Treaty Treatment of Depositary Receipts Program Payments: IRS Releases Chief Counsel Memorandum Treating Payments to a Non-U.S. Corporate Issuer Pursuant to a Sponsored American Depositary Receipts Program as “Other Income” under U.S. and OECD Model Income Tax Treaties

Sullivan & Cromwell LLP - July 22, 2013

On July 12, 2013, the Internal Revenue Service (“IRS”) released a Memorandum from its Office of Chief Counsel (the “Memo”) concluding that payments by a U.S. depositary institution (the “Depositary”) to a foreign corporate issuer (the “Issuer”) in exchange for the exclusive right to sponsor an American Depositary Receipts (“ADR”) program are (i) subject to 30% U.S. withholding unless otherwise reduced by treaty and (ii) treated as “Other Income” under the U.S. and OECD Model Income Tax Treaties (the “Model Treaties”).