Qualified Notice
WITHHOLDING TAX NOT APPLICABLE FOR UNITHOLDERS AND BROKERS ARISING FROM SECTION 1446(F) AND SECTION 1446(A) OF UNITED STATES ("US") INTERNAL REVENUE CODE
NTT DC REIT Manager Pte. Ltd., as manager of NTT DC REIT (the "Manager"), wishes to announce that unitholders of NTT DC REIT (the "Unitholders") are not subject to withholding tax pursuant to Section 1446(f) or Section 1446(a) of the US Internal Revenue Code ("Code") as NTT DC REIT does not operate in a manner that will cause it to be treated as engaging in a US trade or business.
Section 1446(f) of the Code
Section 1446(f) of the Code provides that if a non-US person transfers an interest in a partnership and if any portion of the gain on such transfer is effectively connected with the conduct of a US trade or business, the transferee must withhold 10% of the amount realised upon the transfer or sale. Under the final regulations of Section 1446(f), brokers that effect a transfer of an interest in publicly traded partnership ("PTP") on behalf of a non-US person and pay the amount realised to a non-US transferor (that is their customer) must generally withhold a tax equal to 10% of the amount realised.
NTT DC REIT has, for US federal income tax purposes, elected to be treated as a partnership and, by default, is a PTP. However, withholding tax under Section 1446(f) should not be applicable to the transfers by Unitholders because NTT DC REIT has, and intends to continue to, operate in a manner that will not cause it to be treated as engaging in a US trade or business. Accordingly, Unitholders and their nominees/ brokers that effect a transfer of Units, are also not required to withhold a tax equal to 10% of the amount realised pursuant to Section 1446(f) of the Code.
The Manager intends to issue a qualified notice related to Section 1446(f) ("Section 1446(f) Qualified Notice") on a quarterly basis to formally state that NTT DC REIT is not engaged in a trade or business within the US at any time during its taxable year through the "PTP designated date" within the meaning of the final regulations under Section 1446(f).
Accordingly, and to reiterate, the Section 1446(f) Withholding Tax is not applicable to transfers by Unitholders. Additionally, brokers that effect a transfer of units in NTT DC REIT are also not required to withhold the Section 1446(f) Withholding Tax. Unitholders should not be required to file a US federal income tax return or apply for a US tax identification number solely as a result of the Section 1446(f) Withholding Tax.
Section 1446(a) of the Code
Section 1446(a) of the Code provides that a non-US partner in a partnership, including a PTP, is subject to Section 1446 withholding tax on allocations of income effectively connected with a US trade or business. Further, the regulations of Section 1446(a) stipulate that a PTP that has effectively connected gross income, gain or loss must pay withholding tax by withholding from distributions to a non-US partner. Additionally, nominees who hold an interest in a PTP must withhold tax, as appropriate, on distributions paid to any non-US persons (or to the accounts of any non-US persons) of which the nominee is treated as the withholding agent. A nominee that receives a qualified notice that meets the requirements of Treas. Reg. 1.1446-4(b)(4) must withhold on the amounts specified on the qualified notice.
NTT DC REIT intends to issue qualified notices related to Section 1446(a) ("Section 1446(a) Qualified Notices") concurrent with each distribution made by NTT DC REIT to represent that, in connection with that specific distribution, no portion of that distribution is attributable to income effectively connected with a US trade or business and no US withholding tax under Section 1446(a) would be required for that specific distribution.
Accordingly, as supported by the information to be detailed on the applicable Section 1446(a) Qualified Notice, nominees should not be required to withhold under Section 1446(a) on distributions received from NTT DC REIT, as no portion of the distributions payable are attributable to income that is effectively connected with a US trade or business.
In this regard, NTT DC REIT will provide the Section 1446(f) Qualified Notices and Section 1446(a) Qualified Notices (as appropriate) on its website reflecting it is not engaged in a US trade or business.
