As a result of U.S. Internal Revenue Regulations taking effect 1 January 2023, new withholding charges will be applied to sales proceeds from certain Publicly Traded Partnerships ("PTPs”) held by investors who are not U.S. taxpayers. The IRS withholding charges are substantial, therefore, we have taken steps to limit access to these products for investors who might be unaware of the risks of investing in these PTP products.
Instructions on How to Access PTP Products are available below in this document.
What you need to know:
Amount of Withholding: 10% of sale or distribution proceeds. This means 10% of the amount of funds that would settle resulting from any transaction or distribution, not just 10% on any calculated profit.
Example of PTP withholding:
Buy 200 shares @ 50.
Transaction value = $10,000
Sell 200 shares @ 51.
Transaction value = $10,200
Profit = $200.
Withholding = $1020 USD
Assuming no tax reclaim requests, the loss in value to the investor would be $820
Affected Instruments: Please see the list at the end of this article. The list is maintained on a best efforts basis and there may be some timing issues as information is refreshed. Listed deliverable securities are in scope of the new regulation. Options and other derivative instruments with a PTP as the underlying security are not subject to withholding. However, if the option or derivative is converted into a PTP interest, a subsequent sale of such PTP security would be subject to withholding.
Special Exemptions: The IRS regulation provides issuers the ability to get an exemption from the PTP withholding requirement. The exemption is valid for 92 days, and issuers are required to re-certify with the IRS to extend the duration of the exemption. We will try, on a best-efforts basis, to publish which of the affected instruments have an operating exemption, but investors should ensure they are choosing products whose withholding conditions they fully understand. The issuer document that provides for a withholding exemption is generally referred to as a "Qualified Notice"
What Investors are affected: All investors who are not considered ‘resident’ for U.S. tax purposes, i.e. investors who are not subject to U.S. taxation and tax reporting (and therefore doesn't file a W-9 IRS tax form).
Reporting: Withholding will be reported on the year-end Form 1042-S, Foreign Person's U.S. Source Income Subject to Withholding.
How to Access PTP Products as a Non-US Taxpayer: Please login to Client Portal and select the User menu (head and shoulders icon in the top right corner) followed by Settings. Then under Account Settings find the Trading section and click on the “PTP Trading Opt In/Out” link. The webpage allows you to request the ability to trade PTP securities. Once the request is submitted, it may take up to one hour for the ability to be activated.
Note: Clients who no longer desire to trade PTP securities may request to deactivate the PTP trading ability via the same “PTP Trading Opt In/Out” link.
Additional Resources: For those interested in understanding additional information about the new regulation, please see the IRS website for IRC Sec. 1446(f): http://www.irs.gov/individuals/international-taxpayers/partnership-withholding
This list identifies PTP securities which may be subject to withholding under the IRS Regulation referenced above. The products are presented in 2 groups: those with a "Qualified Notice” exemption, and those "without Qualified Notice". The lists are shown on a best-efforts basis for convenience only. We do not guarantee the accuracy or timeliness of the information, and investors should independently verify that products in which they are invested in, or intend to invest, have the necessary exemptions to avoid punitive withholding outcomes. Duration of the exemptions should also be monitored by position holders in the instruments.
For a list of PTP Securities with Known Qualified Notice, please click here.
Last updated 30/08/2023
For a list of PTP Securities Without Qualified Notice, please click here.
Last updated 30/08/2023