The §871(m) regime seeks to identify non-US derivative instruments that substantially replicate the economic benefits of holding US equities directly and then convert specific payments arising from those instruments into US-source dividends subject to withholding under chapter 3 of the Internal Revenue Code. Once converted into US-source dividends, the existing infrastructure of the Qualified Intermediary (QI) regime would–in theory–provide familiar and well-honed operational tools for withholding and reporting.
On 23 August 2022, the IRS released Notice 2022-37, extending the current lite version of the §871(m) regime, which has been in effect since the issuance of Notice 2016-76 (and was further prolonged via Notices 2018-72 and 2020-2). Per the terms of the new Notice, the “§871(m) Lite” regime shall remain in effect for at least another two years.
For more information, please refer to the Millen Tax & Legal blogs, publications and presentations
Behind the 871(m)-Ball: Facing the Challenges of §871(m) Implementation in Switzerland
- On 30 October 2017, Paul Millen published an article on the current state of Switzerland's §871(m) compliance in Tax Analysts, the leading tax news aggregator website, entitled "Challenges for Swiss Compliance with U.S. Dividend Equivalent Regs"
- Based on interviews with key affected parties, the article provides a summary of the critical concerns confronting affected Swiss parties at the start of 2017, an analysis of the effectiveness of the solutions devised to address those concerns and a review of the significant items outstanding for the Swiss (and non-Swiss) financial industry in 2018
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