The O.E.C.D. Announces Global Standard for Automatic Exchange of Information

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As we noted in our prior issue, the Leaders of the G-20 Summit endorsed automatic exchange of information reporting to combat tax evasion in September 2013. In particular, they stated:

We commend the progress recently achieved in the area of tax transparency and we fully endorse the OECD proposal for a truly global model for multilateral and bilateral automatic exchange of information. Calling on all other jurisdictions to join us by the earliest possible date, we are committed to automatic exchange of information as the new global standard, which must ensure confidentiality and the proper use of information exchanged, and we fully support the OECD work with G20 countries aimed at presenting such a new single global standard for automatic exchange of information by February 2014 and to finalizing technical modalities of effective automatic exchange by mid-2014. In parallel, we expect to begin to exchange information automatically on tax matters among G20 members by the end of 2015.

On February 13, 2014, the Organisation for Economic Co-Operation and Development (“O.E.C.D.”) announced a global standard for automatic exchange of financial account information. Over 40 countries made a joint statement an committed to an early adoption of this standard. On February 23, 2014, the G-20 finance ministers and central bank governors endorsed the proposal.

Dividend Equivalents: Past, Present and Future

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Code §871(m) of the Code was enacted as part of the H.I.R.E. Act on March 18, 2010 and treats “dividend equivalents” as U.S. source dividends for withholding tax purposes. On January 23, 2012, Temporary Regulations (the “2012 Temporary Regulations”) and a notice of proposed rulemaking (the “2012 Proposed Regulations”) were published. The 2012 Proposed Regulations and Temporary Regulations provided guidance relating to U.S. source dividend equivalent payments made to nonresident individuals and foreign corporations. They also provided guidance to withholding agents. Correcting amendments to the 2012 Temporary Regulations were published on February 6, 2012, on March 8, 2012 and on August 31, 2012. On December 5, 2013 new proposed regulations (the “2013 Proposed Regulations”) withdrew the 2012 Proposed Regulations. In addition and at the same date, final regulations (“2013 Final Regulations”) were published that essentially adopted the 2012 Temporary Regulations.

BACKGROUND

Code §871(m) defines a dividend equivalent as one of the following:

• Any substitute dividend made pursuant to a securities lending or a salerepurchase transaction that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States;
• Any payment made pursuant to a specified notional principal contract (“N.P.C.”) that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States; and
• Any other payment determined by the Secretary to be substantially similar to a payment described in the two previous categories (a substantially similar dividend).