IRS 871(m)

IRS 871(m)

Guarantee Your Compliance with IRS 871(m)

IRS 871(m) Compliance

The IRS regulation 871(m) aims to collect tax on dividend-equivalent payments for derivative instruments referencing US equity instruments. Transactions executed in US equity-linked derivative instruments, or those with non-qualified indices, may be “in-scope” for withholding and reporting.

Determining which instruments are “in-scope” is a difficult task that requires a thorough understanding of equity-linked derivatives. Our expert knowledge of derivatives’ delta, constituents, weighting, and performance makes this possible. As does our constant monitoring of dividend payments on the underlying instruments used by 871(m)-relevant derivatives.

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How You Will Benefit

Our IRS 871(m) Data Service

We identify “in-scope” derivatives based on their underlying instruments and indices, and then flag them for clear identification. Based on our award-winning corporate actions, the IRS 871(m) data from SIX provides the required information to track changes in instrument lifecycles and to determine dividend-equivalent payments. Furthermore, SIX delivers dividend equivalent payment tax messages containing the calculated or contributed base amount for withholding.

 

The additional time for demonstrating a ‘good faith effort’ is running out. SIX continues to closely monitor for future updates to ensure clients have all the data elements to comply with the full scope of 871(m).

Jürg Stalder, Senior Product Manager, SIX

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About This Service

SIX delivers the critical data elements required to comply with IRS Section 871(m) and the expertise and global market knowledge to support you to fulfill your withholding and reporting obligations. Learn more about our service.

IRS 871(m): Service Overview

SIX helps you to identify data relevant for section 871(m) by providing the underlying data. Download our factsheet for more information. 

IRS 871(m) Service by SIX: Facts and Figures

  • 1.5 million instruments identified and monitored by SIX
  • 93,000 instruments in scope in May 2018, projected to rise to over 100,000 by 2022
  • 315,000 issuer-defined 871(m) tax-applicability codes captured
  • 85,000 issuer withholding responsibility attributes reported by SIX

Main Service Features

  • “In-scope” and “delta at issue” information from issuers and exchanges with daily calculations and updates
  • Instruments with qualified index underlyings are classified as exempt from 871(m) withholding
  • Collection and emission of dividend-equivalent tax messages
  • Provision of relevant dividend payment corporate action data for the underlying US securities of equity-linked instruments

Included Data in Support of Section 871(m):

  • Classification of “in-scope” equity derivatives
  • For equity derivatives (e.g. options, futures, structured
    products, etc.), SIX sets 871(m) “in-scope” or “potentially in-scope” flags
  • Issuer-confirmed tax applicability codes for securitized
    derivatives

Industry Accolades

The 871(m) Data Service has won the following industry awards:

  • Best Vendor Solution for Tax Compliance, RegTech Insight, 2019
  • Best Reference Data Initiative for IRS 871 (m),
    Inside Market Data & Inside Reference Data Awards (IMD/ IRD), 2018