Foreigners are subjected to 30% withholding tax on U.S stocks' dividends. Does the same withholding tax apply to U.S bonds? Any difference between the treatment for Treasury bonds and corporate bonds?


Withholding (and normally actual tax as well) is 30% unless you qualify for a lower treaty rate depending on your nationality and file W-8BEN to claim it. And YES it does include bond interest, both corporate and government, per Pub 519 Tax Guide for Aliens -- current year online

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  • This is incorrect – Dan Jun 13 '19 at 15:16

There is generally no withholding tax on registered government or corporate bonds. This falls under the "portfolio interest exemption":

From the IRS: U.S. source interest income that is not connected with a U.S. trade or business and that is portfolio interest on obligations issued after July 18, 1984, in registered form is excluded from income. [4]

Portfolio investment income is defined as:

  • The non-US lender does not own, directly or indirectly, 10% or more of the voting power of the borrower.
  • The non-US lender is not a bank that made a loan in the ordinary course of business.
  • The non-US lender is not a controlled foreign corporation related to the borrower.
  • The non-US lender is not engaged in a US trade or business to which the loan is attributable.
  • The non-US lender provides certain certifications to the borrower under penalties of perjury.
  • The loan is in registered form.
  • The interest is not contingent on borrower's revenue, income, equity distributions or property value.

Caution: Obligations in bearer form issued after March 18, 2012, do not qualify for the portfolio interest exemption due to the repeal of § 163(f)(2)(B). Thus, for obligations issued after March 18, 2012, only debt in registered form can qualify for the portfolio debt exemption [5]

A readable discussion of the exemption can be found here: https://www.lexology.com/library/detail.aspx?g=b4386824-da1c-47e9-8e58-197982e17f39

IRS sources:

[4] https://www.irs.gov/individuals/international-taxpayers/nonresident-aliens-exclusions-from-income

[5] https://www.irs.gov/pub/int_practice_units/rpw_t_08_01_01_01-01r.pdf

Other sources:

[1] https://ca.rbcwealthmanagement.com/delegate/services/file/469189/content page 5

[2] https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?referer=https://www.google.com/&httpsredir=1&article=1033&context=bjil

[3] https://uk.practicallaw.thomsonreuters.com/7-502-1292?transitionType=Default&contextData=(sc.Default)&firstPage=true&comp=pluk&bhcp=1#co_anchor_a244528

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