Markit | CTI Tax SolutionsSection 871(m)

Markit | CTI Tax Solutions will streamline a financial institution’s Section 871(m) compliance process by providing a centralised location of data sets to determine Section 871(m) impact and associated compliance obligations.


  • Broker dealers
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  • Fund administrators
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  • Private Equity Funds
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  • Hedge funds
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  • Investment banks
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  • Investment managers
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  • Custodians
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  • Depositories

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Product summary

In 2015, the IRS issued new final and temporary regulations under Section 871(m) of the US Internal Revenue Code. The regulations provide updated rules for determining whether certain payments under swaps or equity-linked instruments might be treated as US ‘dividend equivalent’ payments and, if paid to a non-US beneficial owner, would be subject to US withholding tax generally applicable to US source dividends. The regulations will generally be effective for payments made on or after January 1st 2017.

Payments under swaps or equity-linked instruments are currently not subject to withholding, so banks and brokers must create systems and processes in order to monitor which products may be subject to the new regulations and also implement withholding and reporting where required.

Markit | CTI Tax Solutions’ for Section 871(m) assists financial institutions in addressing their compliance obligations under the Section 871(m) regulations. Leveraging our tax and compliance expertise, it streamlines customers’ Section 871(m) compliance processes by allowing clients to conduct due diligence with respect to their derivative products and integrates the screening of transactions with withholding and reporting functionality.

Financial institutions that act as an issuer can also choose to share Section 871(m) specific data on their structured notes and distribute these details through a repository that will securely share and permission relevant data to withholding agents. The distribution channel may also be coupled with a Dividend Equivalent Amount (DEA) calculator if needed.

    Key Benefits

    • Risk reduction

      Pre-screening of derivative products provides potential withholding rates and amounts. Validation of data points helps mitigate the risk of non-compliance.

    • Centralisation

      Centralised solution for pre-screening, payment processing, withholding and creation of data needed for reporting to meet the Section 871(m) regulations.

    • Cost effective

      Streamlined workflows on a single platform reduce resource allocations, help to lower overall costs and can help reduce the risk of costly regulatory fines.

    • Compliance

      Validated data lineage and reporting help with firm obligations to Section 871(m) regulations.


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