Lazerr wrote: ↑Sat Aug 13, 2022 12:33 pm
It would be nonresident alien.
Clear. Thanks.
Lazerr wrote: ↑Sat Aug 13, 2022 12:33 pm
What is the impact of tax treaties not covering stock awards, if the sourcing is already prorated? ...
I was thinking more in terms of special rules that might modify, unravel, or otherwise mess with prorated sourcing rules. Either to the benefit of the taxpayer, or (perhaps more likely!) to the benefit of one or more taxing authority.
The US/UK
treaty notes have a special section on stock options:
With reference to Article 14 (Income from Employment):
it is understood that any benefits, income or gains enjoyed by employees under share/stock option plans are regarded as “other similar remuneration” for the purposes of Article 14.
It is further understood that where an employee:
a) has been granted a share/stock option in the course of an employment in one of the Contracting States;
b) has exercised that employment in both States during the period between grant and exercise of the option;
c) remains in that employment at the date of the exercise; and
d) under the domestic law of the Contracting States, would be taxable by both Contracting States in respect of the option gain,
then, in order to avoid double taxation, a Contracting State of which, at the time of the exercise of the option, the employee is not a resident will tax only that proportion of the option gain which relates to the period or periods between the grant and the exercise of the option during which the individual has exercised the employment in that Contracting State.
I seem to recall that at the time this treaty was signed, commentators noted that spelling this out for options was "unique". Perhaps these days this is normal. My sense though is that they would have written it into the treaty for a reason, although I can only guess what that might be. Perhaps a way to row back the US's 'saving clause'? Or just clearing up a "similar remuneration" treaty grey area? Who knows.
Anyway, the US/UK treaty is the only one I'm familiar with, and it spelled out a sensible treatment. If your treaty with Germany is silent on options, which it sounds like it is, then you get to run the gauntlet of whatever both countries' tax rules say. It may be that it naturally follows what the US/UK treaty does.
I'm afraid I don't know any more than this. Just confirming that what you suspect (prorated, ECI with all the trimmings; that is, FICA and so on) is anecdotally correct, although for a different non-US country.