Regulations

Clearing of potential Section 871(m) IRC transactions

Description of a potential Section 871(m) IRC transaction

A potential Section 871(m) IRC transaction refers to transactions that could be subject to Section 871(m) IRC of the United States Internal Revenue Code (IRC). 

Such transaction may be any derivative transaction that references interest in at least one security that could give rise to a United States source dividend. If the transaction is in-scope and subject to Section 871(m) IRC, a withholding tax may be levied on the dividend equivalent amounts from derivatives that reference dividend paying United States equities. 

As of 1 January 2017, Eurex Clearing AG has assumed the status as a Qualified Derivatives Dealer (QDD).

Eurex Clearing AG is not a responsible party within the meaning of Treasury Regulations Section 1.871-15(p) and hence not required to provide its Clearing Members with any information identifying potential Section 871(m) IRC transactions, applicable delta, combined transactions, dividend equivalent amount, or the timing of withholding. 

Where Eurex Clearing AG is receiving or treated as receiving dividend equivalent amounts as long party of a Section 871(m) IRC transaction, Eurex Clearing AG confirms that it does not employ any combined transaction strategies. Thus any Clearing Member acting as withholding agent should not subject any transactions in which Eurex Clearing AG is the long party to the combination rules under the presumptions of Treasury Regulations Section 1.871-15(n). 

U.S. Clearing Members
U.S. Clearing Member that identifies as United States Person according to a valid United States Form W-9 (Request for Taxpayer. Identification Number and Certification) may clear potential Section 871(m) IRC transactions after providing Eurex Clearing AG with a duly executed Form W-9.

Non-U.S. Clearing Members
Non-U.S. Clearing Member may solely clear potential Section 871 (m) IRC transactions when providing Eurex Clearing AG with a duly executed and valid Form W 8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting) stating

  • that it entered into a Qualified Intermediary (QI) Agreement with the U.S. Internal Revenue Service assuming primary responsibility for reporting, collecting and remitting withholding taxes, when clearing potential Section 871 (m) IRC transactions for clients

    and / or

  • that it entered into a Qualified Intermediary (QI) agreement with the U.S. Internal Revenue Service acting in a capacity as Qualified Derivatives Dealer (QDD), when clearing potential Section 871(m) IRC transactions for own accounts.

The Clearing Member is obligated to submit reports to Eurex Clearing AG, providing the information for the purpose of Form 1042/1042 S reporting and reporting reconciliation. 

The required information shall be provided to Eurex Clearing AG through a template (see under Further information). Clearing Members must provide this information on the tenth calendar day of the current month after the reporting month to the e-mail address reporting871m@eurex.com.