Publicly Traded Partnership (PTP) is a partnership structure that is traded on public markets, where investors are considered partners in the business. This structure is commonly used by companies in the United States and involves two main parties: the General Partner (GP) and the Limited Partner (LP). The General Partner is responsible for managing and running the company’s operations, while the Limited Partner is an investor who provides capital but is not directly involved in management.

In terms of profit distribution, a PTP does not use the term “dividends” as corporations do, but instead uses “distributions.” The difference is that in corporations, dividends received by investors are generally subject to withholding tax by the company. In contrast, PTP distributions are paid directly to investors without tax withholding, meaning that each individual investor is responsible for their own tax obligations.

In addition to distributions, investors can also realize gains or losses from the difference between the purchase price and the selling price, similar to stock investments in general.

Beyond regular distributions, PTP investors may also face additional complexities, such as specialized tax reporting (for example, Schedule K-1 in the U.S.), which details each investor’s share of income, expenses, and tax liabilities.

Overall, while both PTPs and corporations can be publicly traded investment instruments, they differ in legal structure, profit distribution methods, and tax systems. PTPs are more common in the United States and have not yet been widely adopted within Indonesia’s corporate system.

The deduction is a withholding tax required by the U.S. Internal Revenue Service (IRS) under Internal Revenue Code Section 1446(f). This rule applies specifically to the sale of Publicly Traded Partnerships (PTPs) by non U.S. investors.

Because of the different structure, under this regulation, a 10% withholding tax is applied to the gross proceeds of PTP sales. This withholding is deducted automatically at the time of sale.

For example:

Although the trade generated a $100 profit, the IRS withholding would temporarily result in a net amount of -$10 after deduction.

Please note this is a regulatory tax withholding requirement by the IRS and not a fee charged by broker or trading platform

The deduction on your dividend/distribution is related to U.S. tax withholding rules for Publicly Traded Partnerships (PTPs).

PTPs, such as Enterprise Products Partners (EPD), are not treated like standard U.S. corporations. Under IRS Section 1446, distributions from PTPs to non U.S. investors are often classified as Effectively Connected Income (ECI), which is subject to different tax rules.

Because of this classification, distributions from PTPs may be subject to a withholding tax rate of up to 37% for foreign individual investors, instead of the standard dividend withholding rates that may apply to regular U.S. stocks.

In some cases, an initial withholding may be adjusted later if the incorrect tax rate was first applied. When this happens:

Please note this withholding is required under U.S. tax regulations and is not a fee charged by Gotrade or Alpaca.