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IRS Business Code

IRS updates lists of countries with nonresident alien interest reporting requirements

Thomson Reuters Tax & Accounting  

Thomson Reuters Tax & Accounting  

Rev Proc 2019-23, 2019-38 IRB

In a Revenue Procedure, IRS has updated two lists of countries with which the U.S. has in effect an agreement that requires payors to report certain deposit interest paid to nonresident alien individuals who are residents of the other country under Reg. § 1.6049-8(a) and Reg. § 1.6049-4(b)(5). One list is of countries with which the U.S. has in effect an income tax or other treaty or a bilateral agreement; the other is of countries with which IRS has determined that an automatic exchange of information is appropriate.

Background. Reg. § 1.6049-4(b)(5) and Reg. § 1.6049-8(a) require the reporting of certain deposit interest paid to nonresident alien individuals. Reg. § 1.6049-4(b)(5)provides that, in the case of interest aggregating $10 or more paid to a nonresident alien individual (as defined in Code Sec. 7701(b)(1)(B)) that is reportable under Reg. § 1.6049-8(a), the payor is required to make an information return on Form 1042-S (Foreign Person’s U.S. Source Income Subject to Withholding) for the calendar year in which the interest is paid. Interest that is reportable under Reg. § 1.6049-8(a) is interest described in Code Sec. 871(i)(2)(A) that relates to a deposit maintained at an office within the U.S. and that is paid to a resident of a country that is identified, in an applicable revenue procedure (see Reg. § 601.601(d)(2)) as of Dec. 31 prior to the calendar year in which the interest is paid, as a country with which the U.S. has in effect an income tax or other convention or bilateral agreement relating to the exchange of tax information within the meaning of Code Sec. 6103(k)(4).

Rev Proc 2012-24, 2012-20 IRB 913, identifies the countries with which the U.S. has in effect an income tax or other convention or bilateral agreement relating to the exchange of information within the meaning of Code Sec. 6103(k)(4) pursuant to which the U.S. agrees to provide, as well as receive, information. Rev Proc 2012-24 has been updated several times, most recently by Rev Proc 2018-36, 2018-38 IRB.

Countries to which the reporting requirement applies. Section 3 of the Revenue Procedure adds Georgia to the list of countries with which the reporting requirements of Reg. § 1.6049-8(a) and Reg. § 1.6049-4(b)(5) apply.

Countries with which IRS exchanges tax data. Section 4 of the Revenue Procedure adds Curacao and Cyprus to the list in of approved countries that have an automatic exchange relationship with respect to the information in Reg. § 1.6049-8(a) and Reg. § 1.6049-4(b)(5).

New listing of previous revenue procedures. Section 3 of the Revenue Procedure adds a new column indicating for the listed jurisdiction the number of the revenue procedure that first included the jurisdiction in the list.

Effective date.  For purposes of the reporting requirements of Reg § 1.6049-4(b)(5), the list of jurisdictions to which the reporting requirement applies is effective: (i) with respect to the jurisdiction newly added to such list, for interest paid on or after January 1, 2020; and (ii) with respect to the other listed jurisdictions, for interest paid on or after January 1 of the calendar year following the issuance of the revenue procedure (as cited in Section 3) first identifying the jurisdiction as having in effect an agreement with the United States as described in Reg § 1.6049-8(a).

The list of jurisdictions with which IRS exchanges tax data “is effective from the date of issuance of the revenue procedure with respect to information reported to the IRS pursuant to Reg § 1.6049-4(b)(5) and Reg §1.6049-8(a) for any tax year for which the jurisdiction was included in the list in Section 3.”

References: For reporting of interest paid to certain nonresident alien individuals, see FTC 2d/FIN ¶ S-3012.1United States Tax Reporter ¶ 60,494.05.

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