Deposit interest paid to nonresident aliens by U.S. financial institutions

Deposit interest paid to nonresident aliens

The IRS today released an advance version of Rev. Proc. 2015-50 that adds 16 countries to a list of countries with which the IRS and Treasury determined that it is appropriate to have an “automatic exchange” relationship for purposes of reporting payments of deposit interest of $10 or more made by U.S. financial institutions to nonresident alien individuals. Today’s revenue procedure does not alter or affect a separate list of countries with respect to which reporting requirement nonetheless applies.

Related content

Rev. Proc. 2015-50 [PDF 38 KB] updates a prior list of countries by adding 16 countries to the list previously provided in Section 4 of Rev. Proc. 2014-64. These 16 countries added today are: Brazil, Czech Republic, Estonia, Gibraltar, Hungary, Iceland, India, Latvia, Liechtenstein, Lithuania, Luxembourg, New Zealand, Poland, Slovenia, South Africa, and Sweden.

Rev. Proc. 2014-64 provided two lists: 

  • The list of countries under Section 3 of Rev .Proc. 2014-64 [PDF 20 KB] concerned those countries with which the United States has in effect an income tax or other agreement relating to the exchange of tax information (as defined pursuant to section 6103(k)(4)) and which the United States agrees to provide as well as receive information under which the competent authority is the Treasury Secretary or delegate. 
  • The list of countries under Section 4 concerned those countries with which Treasury and the IRS determined that automatic exchange of deposit interest information is appropriate.

Background

Previously, the reporting of U.S. deposit interest was only required on interest paid to U.S. persons or to a nonresident alien individual who was a resident of Canada. 

The Treasury Department and IRS in April 2012 finalized regulations providing that U.S. deposit interest payments made to nonresident alien individuals must be reported annually to the IRS—if such interest is paid to a nonresident alien individual who is a resident of a country with which the United States has in effect an information exchange agreement, and under which the United States agrees to provide (and to receive) information and under which the competent authority is the Treasury Secretary or delegate. 

The 2012 regulations also stated that the IRS would issue a revenue procedure   identifying those countries with which the United States has in force information exchange agreements, and that this revenue procedure would be updated “as appropriate.” The first revenue procedure was Rev. Proc. 2012-24, issued in April 2012.

To summarize, for any calendar year, payors are only required to report interest on deposits maintained at an office within the United States and paid to a nonresident alien individual (who is a resident of a country identified in the revenue procedure as of December 31 of the prior calendar year, as a country with which the United States has in effect an information exchange agreement).

© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.