itonewbie
Level 15

Glad to be of help, @Shorebird.

My response was to both of your posts.

Income tax treaties are always reciprocal but it does not mean they assign equal right to both countries to tax different classes of income.

If you refer to Article XI(1), Greece is assigned the primary right to tax Greek social security benefits regardless of the residency of the recipient.  It makes no difference whether the recipient resides in the US or Greece.  While the same income could have been exempted from US tax, that's nullified by the Saving Clause in Article XIV(1) by virtue of the taxpayer being a US citizen.  The US, however, will allow FTC to be claimed for taxes paid to Greece.

Since Greece has the primary right to tax the social security benefits it pays, it is not in breach of the income tax treaty.  Totalization agreement serves a different purpose.  It only dictates how contributions and benefits are coordinated between the two treaty countries, not how those benefits are subject to tax.

As for the article you cited from the Master Tax Guide, you have read it wrong.  That article refers to whether social security taxes paid to a foreign country is creditable for purposes of FTC, not foreign taxes paid on social security benefits paid by a treaty partner.  In any case, what you have with Greece is unusual in modern times.  The only reason why you are in this dilemma is because this is an antiquated treaty.

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Still an AllStar

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