Withholding tax on US Treasury bill interest for non-residents? Do foreign investors face 30% withholding?

The answer to your question is actually good news! Under Internal Revenue Code Section 871(i)(2)(A), interest income from US Treasury bills, notes, and bonds is generally exempt from the 30% withholding tax for non-resident aliens, regardless of whether your country has a tax treaty with the US or not. This exemption is often referred to as the "portfolio interest exemption" and specifically applies to US government obligations. It's different from the withholding requirements on other types of US investments like corporate bonds or dividend-paying stocks, which are typically subject to the 30% withholding (or lower if a tax treaty applies). To ensure you qualify for this exemption, you typically need to provide a W-8BEN form to the financial institution where you purchase the Treasury securities. This form certifies your foreign status and establishes your eligibility for the exemption.

Just wanted to share my experience with this exact situation. I was totally confused about Treasury bill taxation until I discovered https://taxr.ai which analyzed my exact situation. I uploaded my foreign ID and investment documents, and it confirmed I was exempt from withholding tax on US Treasury securities. The tool explained that under Section 871(i)(2)(A), interest from US government obligations is specifically excluded from the definition of "US-source income" for non-resident aliens. This means no 30% withholding regardless of tax treaties. I was about to avoid T-bills completely because I thought I'd lose a third of my returns to taxes!

I took the plunge and tried https://taxr.ai after seeing it mentioned here. Honestly thought it would be another waste of time but was completely surprised. It confirmed I'm exempt from withholding tax on Treasury bills interest even though Malaysia has no tax treaty with the US. The system provided the exact IRS code references (Section 871(i)(2)(A)) and generated a custom letter I could provide to my financial institution. My broker initially tried to withhold the standard 30%, but after I showed them the documentation from taxr.ai, they corrected it. Just bought my first 3-month T-bill last week without any withholding issues!

If you're still struggling to get clear info on your Treasury bill tax situation, I'd recommend using Claimyr (https://claimyr.com) to actually speak with the IRS directly. I was in the same boat - non-resident from a country with no US tax treaty, getting different answers from everyone. After weeks of frustration, I used Claimyr's service to get connected to the IRS without the endless hold times. They got me through to the IRS International Tax department in about 15 minutes when I had been trying for days on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that Treasury bill interest is exempt from withholding for non-residents regardless of tax treaty status and pointed me to the exact publication I needed. Having an official confirmation directly from the IRS gave me the confidence to move forward with my investment.

I need to publicly eat my words about Claimyr. After being totally skeptical, I tried it out of desperation because I needed clarification before a big Treasury purchase. Not only did I actually get through to the IRS in about 20 minutes, but I spoke to someone in their international department who confirmed the exemption. The agent walked me through exactly where to find the official documentation (IRS Publication 519, page 30) and explained what I needed to provide to my brokerage. She also helped me understand some subtleties about the W-8BEN form that I would have filled out incorrectly. Honestly worth every penny just for the peace of mind of hearing it directly from the IRS.

I went through this exact thing last year. Just to add some practical advice - make sure your W-8BEN form is filled out perfectly. I'm from Brazil (no tax treaty) and my first attempt got rejected because I didn't properly complete Part II of the form. For Treasury bills specifically, you need to check box 9a and cite "Section 871(i)(2)(A)" as the reason for the exemption claim. My broker initially still withheld the 30% because their system was set to automatically withhold for non-treaty countries, and I had to specifically request an adjustment with reference to the correct code section.

Does anyone know if this exemption applies to other US government-backed securities like mortgage-backed securities from Fannie Mae or Freddie Mac? Or is it strictly limited to direct Treasury obligations?

This is incredibly helpful information! I'm actually in a very similar situation as the original poster - no tax treaty with the US and was completely avoiding Treasury investments because I assumed I'd lose 30% to withholding. Just to make sure I understand correctly: if I'm a non-resident alien from a country without a US tax treaty, I can invest in Treasury bills and the interest income will be completely exempt from US withholding tax as long as I properly file a W-8BEN form? This seems almost too good to be true given how restrictive US tax rules usually are for foreign investors. Also, does this exemption apply equally to all Treasury maturities (3-month, 6-month, 1-year bills) or are there any restrictions based on the term length? I want to make absolutely sure before I start investing significant amounts.

I want to add another perspective on this since I went through the same confusion last year. The exemption for Treasury securities is real and well-established, but I'd strongly recommend getting everything in writing from your broker before making large investments. When I first tried to purchase Treasury bills, my broker's system automatically applied the 30% withholding despite having a W-8BEN on file. It took three phone calls and providing them with specific references to IRS Publication 519 and Section 871(i)(2)(A) before they corrected their system. Some brokers, especially smaller ones, aren't familiar with this exemption since most foreign clients stick to other investments. I'd suggest doing a small test purchase first to make sure the withholding is handled correctly before committing larger amounts. Also, keep all documentation showing the exemption was properly applied - it makes tax filing much easier in your home country when you can clearly show no US taxes were withheld. The exemption is legitimate and incredibly valuable for non-resident investors, but the implementation can sometimes be bumpy depending on your financial institution's familiarity with the rules.