Which products are affected by the US tax regulation 871(m)?

The IRS regulation 871(m) governs the payment of US withholding tax for non-US persons and aims to prevent the avoidance of withholding tax on US equities through trading in derivatives. Originally, US withholding tax only applied to cash dividends, but from 2017, the 871(m) regulation has been extended to 'dividend equivalent payments'.

The 871(m) regulation may apply if a financial instrument has US equities as its underlying, those US equities pay dividends during the term of the derivative, or the derivatives have a delta close to 1. Examples of such instruments are knock-out products, mini futures on US equities or US equity indices or warrants.

The tax rate on dividend-like payments is 30%, but can be reduced to 15% with a W8BEN form. In order to benefit from the lower tax rate, send us the completed form by email to service@scalable.capital. Please ensure that you provide complete information when submitting the form.