Tax on corporate lending and bond issues in United States: overview
A Q&A guide to tax on finance transactions in the United States.
This Q&A provides a high level overview of finance tax in the United States and focuses on corporate lending and borrowing (including withholding tax requirements), bond issues, plant and machinery leasing, taxation of the borrower and lender when restructuring debt, securitisations, the Foreign Account Tax Compliance Act (FATCA) and bank levies.
To compare answers across multiple jurisdictions, visit the Tax on Corporate Lending and Bond Issues: Country Q&A tool.
The Q&A is part of the global guide to tax on transactions. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxontransactions-guide.
The primary authority responsible for administering and enforcing federal taxes (including taxes relating to finance transactions) in the US is the Internal Revenue Service (IRS), a bureau of the US Department of Treasury. In addition, each state has a separate taxing authority that administers and enforces taxes imposed by that state.
Pre-completion tax clearances
In certain situations, taxpayers can request a written determination from the Internal Revenue Service (IRS) regarding the tax consequences of a transaction (either before the transaction is completed or before the tax return is filed for the year of the transaction) by requesting a private letter ruling. This process is governed by the appropriate Associate Chief Counsel of the IRS and with respect to finance transactions, would likely fall within the jurisdictions of either the corporate division or the financial institutions and products division. A private letter ruling issued by the IRS interprets the tax laws and applies them to a taxpayer's specific set of facts. A taxpayer can also seek oral guidance from the IRS; however, any oral guidance given is advisory and is not binding on the IRS.
Circumstances for obtaining clearance
A private letter ruling can be requested in circumstances where the law is not entirely free from doubt. Rulings are not issued with respect to issues that are clearly and adequately addressed by statute, regulations, court decisions, or published guidance from the Internal Revenue Service (IRS). The IRS will not issue a ruling on alternative plans or on a hypothetical transaction. In addition, the IRS will generally not issue a ruling if the questions to be resolved are primarily factual in nature (rather than legal).
Mandatory or optional clearance?
Receipt of a private letter ruling to complete a transaction or to make payments without withholding is not required by law (unlike in certain jurisdictions, where withholding is mandatory unless an appropriate clearance certificate is obtained). In certain situations, the parties to a transaction may require a private letter ruling as a condition to closing the transaction.
Procedure for obtaining clearance
To request a private letter ruling, a taxpayer must submit a written request to the Internal Revenue Service (IRS), along with a user fee (up to US$28,300 for 2015, depending on the nature of rulings requested). The request itself must contain a complete statement of all relevant facts relating to the proposed finance transaction and a copy of all applicable agreements and other documents relating to the transaction. Once the ruling request is submitted, the ruling process generally takes between four and six months, depending on the nature of the issues involved. A written ruling request can be preceded by a more informal process, including a call to the IRS to request the IRS's view on a specific issue (often without identifying the relevant taxpayer) and a pre-submission conference with representatives of the IRS to discuss the issues and analysis that will be contained in the ruling request.
Disclosure of finance transactions
Circumstances where disclosure is required
Generally, specific disclosure of a finance transaction to the Internal Revenue Service (IRS) is not required. However, there are certain circumstances under which a taxpayer may be obligated to disclose its participation in a finance transaction. In particular, taxpayers must separately disclose their participation in transactions that the IRS deems to be potentially abusive or "of interest". These include:
Certain types of transactions that have been identified by the IRS as motivated by tax avoidance (listed transactions).
Certain types of transactions that have been identified by the IRS as "of interest" (transactions of interest).
Transactions offered under conditions of confidentiality that meet certain other requirements (confidential transactions).
Transactions where the taxpayer has the right to a refund from a service provider if its tax position is not sustained (transactions with contractual protection).
Transactions giving rise to certain types of tax losses in excess of specified thresholds (loss transactions).
Transactions involving credits with respect to assets held for less than 45 days.
In addition, certain taxpayers are required to disclose any "uncertain tax position" taken on its tax return. An uncertain tax position is generally any tax return position for which the taxpayer or a related entity recorded a reserve for financial statement purposes (or determined that no reserve was required because the taxpayer expected to litigate its position).
Manner and timing of disclosure
Disclosure of reportable transactions and uncertain tax positions are made, respectively, on Form 8886 and Schedule UTP which must be attached to the taxpayer's tax return for the year in which the transaction occurs or the position is taken. Failure to disclose required positions can result in penalties being assessed against the taxpayer.
Taxes on corporate lending/borrowing
Taxes potentially chargeable on amounts receivable
Key characteristics. The US imposes a tax on the net income of persons subject to its taxing jurisdiction, including citizens and residents, corporations organised in the US and certain foreign persons with US activities. Interest and other amounts received under a loan (other than repayment of principal) are generally treated as ordinary taxable income and must be taken into account in determining a taxpayer's net income for the applicable taxable period.
Calculation of tax. For a given taxable period, a taxpayer subject to US income tax must calculate its net taxable income by taking into account all applicable items of income, gain, loss, deduction and credit, as well as any available exemptions. If the net amount is a positive number, a tax liability may result unless the taxpayer has available attributes (such as net operating loss carry forwards) that can be used to offset the net income. In addition, the US has an alternative minimum tax system that may result in a tax liability even if the taxpayer has a loss for the year under the regular tax system. This can result if the taxpayer has "preference items" such as tax exempt interest income, depletion deductions and other specified items.
Triggering event. A taxpayer must take stated interest into account based on its method of accounting (for example, cash or accrual). If a loan is issued with original issue discount (for example, because it was issued for less than the principal amount or it includes interest that accrues but is not paid in cash on an annual basis) the original issue discount must be accrued into income by the holder on a constant yield to maturity basis (effectively requiring the accrual method for original issue discount). Interest and original issue discount on a loan are generally taken into income on an accrual basis.
Applicable rate(s). The US has graduated income tax rates for corporations, with a maximum rate of 35% for both ordinary income and capital gains. The tax rate under the alternative minimum tax system is generally 20% for corporations.
In addition to any US federal income tax liability that can be imposed on a corporation with respect to its interest income, such income may also be subject to tax by any state in which the corporation has nexus for state income tax purposes.
Tax reliefs available for borrowing costs
Key characteristics. A corporate borrower is generally entitled to take a deduction for any interest paid and any original issue discount accrued with respect to its indebtedness. The deduction has the effect of reducing the borrower's taxable income for the applicable taxable period, thereby reducing its income tax liability. However, there are a number of situations in which a deduction can be disallowed or deferred, including:
If the debt instrument has a maturity of more than five years, has interest that is not paid at least annually and/or is issued with significant original issue discount, and has a yield to maturity that is 500 basis points or more above the "applicable federal rate" (a rate determined monthly that approximates the yield on US treasury obligations) for the month of issuance; then a portion of the taxpayer's deduction for interest and original issue discount can be deferred until it is paid and a portion of the deduction (the amount that exceeds the applicable federal rate plus 600 basis points) may be permanently disallowed. These rules are known as the applicable high yield discount obligation rules.
If the debt is issued to acquire stock of another corporation (or at least two-thirds of the corporation's assets), the debt is subordinated to the borrower's trade creditors and the debt is convertible into (or issued with a warrant to acquire) stock of the borrower; interest on a debt instrument issued by a corporation is disallowed.
If the debt instrument is held by or guaranteed by a person related to the borrower and such related person is not subject to US tax, any interest and original issue discount deduction related to the debt can be limited or deferred.
If the debt is payable in (or by reference to) the equity of the borrower or a related person, interest can be disallowed. If the debt is convertible into equity at the option of the holder, the disallowance rules will apply only if, at the time the debt is issued, there is a substantial certainty the option will be exercised.
If the debt instrument is not in registered form (that is, bearer bonds) in many cases a deduction for interest and original issue discount is disallowed.
Calculation of relief. Any allowable deduction for interest or original issue discount is taken into account in determining the issuer's net taxable income for the applicable tax period.
Triggering event. Stated interest payable at least annually in cash is generally deductible based on the issuer's method of accounting (for example, cash or accrual). Original issue discount is deductible based on a constant yield to maturity methodology.
Applicable rate(s). See Question 4, Income tax: Applicable rate(s).
To the extent a corporation incurs expenses in connection with issuing debt, these expenses are generally treated as deferred financing costs and deducted over the term of the loan on a constant yield to maturity basis (similar to original issue discount).
Tax payable on the transfer of debt
Key characteristics. If a debt instrument is transferred from one holder to another, the only federal tax that will typically apply is the income tax imposed with respect to any gain or loss recognised by the transferor in connection with the transfer. If the taxpayer holds the loan as a capital asset, any gain or loss should be capital in nature (although a portion of the proceeds could be characterised as ordinary income under the market discount rules).
Calculation of tax. See Question 4, Income tax: Calculation of tax.
Triggering event. Gain or loss will be recognised for tax purposes in the taxable year in which the transfer occurs.
Liable party/parties. Gain or loss will be recognised by the transferor, who will be liable for any resulting tax.
Applicable rate(s). See Question 4, Income tax: Applicable rate(s). In addition, certain states may impose a documentary stamp tax in connection with the transfer of a loan secured by real estate.
When withholding tax applies
There are three different types of withholding tax that can apply to payments made under a loan:
Interest withholding. Interest (including original issue discount) paid by a US person to a non-US person can be subject to withholding tax. However, a broad exception, known as "portfolio interest exemption" provides that withholding tax does not apply where the following requirements are met:
The non-US lender does not own, directly or indirectly, 10% or more of the voting power of the borrower.
The non-US lender is not a bank that made a loan in the ordinary course of business.
The non-US lender is not a controlled foreign corporation related to the borrower.
The non-US lender is not engaged in a US trade or business to which the loan is attributable.
The non-US lender provides certain certifications to the borrower under penalties of perjury.
The loan is in registered form.
The interest is not contingent on borrower's revenue, income, equity distributions or property value.
Backup withholding. This can apply to payments of interest and original issue discount to non-corporate US lenders if they fail to provide certain documentation and in limited other situations. Backup withholding is not an additional tax, and can be recovered if the proper information is supplied to the Internal Revenue Service (IRS).
FATCA withholding. This can apply to payments of US-sourced interest and original issue discount made under a loan to a non-US person unless the recipient provides specified documentation to the withholding agent.
Applicable rate(s) of withholding tax
Interest withholding. In the absence of application of the portfolio interest exemption (see above, When withholding tax applies: Interest withholding) the statutory withholding rate on interest and original issue discount paid to non-US lenders is 30%. With proper documentation, this rate can be reduced or eliminated pursuant to tax treaties. If withholding applies, the tax must be withheld by the withholding agent which may be different than the borrower (for example, an agent).
Backup withholding. If backup withholding applies, the applicable rate is 28%.
FATCA withholding. FATCA withholding is imposed at a 30% rate.
Exemptions from withholding tax
Interest withholding. The portfolio interest exemption is described above (see, When withholding tax applies: Interest withholding). In addition, interest is not subject to interest withholding if it is paid:
With respect to bank deposits.
With respect to an instrument with a maturity of 183 days or less.
Applicable treaties may reduce or eliminate interest withholding.
Backup withholding. Payments to foreign persons are generally exempt from backup withholding if the recipient provides documentation establishing its foreign status (or other exemptions apply). Treaties do not reduce backup withholding. Payments to US persons are generally exempt from backup withholding if the recipient provides documentation regarding its federal taxpayer identification number (or other exemptions apply).
FATCA withholding. Treaties do not reduce FATCA withholding. FATCA withholding may be avoided if the recipient provides the withholding agent with the proper documentation.
For a comparative summary of withholding tax on interest, see table, Withholding tax on interest on corporate debt ( www.practicallaw.com/3-502-0416) , in this global guide.
Guarantees of debt raise a number of unique tax issues. Firstly, the nature of the arrangement must be analysed to ensure that the borrower and not the guarantor is treated as incurring the debt for tax purposes. Assuming this is the case, there are four primary issues that arise from a guarantee:
The sourcing of guarantee fees (if any).
The treatment of any payments made by the guarantor pursuant to the guarantee.
The impact of the guarantee on the borrower's interest deductions.
The possibility of a deemed dividend arising from a guarantee of an obligation of a US person by a foreign subsidiary.
Sourcing of guarantee fees. A guarantee fee is generally sourced by reference to the source of the interest income on the underlying loan. Accordingly, a guarantee fee paid by a US borrower is treated as US sourced income. If paid to a foreign guarantor, the fee may be subject to 30% withholding (or a reduced treaty rate if applicable).
Treatment of guarantee payments. If the guarantor is required to make payments to the lender under a guarantee, the guarantor's tax treatment of such payments depends on the facts and circumstances. The guarantor may be entitled to a tax loss for such payments or, alternatively may be required to treat the payments as a non-deductible capital contribution to the borrowing entity. The recipient lender's treatment of such payments should generally be the same as if the lender received the payments from the borrower.
Impact on borrower's interest deduction. See Question 5, Interest deduction: Key characteristics. A guarantee of a US borrower's debt by a related person that is not subject to US tax may result in a limitation on the borrower's ability to deduct interest and original issue discount on the debt. Where certain other conditions are met, the borrower's deduction for interest on the debt may be disallowed (though the deduction may be permitted in subsequent years) if:
The guarantor is more than 50% related (by vote or value) to the borrower (and the guarantor is not a subsidiary of the borrower).
The borrower has a debt-to-equity ratio greater than 1.5:1.
The interest is not subject to 30% interest withholding.
The borrower's net interest expense on all debt exceeds a specified threshold.
Possibility of a deemed dividend. If the debt of a US person is guaranteed by a controlled foreign corporation of such person (or more than two-thirds of the controlled foreign corporation's stock is pledged in support of the loan), the controlled foreign corporation can be treated as having paid a taxable dividend to the US person to the extent of the controlled foreign corporation's earnings and profits. In general, a controlled foreign corporation is a non-US corporation for which 50% of the voting power or value is, directly or indirectly, owned by one or more US persons, each of which owns at least 10% of the voting power. Commercial loans to US persons are often structured to avoid this result when possible.
As a general matter, all debt instruments (whether bonds or loans) are treated the same for US tax purposes. However, as described in previous responses, the nature of the lender may impact certain tax issues (see Question 7, When withholding tax applies: Interest withholding). For instance, the portfolio interest exception does not apply to foreign lenders that are banks making extensions of credit in the ordinary course of business (which is more likely to apply to loans than to bonds because banks are more likely to make loans). Loans are less likely to be issued with original issue discount and are therefore less likely to be subject to the applicable high yield discount obligation rules (see Question 5, Interest deduction: Key characteristics).
Taxes payable on the issue and/or transfer of a bond
There are no federal stamp, transfer or similar taxes imposed on the issue of a bond.
The transfer of a bond can give rise to gain or loss to the transferor which is taken into account in determining the transferor's taxable income for the applicable tax period (see Question 6).
Certain states and other local taxing authorities may impose documentary stamp taxes on certain finance transactions.
Plant and machinery leasing
Claiming capital allowances/tax depreciation
In general, depreciation deductions are available to the owner of tangible personal property used in a trade or business, including plant and machinery. For property subject to a lease, a determination must first be made as to which party to the lease (the lessor or the lessee) is properly characterised as the owner of the property for tax purposes. This determination must be made by reference to the relevant facts and circumstances, including the following:
Legal title to the property.
Legal obligation to pay for the property.
Responsibility for maintenance and operating expenses.
Responsibility for taxes.
The risk of loss if the property is destroyed, condemned, or diminished in value.
Under these rules, a lessee might be treated as owning the plant and machinery subject to a lease if, for example, the lease requires the lessee to return the plant and machinery to the lessor in the same condition and value as when leased. However, in most commercial leases, the lessor typically retains ownership of the property for tax purposes.
If the lessor is the owner of the property for tax purposes, the lessor will be entitled to depreciation deductions if the lessor is engaged in the trade or business of leasing the plant and machinery, or the lessor is holding the plant and machinery for the production of income. Similarly, if the lessee is properly characterised as the owner of the plant and machinery for tax purposes, the lessee will be entitled to depreciation deductions when the plant and machinery is used in the trade or business of the lessee or is held for the production of income.
No depreciation deduction is permitted with respect to property that is placed in service and disposed of by the taxpayer in the same taxable year.
Rate of capital allowances/tax depreciation
The rate of tax depreciation depends on the type of asset depreciated and the year the asset was placed in service. Depreciation begins when an asset is placed into service. Assets placed into service after 1986 are generally subject to the modified accelerated cost recovery system. Under the modified accelerated cost recovery system assets are assigned:
A recovery period between 3 and 39 years.
A depreciation method, such as 200% or 150% declining balance method or straight-line method.
A convention, which provides the rules for the years in which the property is placed into, or retired from service.
Salvage value does not need to be taken into account. Each of these three items will impact the actual depreciation rate applied to the asset.
From time to time, the US adopts rules to incentivise capital expenditure in new property, referred to as "bonus depreciation". These rules most recently permitted a taxpayer to depreciate 50% of the cost of eligible property in the first year it was placed in service. The bonus depreciation rules applied to property placed in service in 2014 but to date have not been extended to property placed in service in 2015.
Lessees not carrying on business in the jurisdiction
There are certain special rules that arise out of concern that lessors and lessees will engage in "double-dip" transactions, where differences between US and foreign legal definitions of ownership permit both the lessor and lessee to "own" the property and obtain favourable tax treatment. Generally, where the lessor retains the incidents of ownership to the property and leases the property to a foreign lessee who is exempt from US tax, the property is subject to significantly less favourable depreciation rates. Where the lessee acquires the incidents of ownership for US tax purposes, the lessee will only be able to take depreciation deductions on the property to the extent that the property gives rise to US income. Further, bonus depreciation is not available for property that is used outside of the US.
In addition, the Internal Revenue Service (IRS) has identified certain leasing transactions with tax indifferent parties (including foreign lessees) as "listed transactions" subject to special disclosure rules and penalty regimes.
Taxation of rentals
The taxation of rentals under leases depends on whether the transaction is properly characterised as a lease or a purchase. Where the lessor retains the incidents of ownership of the property, the transaction is treated as a lease for tax purposes. Where the lessee acquires the incidents of ownership, it is treated as a sale.
If the transaction is respected as a lease, then the lessor treats rental payments as income and the lessee is able to deduct the payments immediately as rental expenses. Certain leases that provide for increasing or decreasing (or contingent) rents over the term of the lease can be subject to the "uneven rent" rules, which may operate to shift the timing of rental income and deductions. Rental income paid to a non-US lessor is generally subject to US withholding at a 30% rate (subject to reduction by treaty) unless the rent is treated as effectively connected with a US trade or business of the foreign lessor.
If the lease transaction is properly characterised as a purchase, the lessee is required to capitalise the asset and recover the cost through depreciation deductions. A portion of each payment is considered an interest expense, which the lessee may potentially deduct and the lessor will include as income.
Rulings and clearances
Unpaid or deferred interest or capital
If the terms of the debt instrument permit the interest to be deferred, interest is generally treated as original issue discount and taken into account over the life of the debt instrument on a constant yield to maturity basis. If the debt instrument requires the interest to be paid but the borrower does not make payment, the treatment to the lender will depend on its method of accounting. For a lender using the cash method of accounting, the deferred interest will not constitute income until it is paid. For a lender using the accrual method of accounting (including most corporations), interest must be included in income as it accrues, regardless of when it is paid. If the lender concludes that there is no reasonable likelihood that the interest will be paid (for example, as a result of the borrower's financial condition), the lender may be permitted to cease accruing the interest into income under the "doubtful collectability" doctrine. The Internal Revenue Service (IRS) has taken the position that this doctrine does not apply to original issue discount, meaning that a lender may be required to accrue original issue discount into income even if it is unlikely such amount will be paid.
For a borrower on the accrual method of accounting, a deduction for accrued interest is generally allowed even if the payment of such interest is deferred. Deferral of interest or principal for an extended period of time and/or a modification of the obligation to defer scheduled payments may cause a deemed reissuance of the underlying debt instrument, which could raise a number of collateral tax consequences.
Debt write-off/release and debt for equity swap
Written off or released (wholly or partly)?
Replaced by shares in the borrower (debt for equity swap)?
If a loan is legally discharged for less than the full amount owing, the borrower will generally have cancellation of debt income equal to the difference between the amount owing and the amount actually paid. This income is generally treated as taxable income to the borrower unless an exception applies (including the insolvency or bankruptcy of the borrower). In this situation, the lender generally realises a tax loss on the cancellation of the debt instrument equal to the difference between the lender's tax basis in the loan and the amount of any payment received in connection with the cancellation (for example, partial repayment), which loss may be capital or ordinary (or a combination of both) depending on the facts.
In the absence of a legal discharge of the loan, a lender may be entitled to write off all or a portion of the loan and claim a tax loss. The ability to claim such a loss depends on the nature of the loan and whether the lender holds the loan as part of its business. If the loan is in the form of a security, the lender may be entitled to take a loss in whole (but not in part) for the year in which the loan becomes worthless. For this purpose, a loan will be characterised as a security if it is in registered form and is issued by a corporation or government entity. Losses with respect to worthless securities are generally capital in nature (unless the issuer of the security is related to the holder).
Other types of loans (including loans issued by individuals and partnerships) can give rise to a bad debt deduction to the holder. Bad debts that arise in the course of the lender's business can be deducted in whole or in part in the year they become wholly or partially worthless, depending on the facts. A debt becomes worthless when the surrounding facts and circumstances indicate there is no reasonable expectation of payment. To demonstrate worthlessness, a holder generally must establish that it took reasonable steps to collect the debt but was unable to do so. A bad debt deduction for a business loan is generally ordinary in nature.
Special tax rules may apply if a lender receives stock of the borrower as partial payment of a loan. The borrower will have cancellation of indebtedness income to the extent the value of the stock issued is less than the amount owing under the loan. As noted above, such income may be excluded from taxable income in certain situations. For the lender, the exchange of the loan for stock may be characterised as a tax-free reorganisation, meaning that the lender is not able to take a tax loss on the transaction (though the lender's basis in the stock received is generally equal to the basis in the loan exchanged for it).
A securitisation vehicle for real estate mortgages may qualify for a special regime known as the real estate mortgage investment conduit. An entity that elects real estate mortgage investment conduit status and satisfies all the conditions can avoid any entity level federal income tax. Instead, the income and deductions generated by the entity are allocated to the holders of the interests in the real estate mortgage investment conduit. In general, a real estate mortgage investment conduit has two types of interests, regular interests and residual interests. An interest that is designated as a regular interest and qualifies as such is treated as a debt instrument for federal income tax purposes. The tax rules impose significant limitations on the types of assets that can be held by a real estate mortgage investment conduit; an entity that fails to satisfy these conditions and other operational limitations will be subject to an entity level tax.
No special regime applies to the securitisation of other types of assets. Rather, such arrangements are subject to the general tax rules. Typical tax issues that arise with these transactions are:
The nature of the securitisation vehicle (corporation, partnership, trust, and so on).
Its jurisdiction of formation (foreign or domestic).
The proper characterisation of the interests as debt or equity. (Opinions of counsel are frequently sought with respect to this point.)
Foreign Account Tax Compliance Act (FATCA)
The United States enacted FATCA in 2010. It has entered into IGAs with a number of foreign jurisdictions. An updated list can be found at www.treasury.gov/resource-center/tax-policy/treaties/Pages/FATCA-Archive.aspx.
In general, banks and other financial institutions are taxed in the same manner as other corporations subject to US tax and are not subject to additional levies or other taxes. However, there are certain special provisions contained in the US tax rules that apply only to banks and thrift institutions, including specialised methods for taking losses with respect to bad debts and a characterisation rule that treats gains and losses on the transfer of indebtedness by banks as ordinary in nature.
Certain states do impose excise taxes and other specific taxes on banks and certain other financial institutions operating or organised in those states.
At any given point in time, there are proposals for reform of the US tax rules that, if enacted, could impact the consequences described above. These proposals range from comprehensive tax reform to changes in the way specific transactions are taxed. Following the November 2014 national elections, the Republican Party holds a majority of seats on both houses of the legislative branch of government. Republican leadership has stated that tax reform is one of their primary objectives. However, given that the President (whose term expires in early 2017) is a member of the Democratic Party, it is unclear what, if any, tax reforms will be enacted.
Internal Revenue Code, Regulations and Other Guidance
Description. This site contains a series of links to certain primary federal tax authorities, including the Internal Revenue Code (maintained by The Legal Information Institute of Cornell University Law School), Treasury regulations and certain other guidance.
US Income Tax Treaties
Description. This site is maintained by the Internal Revenue Service (IRS) and contains links to current US income tax treaties with other nations, as well as the technical explanations where available.
Description. This site is maintained by the Department of Treasury and contains significant resources relating to FATCA, including an updated list of all IGAs currently in effect.
Withholding tax requirement on interest on corporate debt, and the key exemptions
What is the withholding tax requirement on interest on corporate debt?
What are the key exemptions (ignoring double tax treaties)?
What is the rate?
Withholding is required with respect to payments of US-sourced interest and original issue discount to foreign persons.
Key exemptions include:
30% (subject to reduction or elimination by treaty).
Gregory W Gallagher, PC, Partner
Kirkland & Ellis LLP
Professional qualifications. Licensed to practice law in Illinois.
Areas of practice. Mergers and acquisitions; cross-border tax structuring; bankruptcy, restructuring and insolvency transactions; capital markets transactions; real estate investment trusts.
Russell S Light, Partner
Kirkland & Ellis LLP
Professional qualifications. Licensed to practice law in New York, Illinois and the District of Columbia.
Areas of practice. Mergers and acquisitions; cross-border tax structuring; bankruptcy, restructuring and insolvency transactions; capital markets transactions; investment fund formation; real estate investment trusts.
Sara B Zablotney, Partner
Kirkland & Ellis LLP
Professional qualifications. Licensed to practice law in New York.
Areas of practice. Mergers and acquisitions; cross-border tax structuring; bankruptcy, restructuring and insolvency transactions; capital markets transactions; investment fund formation; real estate investment trusts.