Treasury and IRS Provide Greater Certainty on Qualified Foreign Pension Fund Rules

Treasury and IRS Provide Greater Certainty on Qualified Foreign Pension Fund Rules


By: Libin Zhang, Cameron N. Cosby

Although foreign persons are generally subject to U.S. federal income tax on their gains from U.S. real property, “qualified foreign pension funds” have been exempt from tax on this gain since late 2015. However, many foreign pension funds have not been certain as to whether they qualify for this exemption, which has led to uncertainty on the part of both the pension funds and their counterparties who would be withholding agents. On June 6, 2019, the U.S. Treasury Department (“Treasury”) and Internal Revenue Service (“IRS”) issued proposed regulations that broadly interpret the qualified foreign pension fund exemption, which should create more certainty in the market.

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