Recent US legislation effectively makes non-US banks and non-US financial institutions, investment funds, and others information gathering agents of the US tax authorities by threatening their own US source income with 30% withholding. The recently released definition of ‘passthru payments’ further expands the universe of non-US financial entities which will need to comply with the new legislation. Capital market participants, investment vehicles and derivatives counterparties will have to do cost–benefit analysis for becoming compliant with the new legislation, and correspondingly engage in a comprehensive review not only of their business operations, but also of their standard documentation.
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