Vietnam residents owe 30% US tax on dividends, often none on interest

For an individual living in Vietnam, US tax law treats three kinds of return on US holdings differently. Dividends bear a 30% tax on the gross amount, withheld by the payer, and the Internal Revenue Service (IRS) list of treaties in effect has no Vietnam entry to reduce it.

Interest on US bank deposits is exempt, and Treasury interest can be, on conditions. Gains from selling shares are not taxed for someone in the United States fewer than 183 days in the year.

The person described here is neither a US citizen nor a green-card holder, has no US business and is taken to be a “nonresident alien” for US tax. What FATCA means for US permanent residents is covered in a separate article. Only US tax is examined.

Dividends: 30% of the gross, withheld at source

Section 871(a)(1) of the Internal Revenue Code, as published in the 2024 edition of the Code, imposes a 30% tax on dividends, interest and similar income a nonresident alien receives from US sources, to the extent it is not effectively connected with a US trade or business, and section 1441 makes the payer withhold it.

The tax falls on the gross amount, according to the IRS’s instructions for Form W-8BEN. Publication 519, the IRS guide for foreign individuals, says: “The brokerage company or payer of the dividends should withhold this tax at source.”

Dividends from US funds, including exchange-traded funds (ETFs) organised as regulated investment companies (RICs), are dividends under the same rule, except for the categories of fund distribution described below.

No treaty rate for Vietnam residents

Publication 515, the IRS guide for withholding agents, sets the rate at 30% “unless a reduced rate or exemption is authorized under a tax treaty”. Neither IRS list of treaties includes Vietnam: not the A to Z list of income tax treaties, last reviewed on 3 January 2026, nor Table 3, the list of “countries that have tax treaties in effect with the United States”, updated through 26 September 2025.

Table 3 tells readers to use it, rather than the Treasury’s “Treaties and TIEAs” page, for treaties in effect. The US Treasury’s treaty page lists an agreement with Vietnam on taxes on income dated 7 July 2015, among documents it says are posted “upon signature and prior to ratification and entry into force”.

In a worked example in its instructions for Form 1042-S, the IRS reports US dividends paid to a foreign individual who has given a W-8BEN and is not eligible for a treaty rate at a rate of 30.00.

This means that a Vietnam resident has no treaty rate to claim on Form W-8BEN, and US dividends bear the full 30%: a $1,000 dividend arrives as $700.

Interest: exempt by statute, on conditions

Under section 871(i), interest on deposits with a bank is not taxed if it is not effectively connected with a US business, and none is withheld; Publication 515 counts certificates of deposit and time deposits as deposits.

The broader exemption is for “portfolio interest”. Under section 871(h), it is not taxed, and none is withheld, if, among other conditions, the debt is in registered form, the payer has received a statement that the beneficial owner is not a US person, and the holder is not a 10% owner of the issuing corporation or partnership.

Form W-8BEN is the form an individual gives to establish that they are not a US person, according to its instructions. This indicates that it is the statement the section requires.

Publication 515 adds that the debt must have been issued after 18 July 1984, and treats as registered a debt transferable only through a book-entry system kept by the issuer or its agent, or issued through a “dematerialized book entry system” kept by a clearing organisation, in which bonds exist only as book entries.

Treasury notes and bonds are “now issued in electronic form only”, according to TreasuryDirect, and Publication 515 lists the US Government among the obligors whose interest is subject to withholding “with specific exceptions, such as portfolio interest”.

These securities exist only as book entries, which indicates that they meet the registered-form test. Notes run up to 10 years and bonds up to 30, according to TreasuryDirect, which means that none issued on or before 18 July 1984 is outstanding. The 10% test is written for owners of corporations and partnerships.

Taken together, these points indicate that interest on Treasury notes and bonds is portfolio interest for a Vietnam resident whose W-8BEN is on file. No IRS or Treasury text consulted names Treasury securities in the portfolio-interest rule.

Short Treasury bills rest on the statute instead. The 30% tax on “interest” excludes original issue discount (OID), and section 871(g) takes any obligation payable 183 days or less from the date of original issue out of the definition of “original issue discount obligation” used for the tax.

Publication 515 says the interest and discount on such obligations are not subject to withholding, provided other requirements meant to ensure the holder is not a US person are met. TreasuryDirect sells bills of 4, 6, 8, 13, 17, 26 and 52 weeks, whose “interest” is the difference between the price paid and the face value.

This means that a bill first issued for 26 weeks or less falls within the 183-day rule, while the 52-week bill, at 364 days, relies on the portfolio-interest route.

A bill sold at a reopening, a further sale of an existing security, keeps the original maturity date but has a different issue date, according to TreasuryDirect. The 183 days run from original issue. A bill bought in a reopening of a 52-week issue is therefore outside the rule, however long it has left to run.

Several kinds of fund distribution also escape the 30%. Under section 871(k), “interest-related dividends”, the part a US fund reports in writing to shareholders as interest-related, are not taxed if the payer holds a statement that the owner is not a US person, nor are “short-term capital gain dividends”, unless the holder spends 183 days or more in the United States in the year.

The Form 1042-S instructions have payers report funds’ capital gain distributions, long-term and short-term, under the code for income “exempt or reduced” under the Code. This indicates that a US fund’s distribution escapes the 30% to the extent the fund reports it as interest-related or as a capital gain distribution; the rest is taxed as a dividend.

Publication 515 treats these as exemptions from withholding under chapter 3 of the Code, and it and Publication 519 warn that portfolio interest can still be withheld under chapter 4, the regime known as FATCA, unless an exception in that chapter applies.

Interest on short bills is not a payment subject to chapter 4, according to Publication 515, and the IRS’s dividend example above codes the individual with a W-8BEN as “payee not subject to chapter 4 withholding”.

Gains: untaxed below 183 days

Section 871(a)(2) taxes a nonresident alien’s net US-source capital gains at 30% only if the person is present in the United States for 183 days or more in the tax year.

Below that, Publication 519 says, capital gains are tax exempt unless effectively connected with a US business, apart from four kinds taxed regardless of days: gains on timber, coal or iron ore with a retained interest, two kinds of gain on patents and similar property, and gains on the sale or exchange of OID obligations.

That list does not name ordinary sales of shares or ETF units. The last item may reach a Treasury bill, note or bond sold before maturity, a point not examined here.

Payers generally need not withhold on a gain from selling property, according to Publication 515, and a W-8BEN given to a broker keeps sale proceeds out of Form 1099 reporting and backup withholding.

Form W-8BEN and what happens without it

Form W-8BEN, in its October 2021 revision, goes to the withholding agent or payer, generally the person who pays or credits the income, in practice the broker or bank, before payment; “Do not send to the IRS” is printed on it.

It generally stays valid until the last day of the third calendar year after the year of signing, unless a change in circumstances makes it incorrect; the holder must then tell the payer within 30 days and give a new form.

Without it, the instructions warn, the payer may withhold at 30% or at the backup withholding rate, which Publication 515 (2026) puts at 24%. Under the withholding regulations, a payment the payer cannot reliably associate with documentation is, subject to exceptions, presumed made to a US person; even a payee presumed foreign cannot have the portfolio-interest exemption applied, because it requires documentation.

Publication 519 says a nonresident must file a US return, Form 1040-NR, when US-source income was not fully taxed through withholding, and must file to claim a refund of tax overwithheld. This means that dividends withheld at the full 30% require no return.

Estate tax divides the same holdings

For a nonresident who is not a US citizen, shares in a US corporation are property within the United States for estate tax under section 2104, and so is US Government debt, unless section 2105 excludes it.

Section 2105 excludes bank deposits whose interest would be exempt, debt whose interest would qualify as portfolio interest, whether or not a statement was given, and obligations of 183 days or less. The portfolio-interest analysis above indicates that Treasury notes, bonds and 52-week bills are excluded.

The rule that once excluded part of the value of shares in a US-incorporated fund ended for deaths after 2011. Such shares are therefore US property. US estate tax is covered in a separate article.

TreasuryDirect asks for an SSN and a US bank account

Under 31 CFR 363.11, opening a TreasuryDirect account, the Treasury’s own channel for buying its securities, requires a valid Social Security number, a US address of record and an account at a US bank; the application asks the applicant to confirm being a “U.S. person”. A Vietnam resident without those therefore cannot open one.

TreasuryDirect’s page on buying names the other channel: a bank, broker or dealer, which can place both competitive and non-competitive bids.

Whether a Vietnamese individual may lawfully buy US securities from Vietnam at all is a question of Vietnamese law, covered in a separate article. Vietnamese tax residence and cross-border capital transfers are also covered in separate articles.

What this article has not established

Why the agreement dated 7 July 2015 is not in force, and its status before the US Senate, were not established; congressional records were not consulted.

The House of Representatives’ US Code site was under maintenance on 10 October 2026, so amendments after 6 January 2025, the date through which the 2024 edition is current, are not confirmed for the Code sections quoted.

No official text consulted names Treasury notes, bonds or 52-week bills as portfolio interest, says who keeps the system in which Treasuries are held, or calls Form W-8BEN the statement section 871(h) requires. Those links are inferences from the texts.

It was not checked which bill auctions are reopenings of longer issues. The 24% backup rate is taken from Publication 515, as the Code states a formula, and the treatment of funds’ long-term capital gain distributions from the Form 1042-S instructions.

The following seven points were not examined:

• Whether time spent in the United States makes a given person resident there for tax.
• Whether Vietnam is named in Rev. Proc. 2024-42, under which US banks report exempt deposit interest of $10 or more paid to residents of listed countries.
• Chapter 4 (FATCA) withholding for individual investors, beyond the points above.
• Exchange-traded products organised as grantor trusts or partnerships rather than RICs.
• How the rule on gains from OID obligations applies to Treasuries sold before maturity.
• The rules on US real property interests.
• State taxes.

Publication 519 for 2026 had not been published; the 2025 edition is used. Vietnamese tax on the same income and any individual’s position are outside the article.