Revised IRS Rules Require Reporting of Interest Payments to Certain Nonresident Aliens

May 04, 2018

On April 19th, the Internal Revenue Service (IRS) issued revised Rev. Proc. 2015-50 in connection with information reporting on U.S. bank deposit interest paid to nonresident alien individuals who are residents of any foreign country with which the U.S. has either an income tax treaty or tax information exchange agreement. These rules (which updated the prior 2012 and 2014 versions) are part of the IRS’ effort to combat international tax evasion through the U.S. tax treaty network and to encourage other countries to assist in the implementation of the Foreign Account Tax Compliance Act (FATCA) enacted as part of the 2010 Hiring Incentives to Restore Employment (HIRE) Act.

In essence. interest aggregating $10 or more paid by U.S. offices of financial institutions to certain nonresident alien individuals is generally subject to reporting by the payor on Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding,” for the calendar year in which the interest is paid.

The revised rules now provide for “automatic” information exchanges between the U.S. and the following countries: Australia, Brazil, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Slovenia, South Africa, Spain, Sweden, and the United Kingdom.

For more information, please contact Leslie A. Share, Dennis Ginsburg, Jose Nuñez, or Todd Rosenberg