U.S. · Tax forms · Foreign persons
Form 1042-S exemption code 04, tax treaty.
When to use it in box 3a, the country check in box 13b, and the neighbouring codes.
Exemption code 04 is a chapter 3 exemption code for box 3a: exempt or reduced withholding under a tax treaty. Use it only if you withheld at a reduced rate, or the income is exempt from withholding, under an income tax treaty. When code 04 appears in box 3a, or a treaty-reduced rate is in box 3b, the country code in box 13b must be a country with which the United States has an income tax treaty.
Look up a 1042-S Exemption Code 04 item
Result
1042-S Exemption Code 04 at a glance (2026 edition)
| Code | Meaning | What the IRS says |
|---|---|---|
| 01 | Effectively connected income | Recipient U.S. TIN required in box 13i. If the TIN is unknown, withhold 30% and enter 00 |
| 02 | Exempt or reduced withholding under IRC | Use only if no other specific chapter 3 exemption code applies |
| 03 | Income is not from U.S. sources | Chapter 3 exemption code |
| 04 | Exempt or reduced withholding under tax treaty | Box 13b country must be a treaty country. Use only if reduced or exempt under a treaty |
| 05 | Portfolio interest exempt under IRC | Chapter 3 exemption code |
| 06 | QI that assumes primary withholding responsibility | Payee is a QI that represented on Form W-8IMY it assumes primary withholding under chapters 3 and 4 |
| 07 | Withholding foreign partnership or withholding foreign trust | Payee represented on Form W-8IMY that it is a WP or WT |
| 08 | U.S. branch treated as U.S. person | Payee agreed on Form W-8IMY to be treated as a U.S. person |
| 10 | QI represents that income is exempt | QI that has not assumed primary withholding responsibility |
| 11 | QSL that assumes primary withholding responsibility | Substitute dividend payments to a QSL |
| 12 | Payee subjected to chapter 4 withholding | Chapter 3 withholding does not apply because chapter 4 withholding was applied |
| 22 | QDD that assumes primary withholding responsibility | Used instead of 06 when paying a QI acting as a QDD |
| 23 | Exempt under section 897(l) | QIE distributions to a qualified foreign pension fund |
| 24 | Exempt under section 892 | Income paid to a foreign government or international organization |
When box 3a needs a code
An exemption code (01 through 24) may be required if the tax rate in box 3b reflects a reduced rate or the payment is exempt, or if the tax rate in box 4b is 00.00. If an amount was withheld under chapter 3 at 30.00% and the rate is not due to backup withholding, box 3a is 00. If the rate is due to backup withholding, box 3a is blank.
Tax rate format
The instructions say to enter the tax rate as two digits, a decimal point and two digits, such as 30.00. If the income is exempt under a U.S. tax treaty or the Internal Revenue Code, enter 00.00, and put a zero before a rate under 10% (for example 04.00).
Treaty claims and other boxes
A foreign person claiming a reduced rate or exemption under a treaty generally must have a U.S. TIN reported in box 13i, with listed exceptions such as a foreign TIN provided in box 13m. For an entity beneficial owner claiming treaty benefits and having documented its limitation on benefits article, enter the LOB code in box 13n.
Chapter 4 in the same form
Box 4a has its own chapter 4 exemption codes (13 to 21). Code 04 is not one of them. Do not confuse the two lists.
Worked example
A made-up foreign individual resident in a treaty country provides a Form W-8BEN claiming a reduced treaty rate on royalties, and the payer withholds at the treaty rate. Following the instructions, box 3a is 04, box 3b shows the reduced rate in the two-digit-point-two-digit format, and box 13b is the treaty country’s code. The correct treaty rate comes from the treaty itself, not from this page.
More pages in this set
Related decoder pages: 1042-S Chapter 4 Status Codes, 1042-S Box 12b, 1042-S Income Code 50.
Sources
- Instructions for Form 1042-S (2026): the line-by-line and code instructions summarized on this page. Page last reviewed or updated April 30, 2026. Read November 2, 2026.
Edition: Instructions for Form 1042-S (2026). Line numbers, codes, dollar limits and rates are those printed in that edition and change by year. Names in worked examples are made up.
Frequently asked questions
What does exemption code 04 mean on Form 1042-S?
Exempt or reduced withholding under a tax treaty. It is a chapter 3 exemption code entered in box 3a.
When should I use code 04?
Only if you withheld at a reduced rate, or the income is exempt from withholding, under an income tax treaty.
What must box 13b show when I use code 04?
The country code must be for a country with which the United States has entered into an income tax treaty.
What if no other specific code applies?
Chapter 3 exemption code 02 (exempt or reduced withholding under IRC) is for use only if none of the other chapter 3 exemption codes apply.
Is 04 also a chapter 4 exemption code?
No. Chapter 4 exemption codes are 13 through 21 and are entered in box 4a.
Not tax advice
This page summarizes IRS instructions, mostly written for the people who prepare the form, and is not tax, legal or financial advice. A CPA, an enrolled agent or a payroll professional can confirm what a line or code means for your filing. Everything runs in your browser; nothing you enter is sent anywhere.