Page 1 of 1

[Europe] Tax withholding on US bonds on funds with Luxembourg domicile

Posted: Mon Feb 04, 2019 2:08 pm
by indexfundinvestor.eu
Hi,

Are the interest payments of US bonds held by Luxembourg domiciled funds subject to tax withholding? I found this document which states
Generally, the 30 percent (or lower treaty rate) U.S.
withholding tax applies to interest paid or accrued to
a nonresident on a debt obligation issued by a U.S.
borrower. However, several exceptions to this rule
may apply.
Portfolio Interest
Certain U.S.-source interest income (portfolio interest)
is exempt from the 30 percent U.S. withholding tax.
Portfolio interest includes interest which is payable on
the following types of U.S. instruments:
Obligations issued after July 18, 1984, in registered
form, if the foreign investor provides the paying agent
with a signed statement certifying nonresident status
(Form W-8BEN).
and
Interest (including OID) received by
U.S. nonresidents on obligations of
the U.S. government (e.g., Treasury
bills, notes and bonds) which were
issued after July 18, 1984 (“portfolio
interest” obligations) is generally
exempt from U.S. withholding tax,
as long as a Form W-8BEN has been
provided to the payer.
but I still wanted to confirm if this is correct. Mostly I wondered if this is a case where holding an Irish domiciled fund and a Luxembourg domiciled fund would be equivalent from an interest withholding perspective.

Thanks in advance for the help.

Re: [Europe] Tax withholding on US bonds on funds with Luxembourg domicile

Posted: Mon Feb 04, 2019 2:24 pm
by BeBH65
The text you quote seems to be applicable to people, not funds.

For stocks, the last time that I looked funds domiciled in Luxembourg seemed to suffer 30% US dividend witholding tax. So no advantages via the tax treaty for Lux funds for stocks.

hat the situation is for Lux funds of bonds is unclear.

Re: [Europe] Tax withholding on US bonds on funds with Luxembourg domicile

Posted: Mon Feb 04, 2019 2:39 pm
by LadyGeek
This thread is now in the Non-US Investing forum.

Re: [Europe] Tax withholding on US bonds on funds with Luxembourg domicile

Posted: Tue Feb 05, 2019 12:30 pm
by ICH
Ted,
That's for dividends.
US does not withhold from bonds' interest irrespective if the fund is domiciled in Ireland or Luxembourg.
To the best of my knowledge at least.

Re: [Europe] Tax withholding on US bonds on funds with Luxembourg domicile

Posted: Tue Feb 05, 2019 4:15 pm
by galeno
We hold 3 ETFs from Ireland Vanguard and 2 ETFs from Ireland iShares. All bought from the LSE. Our equity dividend income is taxed 10.2%. Our bond interest income has 0% tax.