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English definition of “backup withholding”

backup withholding

noun [U]    
TAX in the US, a system in which the tax on the income from some types of investment is sent directly to the tax authority, for example when a bank does not have all the information it needs about the person paying the tax: Under the backup withholding rules, the business or bank must withhold on a payment if the payee did not provide a taxpayer identification number.
(Definition of backup withholding noun from the Cambridge Business English Dictionary © Cambridge University Press)
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