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Daily Tax Report: International

Foreign Investors Get Limited Dividend Equivalent Payment Rules

Dec. 16, 2019, 8:57 PM

Foreign investors making dividend equivalent transactions got clarity on narrow aspects of IRS rules that prevent them from avoiding a withholding tax by making such transactions.

The IRS released final regulations, T.D. 9887, under tax code Section 871(m), Dec. 16 that make final a 2017 proposal on the treatment of dividend equivalent payments. The section is intended to prevent foreign investors from using derivative instruments to avoid paying a 30% withholding tax on U.S. equities, such as a structured note, warrant, convertible stock, or convertible debt.

The limited guidance is neither beneficial nor detrimental, said...

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