Lux Investing

Do foreign countries have to pay the IRS taxes on income generated from investing in government bonds?

Do you? So are you saying, if the Chinese government buys $1T in US government bonds, they pay themselves taxes on that income?

Public Comments

1. First, there are no "IRS taxes". All taxes collected by the IRS are imposed by Congress, not the IRS, which merely collects and administers the taxes that Congress creates. Second, taxes on income from their investments in bonds are made only to the government of the place where the person lives, regardless of where the investment is. For example, if a California resident invests in New York bonds, the investor pays tax on the investment income to the California, but not to New York, and if a New York resident invests in California bonds, the investor pays tax on the investment income to the New York, but not California. Similarly, if you are in one country and buy bonds from another country, you pay tax to your home country (the one where you are a citizen or resident) and not to the country that issued the bonds.
2. No, they do not pay taxes on the interest from owning US government bonds.