New US Withholding on Sales of US Partnership Interests by Non-US PartnersDownload
Under 1991 US guidance, if a non-US partner sold its interest in a US partnership, the selling partner would look through to the business of the partnership and would be required to file a US tax return and pay US tax if the partnership would have had income effectively connected to a US trade or business on a deemed sale of its assets. But that guidance was dramatically reversed in a 2017 tax court case called Grecian Mining. Then the US position was reversed again in the Tax Cuts and Jobs Act, when the US Congress reversed Grecian Mining, codified the 1991 guidance and implemented withholding on the sale of a US partnership interest by a non-US person.
Since the new withholding was implemented at the beginning of the year, the Internal Revenue Service has issued two new pieces of guidance to assist taxpayers in determining and ex-ecuting the withholding. However, taxpayers still await formal regulations on the new withholding.
This column is reprinted with the publisher’s, Wolters Kluwer, permission from Global Tax Weekly, and originally appeared at page 5, Issue 288, May 17, 2018.