Bloomberg Tax
Dec. 16, 2019, 8:57 PM

Foreign Investors Get Limited Dividend Equivalent Payment Rules

Sony Kassam
Sony Kassam

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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