IRS to Amend Withholding Rules On Financial Instruments Under Section 871(m)

The Internal Revenue Service will amend forthcoming regulations on the treatment of specified equity-linked instruments (ELIs) under tax code Section 871(m) to give the financial markets more time to implement necessary changes.

The proposed rules (REG-120282-10) were aimed at curbing the ability of foreign investors to skirt a 30 percent withholding tax on dividends paid by U.S. companies. Treasury has expressed concern about transactions that use instruments such as securities loans, sale-repurchase transactions or specified notional principal contracts to avoid U.S. withholding requirements 234 DTR GG-1, 12/5/13.

But the IRS and the Treasury Department said March 4 in Notice ...