News

4 November 2022

Client Notification in Response to Major Changes in the U.S. Withholding Mechanism for Publicly Traded Partnerships

Dear Valued Customers,

Client Notification in Response to Major Changes in the U.S. Withholding Mechanism for Publicly Traded Partnerships 

The U.S. Internal Revenue Service (IRS) recently announced additional withholding on the transfer of interests in the publicly traded partnerships (PTPs) held by non-U.S. investors in accordance with Section 1446(f) of the Internal Revenue Code (IRC Section). The latest regulations on withholding and information reporting of relevant subjects, which will come into effect on January 1, 2023. After taking effect, non-U.S. investors will incur the following U.S. tax costs when they hold/sell, trade, or transfer PTP-related subjects for compensation:

 

When receiving dividends/ interest: 37% withholding tax will be levied on the allotted amount;

When selling, trading or transferring PTP subject matter for compensation: 10% of the "total price" obtained will be deducted.

 

In order to reduce the complex US withholding risks and impacts arising from investing in these commodities, CITIC Securities Brokerage (HK) Limited shall no longer accept trading instructions to buy PTP-related targets from 14 November 2022 onwards. 

 

The customers can still sell the original holdings of PTP related subjects through the original trading channel. CITIC Securities Brokerage (HK) Limited will completely suspend or restrict the sale, trading or other transfer of PTP subject matter (including any transactions with exceptions listed in the regulations) from 28 Dec 2022. In addition, investors are reminded to note the following:

 

1. The above is based on the current IRS announcements and decrees. The implementation may be different due to future changes in regulations. CITIC Securities Brokerage (HK) Limited will not notify any changes in the relevant laws and regulations on PTP products, but investors should pay attention to their own investment positions, the development of laws and regulations and understand their impact on their own rights.

 

2. The industry has announced a tentative list of affected PTPs on the many forums (click here to view the list). The list is based on market peer information and notices from financial institutions in the United States, but CITIC Securities Brokerage (HK) Limited cannot guarantee the completeness of the list. Moreover, the list may evolve as more peer information becomes available in future. Investors are advised to pay attention to the relevant announcements on the IRS official website. 

 

3. If you hold PTP-related subjects, please consult your tax advisor as soon as possible to understand the tax costs derived from holding, trading or other paid transfer of PTP and the impact on the rights and interests related to asset allocation, and refer to your tax advisors of the company recommendation or consider at your own discretion whether to dispose of the sale before the end of 2022.

 

For further details, please contact your relationship manager.

 

Yours faithfully,

CITIC Securities Brokerage (HK) Limited