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Publicly Traded Partnerships (PTP)
The sales proceeds from publicly traded partnerships (PTPs) are subject to a 10% withholding tax.
As a result of U.S. Internal Revenue Regulations that took effect on January 1st 2023, new withholding charges are to be applied to sales proceeds from Publicly Traded Partnerships (“PTPs”) that do not have Qualified notice exemptions held by non-U.S. taxpayers. The IRS withholding charges are substantial, which is why there is limited access to these products through LYNX for investors who may not be aware of the risks associated with investing in PTPs.
More information about this new legislation is available on the IRS website:
Publicly Traded Partnerships | Internal Revenue Service
Definition: What is a Publicly Traded Partnership or a PTP?
A publicly traded partnership (PTP) is a business organization owned by two or more co-owners whose shares are regularly traded on an established securities market or are easily tradable on a secondary market, regardless of the number of partners.
A publicly traded partnership is a type of limited partnership managed by two or more general partners—including individuals, corporations, or other partnerships—and is capitalized by limited partners who provide capital but have no management role in the partnership.
PTP securities that may be subject to withholding under the IRS Regulation are divided into two groups: those with a Qualified Notice and those without a Qualified Notice.
A Qualified Notice is an exemption provided by the IRS Regulation to issuers of PTP. This exemption remains valid for 92 days.
U.S. withholding tax on PTP
All investors who are considered non-U.S. residents, meaning they are not subject to U.S. taxation and reporting (and do not file a W-9 IRS form), are required to pay a 10% withholding tax on the sales or distribution proceeds of PTPs.
This means 10% of the amount of funds that would settle resulting from any transaction or distribution of a PTP, not just 10% on any calculated profit.
Here is an example on how this withholding tax is calculated on the sale of a PTP that does not have a Qualified notice exemption:
Buy 200 shares @ 50
Transaction value = $10,000
Sell 200 shares @ 51
Transaction value = $10,200
Profit = $200
Withholding = $1020 USD
Assuming no tax refund is claimed, the investor’s loss would be 820 dollars.
Options and other derivative instruments with a PTP as the underlying security are not subject to a withholding tax. However, if the option or derivative is converted into a PTP, a subsequent sale of such PTP security would be subject to withholding.
For more information about this new regulation, please refer to the IRS website below:
Partnership Withholding | Internal Revenue Service
How to activate trading on PTPs?
In the menu at the top right corner, select Help and then Secure Message Center.
Create a ticket
To create a ticket, click Compose, and select New Ticket from the dropdown menu. Choose the following category for the ticket: Trade Issues > Other Trade Problem.
Here is an example of a ticket that you can use as a template to request the enabling of trading for PTP symbols for non-U.S. taxpayers:
Problem/Request Title: “Access to PTP Products”
Detailed Description of problem/request:
I hereby request the enabling of trading for PTP symbols on my account UXXXXXX.
List PTPs with Qualified Notice
PTP Securities with Qualified Notices can be found on the following link:
PTP Securities with known Qualified Notice
List PTPs without Qualified Notice
PTP Securities without Qualified Notices can be found on the following link:
PTP Securities without Qualified Notices