NOTIFICATION ON BROKER WITHHOLDING TAX ON PUBLICLY TRADED PARTNERSHIPS (“PTP”) SECURITIES: NEW SECTION 1446(F) REGULATIONS
 
The U.S. Internal Revenue Service has issued a new regulation under Section 1446(f) of the Internal Revenue Code which imposes a new U.S. PTP withholding tax that would be applied on trades of PTP securities with effect from 1 January 2023.

This would primarily impact non-U.S. residents who invest in PTP securities. Unless an exception applies, a 10% withholding tax applies to:
1. Gross proceeds from the sale of a PTP interest, regardless of the amount of gain on such sale; and
2. Certain PTP distributions

With respect to PTP distributions (which includes dividend payments), the 10% PTP withholding tax will be imposed on all, a portion, or none of the distribution, depending on the existence of, and the details provided by the PTP in, a qualified notice. The PTP withholding tax is in addition to any other applicable non-resident withholding tax on PTP distributions of effectively connected income and certain other types of U.S. source income. Thus, a PTP distribution can potentially be subject to up to 47% withholding tax with respect to individual clients and 40% withholding tax with respect to corporate clients.
 
In view of the significant impact and the complications of withholding, CGS-CIMB Securities Sdn Bhd (“CGS-CIMB”) will be taking the following actions:

1.   By 7 November 2022, CGS-CIMB will cease to accept buy orders and share transfer-in requests for PTP securities.
2.  By 28 December 2022, existing clients who hold such PTP securities can choose to sell their PTP securities to avoid the additional U.S. PTP withholding tax described above. On the other hand, clients may choose to hold onto their PTP securities past 31 Dec 2022, but do note that any transaction thereafter will be subjected to the additional U.S. PTP tax withholding.

Please click here for more information on U.S. PTP withholding and here for the list of PTP securities identified by CGS-CIMB. Please note that the PTP securities list is not exhaustive and can change over time.

If the sale of security (from 1 January 2023 onwards) is not listed in the provided PTP list but falls under PTP classification, CGS-CIMB reserves the right to claim the withholding tax from the customer to satisfy IRS withholding requirements.

If you need assistance or have any queries, please do not hesitate to contact your Dealer’s Representatives.


Yours sincerely,

CGS-CIMB Securities Sdn Bhd (197901004504)(48703-W)
(A Participating Organisation of Bursa Malaysia Securities Berhad)