The payments that foreign companies receive from US banks under sponsored American Depositary Receipt programs should be considered US-source income and subject to withholding of US taxes, according to an IRS memo released Friday.
Sponsored ADR programs are jointly established by a foreign company and a US bank, with the bank often paying a portion of the company’s expenses or sharing revenue with the company in exchange for the exclusive right to handle the trading of its ADRs.
- That exclusivity constitutes a property right under tax code Section 861, and the US is the location of the capital ...