IRS Issues Guidance On Partnership Interests Transfer Withholding Tax

; posted on
April 3rd, 2018

On April 2, 2018, the Treasury Department and the Internal Revenue Service in the United States issued a guidance on the withholding on the transfer of non-publicly traded partnership interests, but exemptions or reductions from the withholding tax is possible for some qualifying cases.  

General Tax Treatment

Under the new law, if a foreign person realizes gain or loss on the sale or exchange of a partnership interest which is effectively connected with the conduct of a trade or business in the United States, the gain or loss would be treated as effectively connected with the conduct of a trade or business in the United States if the partnership sold all of its assets. In this circumstance, a withholding tax would be levied on the disposition of a partnership interest by the foreign taxpayer.

Guidance

Notice 2018-29 announces that the Treasury Department and the IRS intend to issue regulations, including rules and procedures relating to qualifying for exemptions from withholding or reductions. The guidance does not affect the suspension of the application of withholding in the case of a disposition of certain publicly traded partnership interests. The notice also requests comments on the rules described in the notice and also requests comments on what additional guidance should be issued to assist taxpayers in applying these sections of law.

Source: IRS

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