One-Year Extension of Current U.S. Withholding Tax Regime for “Dividend Equivalent Payments” on Equity Swaps and Other Derivatives

The IRS issued temporary regulations that extend until January 1, 2014 the current U.S. federal withholding tax regime that applies to “dividend equivalent payments” on equity swaps and derivatives under section 871(m) of the Internal Revenue Code. After January 1st 2014, U.S. withholding tax is expected to apply to dividend equivalent payments on a broader class of financial instruments.

Cross-Reference(s): IRC Sec. 871(m).

View full text of temporary regulations here (links to GPO website). For more information on section 871(m) and the proposed regulations issued thereunder, please see our Clients Friends Memo.