US Withholding Tax Reviewed

In 1997 the United States Internal Revenue Service issued new regulations concerning the withholding and reporting obligations for payments of income on United States debt and equity securities to non-United States persons. In particular the Regulations substantially amended the procedural rules relating to the claiming of relief from United States withholding tax on such payments while retaining the basic withholding tax rules.

The Regulations reflect two important policy objectives. These objectives are first ensuring that the benefit of reduced double tax treaty rates of withholding tax are received only by non-United States persons who reside in tax treaty countries and secondly ensuring that United States persons do not escape United States tax on their income.

The Internal Revenue Service plans to achieve these objectives principally by requiring intermediaries and flow-through entities to adopt procedures designed to identify the beneficial owner of...