even though such compensation is paid by a United States resident or by a domestic corporation or other domestic entity.

(b) If, therefore, such nonresident alien individual (1) is temporarily present in the United States for a period or periods in excess of 90 days during the taxable year, or (2) receives more than $3,000 in the aggregate during the taxable year for labor or personal services performed within the United States he is not exempt under paragraph (a)(2)(ii) of this section, and his right to exemption under the convention will depend on his meeting both tests prescribed under paragraph (a)(2)(i) of this section.

(c) These exceptions, however, do not extend to the professional earnings of actors, artists, musicians, professional athletes and those engaged in like activities. The professional earnings of such individuals resident in Sweden for services rendered within the United States are subject to the provisions of the Internal Revenue Code applicable generally to the taxation of nonresident alien individuals.