As of January 1^st, 2017, Section 871(m) IRC treats “dividend equivalent payments” made with respect to certain derivative transactions referencing dividend-paying U.S. equities as U.S.-sourced dividends subject to withholding under Chapter 3 and 4 IRC. Withholding agents (specifically those with a QI agreement in place) will be required to withhold on such payments irrespective of the derivative contractor’s residence. However, it is unclear whether such payments will be treated as U.S.-sourced dividends between non-U.S. parties for the purpose of the applicable U.S. income tax treaty, specifically when the payoff-paying party is not resident in the USA. Based on opinions of the Austrian Federal Ministry of Finance and the G5, Dominik Stundner discusses if dividend equivalent payments can be considered as “dividends” and why the USA may not have a right to withhold under both Art 10 of the OECD model tax treaty and the tax treaty with Austria.