If you are a tax resident of certain countries, you should be aware the Internal Revenue Service (IRS) annually reports the amount of US sourced interest income from banks and other entities in the United States to your local tax authorities, even if the interest income may not be subject to US withholding taxes.
In recent guidance, the IRS updated the list of countries in Revenue Procedure 2021-32 that the United States has, in effect, an agreement requiring payors to report certain deposit interest paid to nonresident alien individuals who are residents of the other country. Also updated is the list of countries with which the IRS has determined it’s appropriate to have an “automatic exchange relationship” regarding this deposit information.
Updating the List
New to the list of countries with an information exchange agreement is Chile. Therefore, interest paid to residents of Chile, as well as the other countries on the information exchange agreement list, must be reported by payors.
The Dominican Republic and Singapore were also recently added to the automatic information exchange list.
A complete list of the countries with this type of agreement in effect, as well as those determined that the US can automatically receive tax information collected under tax-code regulations can be viewed here.
Understanding the Ramifications
This list is important not only for the US payors of this interest, but for the nonresident aliens (non-US payees) who might be earning this interest income. This is all part of FATCA and Common Reporting Standard initiatives to make sure taxpayers are properly reporting their cross-border income to local tax authorities. If you have any concerns about this issue, please contact a Moore Doeren Mayhew tax advisor.
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