Taxes on dividends for foreign investors

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theM6
Posts: 9
Joined: Sat Jun 17, 2017 6:24 am

Taxes on dividends for foreign investors

Post by theM6 » Mon Jun 19, 2017 9:29 am

Currently I know that foreign investors (non-resident aliens) pay 30% in taxes from dividends.

Does anyone know if foreign investors are still subject to the the 30% tax if dividends come from tax-excempt municipal bond or bond funds?

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HueyLD
Posts: 4995
Joined: Mon Jan 14, 2008 10:30 am

Re: Taxes on dividends for foreign investors

Post by HueyLD » Mon Jun 19, 2017 9:56 am

No. Tax-exempt income is not subject to withholding requirement.

The IRS says:
Beginning on July 1, 2014, a withholding agent must withhold on a payment of U.S. source FDAP income that is a withholdable payment to which an exception does not apply.

FDAP income is all income except:

Gains from the sale of property (including market discount and option premiums but not including original issue discount), and

Items of income excluded from gross income without regard to U.S. or foreign status of the owner of the income, such as tax-exempt municipal bond interest and qualified scholarship income.

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