Depositary Receipts Program Payments: IRS Releases Chief Counsel Memorandum Applying Withholding Tax to Payments Made to a Non-U.S. Corporate Issuer Participating in a Sponsored American Depositary Receipts Program

Sullivan & Cromwell LLP - December 21, 2010

On December 17, 2010, the Internal Revenue Service (the “IRS”) released a Memorandum from the Office of Chief Counsel (the “Memo”), concluding that (i) payments by a U.S. depositary institution (the “Depositary”) to a foreign corporate issuer (the “Issuer”) reimbursing the Issuer for various expenses incurred in relation to a sponsored American Depositary Receipts (“ADR”) program are includible in the gross income of the Issuer; and (ii) such payments to the Issuer are subject to withholding under Section 1442.