Factsheets - Qualified Indices under Section 871(m)

Section 871(m) of the Internal Revenue Code (26 USC 871(m)) seeks to ensure that non-US persons cannot avoid withholding tax on US-sourced dividend payments through the use of financial derivatives. Save for the exemption provided by Treasury Regulation 1.871-15, such financial derivatives could include derivatives on financial indices.

To assist our index subscribers in undertaking a compliance review of the financial indices that form the basis of financial derivatives, FTSE Russell has published a statement that summarises information available to support clients that may be of assistance to those involved in transacting derivatives on FTSE Russell indices in their determination of whether the indices they use comply with the definitions of a “qualified index” in relation to Section 871(m) of the US Internal Revenue Code and Treasury Regulation Section 1.871-15.