New US tax rules could hamper ETN market, dealers warn

dollar taxman — High-delta ETNs with equities and certain master limited partnerships as underlyings could be captured

Louie Woodall
23 May 2016

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US tax regulations aimed at preventing withholding tax avoidance on equity derivatives may inadvertently capture a huge chunk of the exchange-traded notes (ETN) market, including those initially issued many years prior to the rule's implementation, dealers have warned.

Section 871(m) of the Internal Revenue Code, which comes into full effect in January 2017, imposes a 30% withholding tax on dividend-equivalent payments from delta one-like equity-linked investments (ELIs) held by non-US persons.

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