A J-1 scholar is considered a "non-resident alien" for the first two years (Example 4). I wonder how that interacts with the definition of "residence" in a tax treaty, for instance, the one with Germany. This reads in Article 4:
- For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature, provided, however, that a) this term does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein; and b) in the case of income derived or paid by a partnership, estate, or trust, this term applies only to the extent that the income derived by such partnership, estate, or trust is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners or beneficiaries.
Now I wonder if one could ever be considered a resident of the US for purpose of the tax treaty, despite one's status as non-resident alien. I would guess "yes" since one is "liable to tax"; but then again, "under the laws of that state", one is not liable to tax by reason of residence or domicile, right? (Or wrong? Or, if it's right, by what other reason would one be liable to tax?) Domicile seems to imply residence, and one is not a resident under the US tax code (but a non-resident alien), so somehow that would mean one could not be a resident of the US for purpose of the tax treaty. So are you automatically a resident of the respective other country as a J-1 (if there is any, whatever little chance of being a resident there, that is)?
I am confused.