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Abstract: 

Non-U.S. issuers of corporate stock listed on foreign exchanges that want to make their stock accessible to U.S. investors frequently participate in ADR programs in the U.S. In July 2013, the Internal Revenue Service released a memorandum from its Office of Chief Counsel concluding that payments by a U.S. depositary institution to a foreign corporate issuer in exchange for the exclusive right to sponsor an American Depositary Receipts program are (1) subject to 30 percent U.S. withholding unless otherwise reduced by treaty and (2) treated as “Other Income” under the U.S. and OECD model income tax treaties. This article discusses that memorandum and its potential impact on issuers.

Keywords: foreign issuer; tax treaty; American Depositary Receipts; ADR; AM 2013-003; “other income”; withholding tax

Affiliations:  1: Sullivan & Cromwell LLP; 2: Sullivan & Cromwell LLP; 3: Sullivan & Cromwell LLP; 4: Sullivan & Cromwell LLP.