Clifford Chance

Supplemental IRS Guidance on Upcoming Compliance Obligations of Non-US Banks, Financial Intermediaries and Investment Vehicles

14 April 2011

On April 8, 2011, the US Internal Revenue Service ("IRS") issued supplemental guidance on the new compliance obligations enacted under the Hiring Incentives to Restore Employment Act of 2010 (the "HIRE Act") that will be imposed beginning in 2013, subject to certain transitional rules, on non-US banks, financial intermediaries and investment vehicles holding US investments directly or through intermediaries.

The guidance, published under Notice 2011-34, supplements guidance set forth in Notice 2010-60 on how the IRS will apply new US tax compliance rules beginning in 2013 to non-US banks, financial intermediaries and investment vehicles. The guidance in the two Notices, which is described in greater detail in the attached memorandum, will help non-US banks, financial intermediaries and investment vehicles ("Foreign Financial Institutions" or "FFIs") evaluate their options for avoiding a new 30% withholding tax on proceeds from investments in US financial assets. In considering its options, an FFI must consider not only the scope of the obligations, but whether the FFI will be permitted to take such measures under its local law and whether affiliated FFIs are also able to comply.

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