Amendments to the US Internal Revenue Service (IRS) regulations 871(m) were announced in September 2015 and are due to come into effect January 1, 2017. These changes require dealers to withhold US federal taxes on certain equity linked instruments, including those which reference indices. IRS guidance notes published on December 2 provide further details on enforcement and administration during the phase in period.
To comply with these changes dealers must be able to identify which equity linked instruments are in scope. As part of that determination, the IRS has provided a set of criteria for qualified and non-qualified indices within 871(m).
Exchange Data International (EDI) has reviewed the universe of underlying indices for derivatives traded on the full list of exchanges recognised by the IRS. Index composition, weightings, dividend yields, and rebalancing methodologies for each are analysed against the IRS 871(m) qualified indices definitions allowing each index to be appropriately flagged.
Jonathan Bloch, CEO of EDI said, “Dealers require accurate data to meet the January 1,2017 implementation of these new 871(m) regulations. With over 20 years’ market data experience, and comprehensive databases, EDI is pleased to simplify compliance with quality, reliable data solutions.”