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We have borrowings from a foreign entity and we pay

Hi we have borrowings...

Hi we have borrowings from a foreign entity and we pay interest, what is the equivalent of a 1099 for foreign entities?

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

When paying interest on a loan you typically issue a 1099 to that company in the US however what if that loan is held with a foreign company

Accountant's Assistant: Is there anything else important you think the Accountant should know?

Yeah its a non-US company so what is issued then?

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Customer reply replied 5 months ago
We have borrowings from foreign entities and then pay interest to them. For the US, typically we would issue a 1099. What is done for foreign entities in say Korea, Kenya, Chile London, etc?
Answered in 8 minutes by:
3/14/2018
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 6,640
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Form 1099-INT is NOT issued to foreign entities to which you pay interest.

You should have on file W-8BEN-E's for each entity to which you pay interest.

You may have to file IRS Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding.” This is not a withholding tax obligation, but only a reporting obligation, and it only applies to the non-business bank deposits of INDIVIDUALS. These forms 1042-S take the place of the normal 1099-INT that would be used for domestic interest income reporting.

If none of the foreign recipients of the interest payments are individuals, there is no reporting requirement on your part.

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 5 months ago
Okay, all counter parties are companies, not individuals. They are cryptocurrency companies, so there is no reporting requirement for paying that interest?

That's correct.

But you should obtain W-8BEN-E's for each entity to keep in your files if you are ever questioned by the IRS.

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Customer reply replied 5 months ago
what exactly does this form do ?

It proves that the entity you are dealing with is a foreign entity.

As I mentioned, if the IRS should ever question the interest expense and there is no 1099-INT issued, you can provide the W-8BEN-E as proof that you were not required to issue the 1099-INT.

Make sense?

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Barbara
Barbara, Enrolled Agent
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