Helpful guidelines

What is 871 m withholding?

What is 871 m withholding?

Section 871(m) imposes a 30 percent withholding tax on dividend equivalent payments that are made or deemed to be made to non-U.S. persons with respect to certain derivatives that reference equity (“Equity Derivatives”) of a U.S. issuer.

What is section 871?

(1) Imposition of tax. A nonresident alien individual engaged in trade or business within the United States during the taxable year shall be taxable as provided in section 1 or 55 on his taxable income which is effectively connected with the conduct of a trade or business within the United States.

What is 871 m covered partnership?

Section 871(m) imposes a tax on “payments” that are contingent upon, or determined by reference to, U.S.-source dividends.

Are dividend equivalents taxable?

Dividend equivalents are not dividends. They are payments of cash or additional shares that you would have received had you already exercised your stock options. Because they are not dividends, these payments do not qualify for the special tax rate on qualified dividends.

What is a dividend equivalent payment?

A dividend equivalent payment is any gross amount that references the payment of a dividend on a U.S. equity and that is used to compute any net amount transferred to or from the long party, even if the long party make a net payment to the short party or the net payment is zero.

What is portfolio interest exemption?

Portfolio interest is entirely exempt from the 30% US withholding tax. To qualify as portfolio interest, the loan must be from a foreign lender and the following requirements must be met: The interest is paid on debt that is in registered form. The loan cannot be from a bank lending in the ordinary course of business.

How do you calculate dividend equivalent?

Dividend Equivalent Amount means an amount determined by multiplying the number of Dividend Equivalents subject to a Grant by the per-share cash Dividend paid by the Company on its outstanding Company Stock, or the per-share fair market value (as determined by the Committee) of any Dividend paid by the Company on its …

What is a dividend equivalent unit?

Dividend Equivalent Unit means the right to receive a payment, in cash or Shares, equal to the cash dividends or other distributions paid with respect to a Share.

Where do you report dividend equivalents?

IRS Clarifies That Dividends and Dividend Equivalents Must Separately Satisfy Section 162(m) as Performance-Based Compensation.

How do I claim portfolio interest exemption?