US IRS publishes final tax regulations on dividend equivalents

The US today published final tax regulations on dividend equivalents from sources within the United States.

The final regulations address section 871(m), which treats payments or deemed payments of dividend equivalents paid under certain contracts as US source dividends subject to the 30 percent withholding tax (or lower treaty rate) if paid to a non-US person.

Final regulations under § 1.871-15 define the term broker for purposes of section 871(m). The final regulations provide guidance relating to when the delta of an option listed on a foreign regulated exchange may be calculated based on the delta of that option at the close of business on the business day before the date of issuance.

The final regulations further provide guidance identifying which party to a potential section 871(m) transaction is responsible for determining whether a transaction is a section 871(m) transaction when multiple brokers or dealers are involved in the transaction.

Temporary regulations under § 1.871-15T were also withdrawn.