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Follower ○○

Tax deducted from bond coupon

I m a private bond investor not US based. Investing direct in bonds not ETFs. On some of the bonds in my portfolio tax is deducted on paying out the coupon. Happens to US$ and EUR nominated ones. About 3 out of 10. This is destroying my yield as my numbers are too small to make it worthwhile asking the tax back. 
Does anyone know where I can find this information before buying the bond? I can not find any bond screener that includes this information and the broker also can not provide when I place an order. I have tied finding it the prospectus of the issue, but without luck. 

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7 Replies
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Frequent Contributor

Re: Tax deducted from bond coupon

Sorry - original post was helpful to US based investors. My error.


Capital
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Participant ○○○

Re: Tax deducted from bond coupon

As a non-USA domiciled investor you need to AVOID USA domiciled assets.

Read this.

https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles

Follow us on the Boglehead's Non-US Investor's board.

 https://www.bogleheads.org/forum/viewforum.php?f=22

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Participant ○

Re: Tax deducted from bond coupon

If you dont have a valid tax identification number in the US, you will automatically be subject to IRS backup withholding at 30 percnt.  You dont have any choice in the matter, except for not doing business in the US.  You might find other countries more tax friendly.  As far as learning about taxes, it is rare to find out in advance, until you get wacked by backup withholding.  Nobody will warn you.  You might try filing a tax return at the end of the year to see if you qualify for a refund.  Of course, you would need a tax id for that too.  Good luck.

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Follower ○○

Re: Tax deducted from bond coupon

Thanks for the reply. Getting a US tax ID not in the planning. Avoiding all US bonds an option. Annoying that this information is not readily available.

I have a number of bonds with US companies (eg AIG/Murphy Oil), but a Goldman Sachs one has the tax withheld at coupon payout. I tried finding out some logic behind it, but did not manage to find it.

Another of the bonds I have the deduction with is a EUR bond issued by an Italian insurance company  Generali.  https://www.bourse.lu/security/XS1428773763/238283.

Guess will have to live with the unknown when I buy.

 

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Follower ○○

Re: Tax deducted from bond coupon

No worries. Thanks for replying @Capital .

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Participant ○○○

Re: Tax deducted from bond coupon

If the country where you are tax resident has a tax treaty with the US, the withholding rate may be lower than 30%. Ask your bank/broker to request that the lower withholding rate be applied. They may have to document that you are resident in a country with a tax treaty to get the change to withholding at source. It may be worth your time to look into the details of the relevant bilateral tax treaty. 

Additionally, you should be able to get a local tax credit for US or other tax withheld. Whether this fully offsets local tax on your USD/EUR bonds depends on the specifics of you tax situation. Example: if bond interest is taxed at the same or higher rate in your local system as the withholding tax, it doesn't matter where you pay the tax in the end. 

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Participant ○○○

Re: Tax deducted from bond coupon

FWIW. For non-US investors.

INDIVIDUAL US Treasury bonds or notes are NOT condidered USA assets. No 30% withholding tax.

If they are in a fund or ETF then they ARE considered USA assets. Yes 30% withholding tax.

FDIC insured US bank accounts (CDs) are also NOT condidered USA assets. No 30% withholding taxes. 

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