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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?

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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, 2019 at 15:16
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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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