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German Banks Seek Relief From Dividend Equivalent Payment Rules

JUL. 3, 2019

German Banks Seek Relief From Dividend Equivalent Payment Rules

DATED JUL. 3, 2019
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3 July 2019

Mr Lafayette G. “Chip” Harter
Deputy Assistant Secretary
(International Tax Affairs)
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dividend Equivalent Payments

Regulations under Section 871(m) of the Internal Revenue Code

Dear Mr Harter,

Dear Sir or Madam,

We — the German Banking Industry Committee1 and the German Derivatives Association2 — would like to come back to the personal discussions3 with you and the comment letters4 we have already submitted, in which we referred to individual aspects of the regulations under Section 871(m) of the Internal Revenue Code that, in our view, constitute a disproportionate burden for German financial institutions operating as issuers of listed financial derivatives on US equities or as custodian banks for clients investing in these.

While it is true that some of these obligations have been suspended for a transitional period, full implementation of the Section 871(m) regulations beginning on 1 January 2021 “looms” unless the relief that we believe is vital for the European derivatives market is granted permanently at your end.

May we therefore once again offer to discuss the particularly serious components of full implementation with you in a telephone conference in the near future, with a view to achieving an acceptable long-term solution that is compatible with US tax interests and in line with European market practices.

We should greatly appreciate it if you could let us know on which dates a conference call would be convenient for you in the second half of August.

Please feel free, of course, to contact us for a personal exchange of views at any time.

Yours sincerely,
on behalf of the German Banking Industry Committee,
Association of German Banks
Berlin, Germany

Joachim Dahm
Member of the Management Board

Mario Labes
Division Manager

cc:
Douglas Poms
Deputy International Tax Counsel
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Daniel Winnick
Associate International Tax Counsel
Department of the Treasury
1500 Pennsylvania Ave, NW
Washington, DC 20220

Karl Walli
Senior Counsel — Financial Products
Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Lawrence D. Norton
U.S. Treasury's Representative for Europe
U.S. Mission to the European Union
Zinnerstraat — 13 — Rue Zinner
B-1000 Brussels, Belgium

Raimo A. Mitschke
Economic Specialist
Botschaft der Vereinigten Staaten
von Amerika
Pariser Platz 2
10117 Berlin

FOOTNOTES

1 The German Banking Industry Committee (GBIC) is the joint committee operated by the central associations representing the interests of the German banking industry. These associations are the Bundesverband der Deutschen Volksbanken und Raiffeisenbanken (BVR), for the cooperative banks, the Association of German Banks (Bundesverband deutscher Banken, BdB), for the private commercial banks, the Bundesverband Öffentlicher Banken Deutschlands (VÖB), for the public banks, the Deutscher Sparkassen- und Giroverband (DSGV), for the savings banks finance group, and the Verband deutscher Pfandbriefbanken (vdp), for the Pfandbrief banks. The member associations of GBIC engage in a collective opinion-forming and decision-making process on legal, political and practical issues relating to banking. These include, in particular, questions concerning prudential regulation, securities legislation and tax law.

2 Deutscher Derivate Verband (DDV), the German Derivatives Association, is the industry representative body for the 16 leading issuers of structured products in Germany. The largest association of its kind in the world, the DDV serves as a political interest group in Berlin and Brussels. DDV's members are among the most important structured products issuers in Germany, representing more than 90 percent of the total market. DDV is an advocate of self-regulation, and it works in conjunction with its members and sponsoring members to set industry standards.

3 Our last meeting with Dana Trier, Chip Harter, Douglas Poms, Karl Walli and Daniel Winnick took place on 20 December 2017.

4 Our latest letter concerning these issues is dated 11 July 2018.

END FOOTNOTES

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