It used to be that NRA are not taxed on capital gains and bond interest. Has the rules changed?
I am looking at the instructions for form W-8BEN and it states in part as follows:
- Foreign persons are subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of: ? Interest (including certain original issue discount (OID). ? Dividends; . . ? Other fixed or determinable annual or periodical gains, profits, or income.
and
- You may also be required to submit Form W-8BEN to claim an exception from domestic information reporting and backup withholding for certain types of income that are not subject to foreign-person withholding. Such income includes: ? Broker proceeds ? Short-term (183 days or less) original issue discount (OID) ? Bank deposit interest. ? Foreign source interest, dividends, rents, or royalties ? Proceeds from a wager placed by a nonresident alien individual in the games of blackjack, baccarat, craps, roulette, or big-6 wheel.
Based on the above, it appears that only bank interest and foreign source interest are exempt for the 30% withholding tax. And interests from U.S. treasury Bills, Notes, Bonds and U.S. corporate bonds are subject to 30% withholding tax -- assuming that there is no tax treaty that provide otherwise? If not, can you point me to an official source that states the exemptionfor all portfolio interest ( for NRAs) from the 30% withholding?
Also, does foreign source interest include U.S. corporate bonds bought on
*foreign* exchanges -- in a U.S. brokerage account? OR it is strictly from foreign bonds traded on either the U.S. or foreign exchanges?
TIA