The US IRS on May 7 published proposed tax regulations (REG-105476-18) applicable to partnerships that conduct a trade or business in the United States and that have foreign partners.
The new guidance addresses tax withholding and information reporting obligations upon the disposition or transfer of such foreign partner’s partnership interest.
The new rules implement Section 1446(f) enacted in the 2017 Tax Cuts and Jobs Act which generally imposes a 10 percent withholding tax on the transferee of a foreign partner’s interest equal to the amount realized on the disposition.
The new regulations follow Notice 2018-29, which provided notice of the forthcoming proposed regulations.
The preamble to the proposed reg states that, similar to the approach described in Notice 2018-29, the proposed regulations provide various exceptions to withholding and procedures for determining the amount to withhold.
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