Canadian Securities Industry Group Recommends Delaying Implementation Provisions Regarding Treatment of Dividend Equivalent Payments

The Investment Industry Association of Canada ("IIAC"), a national association that represents members of the Canadian securities industry, requested that the U.S. Treasury Department ("Treasury") and the IRS extend the effective date of the final regulations under Section 871(m) of the Internal Revenue Code regarding the treatment of dividend equivalent payments.

Citing "significant operational challenges" that include a lack of existing infrastructure and broad, ongoing systems development, the IIAC requested that final regulations apply to dividend equivalent payments made on or after January 1, 2017 with respect to notional principal contracts ("NPCs") or equity linked instruments ("ELIs"). Furthermore, they requested grandfathering until July 1, 2016 for delta-1 NPCs and ELIs that are OTC derivatives or single stock futures, and grandfathering until 2017 for all other NPCs or ELIs. The letter underscored that expanded implementation of 871(m) withholding "is particularly burdensome" for foreign intermediaries due to their concurrent and ongoing obligations under FATCA.

See: IIAC Letter.