The US IRS today issued new guidance on the withholding tax on dispositions by nonresident aliens or foreign corporations of partnership interests that are not publicly traded.
The guidance, Notice 2018-29, clarifies new section 1446(f) of the tax code, enacted in the Tax Cuts and Jobs Act in December 2017.
In general, section 1446 provides that if any portion of the gain on a disposition of an interest in a partnership would be treated under section 864(c)(8) as effectively connected with the conduct of a US trade or business then the transferee must deduct and withhold a tax equal to 10 percent of the amount realized on the disposition.
An exception provides that withholding is generally not required if the transferor furnishes an affidavit to the transferee stating, among other things, that the transferor is not a foreign person.
The new rules will be incorporated into tax regulations, the Service said.
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