What does section 871(m) mean?

Section 871(m) is a section of the Internal Revenue Code issued by the US Internal Revenue Service (IRS). Regulations used under section 871(m) apply to non-US residents who hold US equity derivatives.

The section includes tax regulations related to dividend income earned on US equity derivatives. According to section 871(m), non-US residents who earn dividend income are subject to 30% withholding tax. The rate of withholding tax is much lower for countries that have existing tax treaties with the US.