The qualified derivatives dealer (“QDD”) rules allow non-US financial institutions selling derivatives and structured products referencing US equities to avoid US federal income tax withholding on dividends (2017 only) and dividend equivalents on their hedges. The QDD rules have been promulgated through a hodgepodge of sources including FAQs, regulations and Internal Revenue Service revenue procedures. In Chief Counsel Advice 201727006, the IRS synthesized these materials into a cohesive whole. The attached Legal Update, prepared by Mark Leeds and Jared Goldberger of Mayer Brown’s New York office, analyzes this memorandum and discusses why taxpayers most likely will be relying on it at their own risk.

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