Tuesday, April 17, 2012

IRS Issues Final Rules on Reporting Interest Paid to Nonresident Aliens


The Internal Revenue Service issued final rules April 17 on the reporting requirements for interest on deposits maintained at U.S. offices of certain financial institutions and paid to nonresident aliens.

The regulation (T.D. 9584) will affect commercial banks, savings institutions, credit unions, securities brokerages, and insurance companies that pay interest on deposits.

The regulation applies to payments of interest made on or after January 1, 2013. It becomes effective April 19, the date it is published in the Federal Register.

1 comment:

  1. The key features of this new regulation are the following:

    • The reporting requirement only pertains to interest paid to non-resident individuals (not to corporations such as a company established in the BVI);

    • It applies to payments of interest made on or after January 1, 2013;

    • The reporting requirement applies to a broad range of financial institutions –banks, brokerage firms, credit unions, insurance companies– but only to interest paid on deposits maintained at the US offices of these institutions (and not at overseas offices or branches);

    • The exchange of information will not be automatic (except with Canada under pre-existing rules), but only upon request, although the Treasury Department indicated that this may change in case certain countries agree to automatic exchange of information with the USA going forward. Several European countries –France, Germany, Italy, The Netherlands, Spain and The United Kingdom– are already discussing automatic exchange of information with the USA;

    • The USA will only exchange information with countries that have entered into a Tax Information and Exchange Agreement with the USA (see below list).

    Antigua & Barbuda
    Aruba
    Australia
    Austria
    Azerbaijan
    Bangladesh
    Barbados
    Belgium
    Bermuda
    British Virgin Islands
    Bulgaria
    Canada
    China
    Costa Rica
    Cyprus
    Czech Republic
    Denmark
    Dominica
    Dominican Republic
    Egypt
    Estonia
    Finland
    France
    Germany
    Gibraltar
    Greece
    Grenada
    Guernsey
    Guyana
    Honduras
    Hungary
    Iceland
    India
    Indonesia
    Ireland
    Isle of Man
    Israel
    Italy
    Jamaica
    Japan
    Jersey
    Kazakhstan
    Korea (South)
    Latvia
    Liechtenstein
    Lithuania
    Luxembourg
    Malta
    Marshall Islands
    Mexico
    Monaco
    Morocco
    The Netherlands Netherlands Island territories: Bonaire, Saba, St. Eustatius and the countries Cura├žao, and St. Maarten (Dutch part)
    New Zealand
    Norway
    Pakistan
    Panama
    Peru
    Philippines
    Poland
    Portugal
    Romania
    Russian Federation
    Slovak Rep.
    Slovenia
    South Africa
    Spain
    Sri Lanka
    Sweden
    Switzerland
    Thailand
    Trinidad and Tobago
    Tunisia
    Turkey
    Ukraine
    United Kingdom
    Venezuela

    Also the Treasury Department expressed that it will only exchange information with countries that protect confidentiality and use the released data only for tax purposes.

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