Foreign Private Money Lenders

[David Fernandez]

Hi,

I have access to foreign private money lenders (people with money that have invested with me in the past in Europe). Now I am investing in the US and a few of them have offered to lend me money at a set interest rate that I will use to grow my US real estate portfolio. 

 I am wondering what are the tax implications for this individuals (most of them are from Spain). For example: one person from Spain lends me $100,000 @ 5% interest only. At the end of the year 1, I paid him a total of $5,000 in interests. Where and how is this money taxed?

Do they have to pay taxes in the US and do I need to withhold anything from them before paying their interests or will they report their gain in their home country and pay taxes there and nothing in the US?

I will run this through my CPA, but any input from other investors in a similar situation will be greatly appreciated. 

Thank you!

David