Revised tax treatment for certain U.S. RIC distributions
Effective
1 January 2014
Non-Resident Alien (NRA) withholding tax will be applied on short-term capital gains and interest-related dividends paid by U.S. Regulated Investment Companies (RICs) whose taxable year begins after 31 December 2013.
Background
Before the American Jobs Creation Act of 2004 (the “Act”), RIC distributions were treated as ordinary dividends and were subject to the same NRA withholding rate as applied to ordinary dividend distributions.
In 2004, the Act provided for the relief from NRA withholding tax for short-term capital gains and interest-related dividends paid by RICs but for a limited period only. Since then, “tax extender” bills have extended the application of the provisions scheduled to expire. However, the U.S. Congress has to date not introduced such a bill.
As a consequence, if, as of 1 January 2014, the relief is not extended, distributions made by RICs whose taxable year begins after 31 December 2013 will once again be subject to NRA withholding.
Impact on customers
As of 1 January 2014, short-term capital gains and interest-related dividends paid by a RIC whose taxable year begins after 31 December 2013 will be subject to the 30% withholding tax rate of ordinary dividends (or a lower rate, as appropriate, according to a respective Double Taxation Treaty in force).
Such income distributions will be reported under income code 06.
If a new provision extends the distribution rules and related relief from withholding tax, we will publish the new information accordingly.
Further information
For further information, customers may contact the Clearstream Banking1 Tax Help Desk on:
| Luxembourg | Frankfurt | |
| Email: | tax@clearstream.com | tax@clearstream.com |
| Telephone: | +352-243-32835 | +49-(0) 69-2 11-1 3821 |
| Fax: | +352-243-632835 | +49-(0) 69-2 11-61 3821 |
or Clearstream Banking Customer Service or their Relationship Officer.
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1. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500 (CBF) and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Register of Commerce and Companies under number B-9248 (CBL).
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