Page 16 - Withholding Taxes for Foreign Entities

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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
does not assume any primary withholding re- or is covered as an account that is exclu- withholding rate pool) (see Pooled with-
sponsibility. The QI gives you a Form W-8IMY ded from the definition of financial account holding information, later); and
with which it associates the Form W-9 and a under Annex II of an applicable IGA or un- • You have sufficient information to report
withholding statement that allocates 40% of the der Regulations section 1.1471-5(a) and the payment on Form 1042-S or Form
dividend to a 15% withholding rate pool, 40% to has provided QI with a certification that it 1099, if reporting is required.
a 30% withholding rate pool, and 20% to the has maintained such Chapter 4 status dur-
U.S. individual. You should report on Forms ing each certification period. Withholding statement. The NQI or U.S.
1042-S 40% of the payment as made to a 15% • None of its partners, beneficiaries, or own- branch must give you certain information on a
rate dividend pool and 40% of the payment as ers is a withholding foreign trust, withhold- withholding statement that is associated with
made to a 30% rate dividend pool. The part of ing foreign partnership, participating FFI, the Form W-8IMY. A withholding statement
the payment allocable to the U.S. individual registered deemed-compliant FFI, regis- must be updated to keep the information accu-
(20%) is reportable on Form 1099-DIV. tered deemed-compliant Model 1 IGA FFI, rate prior to each payment. See, however, Reg-
or another QI acting as an intermediary for ulations section 1.1441-3(e)(4)(iv)(C) for when
Joint account treatment. A QI may apply joint a payment made by the QI to the partner- a withholding agent may instead accept an al-
account treatment to a partnership or trust if the ship or trust. ternative withholding statement.
partnership or trust meets the following condi- • It agrees to permit the QI to treat its direct
tions. and indirect partners, beneficiaries, or For Chapter 4 purposes. An NQI receiv-
• It is a nonwithholding foreign partnership or owners as direct and indirect account hold- ing a withholdable payment must provide a
nonwithholding foreign trust that is either a ers, respectively, of the QI under the QI withholding statement which satisfies the re-
simple or grantor trust. agreement. quirements of an FFI withholding statement or,
• It is a certified deemed-compliant FFI • It agrees to comply with the compliance if the NQI is not a participating FFI or registered
(other than a registered deemed-compliant procedures of the QI agreement. deemed-compliant FFI, a Chapter 4 withholding
Model 1 IGA FFI), an owner-documented For information on these rules, see section statement.
FFI with respect to the QI, an exempt ben- 4.06 of the QI agreement in Revenue Proce- An FFI withholding statement may allocate
eficial owner, an NFFE, or is covered as an dure 2017-15, available at IRS.gov/irb/ the payment to Chapter 4 reporting rate pools
account that is excluded from the definition 2017-03_IRB#RP-2017-15. (as appropriate), including a Chapter 4 with-
of financial account under Annex II of an holding rate pool for nonparticipating FFIs, re-
applicable IGA or under Regulations sec- Form 1042-S reporting. A QI is generally per- calcitrant account holders (in each class of ac-
tion 1.1471-5(a) and has provided the QI mitted to report payments made to its foreign count holders as described in the Chapter 4
with a certification that it has maintained account holders on a pooled basis rather than regulations), and, for an NQI that is a participat-
such Chapter 4 status during each certifi- reporting payments to each account holder spe- ing FFI (including a reporting Model 2 FFI) or a
cation period. cifically. Pooled basis reporting is not available registered deemed-compliant FFI (including a
• It is a direct account holder of the QI. for payments to certain account holders, such reporting Model 1 FFI), U.S. payees. However,
• None of its partners, beneficiaries, or own- as nonqualified intermediaries, flow-through en- an NQI may allocate a payment of a reportable
ers is a flow-through entity or is acting as tities (discussed earlier) and certain of their ac- amount (regardless of whether the payment is a
an intermediary for a payment made by the count holders and owners, private arrangement withholdable payment) to a Chapter 4 withhold-
QI to the partnership or trust, and none of intermediaries, and, in certain circumstances, ing rate pool of U.S. payees when the NQI sat-
its partners, beneficiaries, or owners is a qualified intermediaries, withholding foreign isfies the requirements for providing such a
U.S. person. partnerships, and withholding foreign trusts. pool, including the requirement to certify to its
• None of its foreign partners, beneficiaries, Notwithstanding these requirements, separate status as a participating FFI, including a report-
or owners is subject to withholding or re- Forms 1042-S are not issued to account hold- ing Model 2 FFI, or registered deemed-compli-
porting under Chapter 4. ers that the QI is permitted to include in a Chap- ant FFI, including a reporting Model 1 FFI.
• It agrees to make available upon request to ter 4 withholding rate pool. If the FFI withholding statement instead in-
the QI (or QI’s reviewer) records that es- cludes payee-specific information for purposes
tablish it has provided the QI with docu- Collective refund procedures. A QI may of Chapter 4, it must indicate both the portion of
mentation for purposes of Chapters 3 and seek a refund of tax withheld under Chapters 3 the payment allocated to each payee and each
4 for all of its partners, beneficiaries, or and 4 on behalf of its account holders when the payee’s Chapter 4 status. The withholding
owners. QI has not issued a Form 1042-S to the account statement also must identify each intermediary
or flow-through entity that is receiving a pay-
For information on these rules, see section holders that received the payment that was ment (excluding any intermediary or
4.05 of the QI agreement in Revenue Proce- subject to overwithholding. The account hold- flow-through entity that is an account holder or
dure 2017-15, available at IRS.gov/irb/ ers, therefore, are not required to file claims for interest holder in another QI, WP, or WT), each
2017-03_IRB#RP-2017-15. refund with the IRS to obtain refunds, but rather such entity’s Chapter 4 status and GIIN (if appli-
may obtain them from the QI. A QI may obtain a cable) when required for Chapter 4 purposes,
Agency option. A QI may apply the agency refund of tax withheld under Chapter 4, how- and the Chapter 4 withholding rate pools asso-
option to a partnership or trust under which the ever, to the extent permitted under the QI ciated with each such entity.
partnership or trust agrees to act as an agent of agreement. A Chapter 4 withholding statement must
the QI and to apply the provisions of the QI contain the name, address, TIN (if any), entity
agreement to its partners, beneficiaries, or own- Nonqualified Intermediary (NQI) type, Chapter 4 status of each payee, the
ers. A QI and a partnership or trust may only ap- amount allocated to each payee, and a valid
ply the agency option if the partnership or trust If you are making a payment to an NQI or U.S. withholding certificate or other documentation
meets the following conditions. branch that is using Form W-8IMY to transmit sufficient to establish each payee’s Chapter 4
• It is a nonwithholding foreign partnership or information about the branch's account holders status for payees that are not included in a
nonwithholding foreign trust that is either a or customers, you can treat the payment (or a Chapter 4 withholding rate pool of nonpartici-
simple or grantor trust. part of the payment) as reliably associated with pating FFIs. The withholding statement also
• It is either a direct account holder of the QI valid documentation from a specific payee only must identify each intermediary or flow-through
or an indirect account holder of the QI that if, before making the payment: entity that is receiving a payment (excluding any
is a direct partner, beneficiary, or owner of • You can allocate the payment to a valid intermediary or flow-through entity that is an ac-
a partnership or trust to which the QI also Form W-8IMY; count holder or interest holder in another QI,
applies the agency option. • You can reliably determine how much of WP, or WT), each such entity’s Chapter 4 sta-
• It is an FFI that is a certified deemed-com- the payment relates to valid documentation tus and GIIN (if applicable), and the Chapter 4
pliant FFI (other than a registered provided by a payee (a person that is not withholding rate pools associated with each
deemed-compliant Model 1 IGA FFI), an itself a foreign intermediary, flow-through such entity. An allocation of a payment to an
owner-documented FFI with respect to the entity, or U.S. branch with a Chapter 4 NQI, nonwithholding foreign partnership, or
QI, an NFFE, an exempt beneficial owner,
Page 14 Publication 515 (2020)