IHS Markit Launches Solution for US Equity Derivatives Tax Mandate

The solution will help firms determine whether certain derivatives fall in scope of the Section 871(m) tax law, and calculates withholding details.

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Section 871(m) establishes a withholding tax on dividend-equivalent payments to non-US people under equity derivatives, in response to certain non-US financial institutions using well-timed equity derivatives to dodge the up to 30 percent withholding tax on payments from US equities to non-US citizens.

The data management implications of the law require banks and brokers to monitor which instruments fall into the scope of the tax mandate, and implement withholding and reporting if needed

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