Section 871(m) amendment - ISDA Provision

Section 871(m) of the Internal Revenue Code clamps down on foreigners avoiding withholding tax for dividends on US equities.

The new regulations will establish up to a 30% withholding tax on foreign investors on dividend-equivalent payments under equity derivatives. There are a wide range of products that fall into this camp including swaps, options, futures, convertible debt, structured notes and other customised derivative where the ...

===Beware of Greeks=== ... delta (see what I did there?) against the underlying stock is .08 or greater. (Pro tip: a delta of 1 gives a one-for-one correlation with the delta on the underlying. A delta of -1.0 does the exact opposite of what the underlyer is doing. a delta of 0 means the two products are correlated at random).

The calculation is cumulative so even if the delta threshold isn’t met in one transaction, it may be as a result a connected transaction.

It applies from 1 January 2017.