Page 18 - Withholding Taxes for Foreign Entities

10:50 - 14-Feb-2020
Page 16 of 55
Fileid: … tions/P515/2020/A/XML/Cycle10/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Chapter 4 statuses referenced in the preceding its U.S. accounts (or U.S. reportable accounts if the WP and to apply the provisions of the WP
sentence when a Chapter 4 status is required. a reporting Model 1 FFI) on Form 8966 consis- agreement to its partners, beneficiaries, or own-
tent with its Chapter 4 requirements or the re- ers. A WP that applies the agency option must
Responsibilities of the WP. The WP must quirements of an IGA. If the WP is an NFFE, the elect to perform pool reporting for amounts sub-
withhold under Chapter 3 or 4 on the date it WP must file Form 8966 to report any partner ject to Chapter 3 withholding that either are not
makes a distribution of a withholdable payment that is an NFFE (other than an excepted NFFE) withholdable payments or are withholdable pay-
or an amount subject to Chapter 3 withholding with one or more substantial U.S. owners (or, ments for which no Chapter 4 withholding is re-
to a direct foreign partner based on the Forms under an applicable IGA, controlling persons quired and that the WP distributes to, or in-
W-8 or W-9 it receives from its partners. If the that are specified U.S. persons) if the NFFE is cludes in the distributive share of, a foreign
partner's distributive share has not been distrib- the beneficial owner of a withholdable payment direct partner. A WP and a partnership or trust
uted, the WP must withhold on the partner's dis- received by the WP. The WP also must file a may only apply the agency option if the partner-
tributive share on the earlier of the date that the Form 8966 to report withholdable payments ship or trust meets the following conditions.
partnership must mail or otherwise provide to made to a pass-through partner for which the • It is a nonwithholding foreign partnership or
the partner a Schedule K-1 (Form 1065) or the WP acts under the WP agreement that provides nonwithholding foreign trust that is either a
due date for furnishing the statement (whether information on an account holder (or interest simple or grantor trust.
or not the WP is required to furnish the state- holder) that is an NFFE (other than an excepted • It is either a direct partner of the WP or an
ment). NFFE) with one or more substantial U.S. own- indirect partner of the WP that is a direct
The WP may determine the amount of with- ers (or, under an applicable IGA, controlling partner, beneficiary, or owner of a partner-
holding based on a reasonable estimate of the persons that are specified U.S. persons) and ship or trust to which the WP also applies
partner's distributive share of income subject to that is the beneficial owner of the withholdable the agency option.
withholding for the year. The WP must correct payment received by the WP, unless the • It is an FFI that is a certified deemed-com-
the estimated withholding to reflect the actual pass-through partner certifies to the WP that it pliant FFI (other than a registered
distributive share on the earlier of the dates is reporting on the account holder (or interest deemed-compliant Model 1 IGA FFI, as
mentioned in the preceding paragraph. If that holder) pursuant to its U.S. account reporting defined in the WP agreement), an
date is after the earlier of the due date (includ- requirements. The preceding sentence applies owner-documented FFI, an NFFE, or an
ing extensions) for filing the WP's Form 1042-S with respect to a pass-through partner to which exempt beneficial owner.
or the date the WP actually issues Form 1042-S WP applies the agency option or which has • None of its partners, beneficiaries, or own-
for the calendar year, the WP may withhold and partners, beneficiaries, or owners that are indi- ers is a WT, WP, participating FFI, regis-
report any adjustments required by correcting rect partners of the WP. tered deemed-compliant FFI, registered
the information for the following calendar year. deemed-compliant Model 1 IGA FFI (as
Joint account treatment. Under special pro- defined in the WP agreement), or QI acting
Form 1042 filing. The WP must file Form cedures provided in the WP agreement, a WP as an intermediary for a payment made by
1042 even if no amount was withheld. In addi- may apply joint account treatment to a partner- the WP to the partnership or trust.
tion to the information that is required for the ship or trust that is a direct partner of the WP. A • The WP may not act as a withholding for-
Form 1042, the WP must attach a statement WP that applies the joint account option must eign partnership with respect to any direct
showing the amounts of any over- or un- elect to perform pool reporting for amounts sub- or indirect partner of the partnership or
der-withholding adjustments and an explana- ject to Chapter 3 withholding that either are not trust that is a U.S. nonexempt recipient,
tion of those adjustments. withholdable payments or are withholdable pay- unless the U.S. nonexempt recipient is a
Form 1042-S reporting. The WP can ments for which no Chapter 4 withholding is re- partner of an owner-documented FFI or
elect to report payments made to its foreign di- quired and that the WP distributes to, or in- passive NFFE to which the WP applies the
rect partners on a pooled basis for Chapter 3 cludes in the distributive share of, a foreign agency option and is included in the WP’s
purposes rather than reporting payments to direct partner. These rules only apply to a part- U.S. payee pool.
each direct partner in addition to reporting pay- nership or trust that meets the following condi- • It agrees to comply with the compliance
ments in a Chapter 4 withholding rate pool to tions. procedures described in section 8.05 of
the extent the WP is permitted to do so based • It is a nonwithholding foreign partnership or the WP agreement by providing the WP
on its Chapter 4 status. A WP can treat as its di- nonwithholding foreign trust that is either a with the certification described in section
rect partners those indirect partners of the WP simple or grantor trust. 8.03 of the WP agreement and providing
for which it applies joint account treatment or • It is a certified deemed-compliant FFI the WP with documentation or other infor-
the agency option (described later). A WP must (other than a registered deemed-compliant mation for review.
otherwise issue a Form 1042-S to each partner Model 1 IGA FFI as defined in the WP • It agrees to comply with the documentation
to the extent it is required to do so under the agreement), an owner-documented FFI, an requirements of a WP in the WP agree-
WP agreement. You may issue a single Form exempt beneficial owner, or an NFFE ment.
1042-S for all payments you make to a WP (other than a WP or WT). For more information on applying these
other than payments for which the entity does • It is a direct partner of the WP. rules, see section 9.02 of the WP agreement in
not act as a WP. You may, however, have Form • None of its partners, beneficiaries, or own- section 6 of Revenue Procedure 2017-21, avail-
1099 requirements for certain indirect partners ers is a flow-through entity or intermediary. able at IRS.gov/irb/2017-06_IRB#RP-2017-21.
of a WP that are U.S. nonexempt recipients. • None of the partnership’s or trust’s part-
ners, beneficiaries, or owners is a U.S.
Collective refund procedures. A WP may person or is subject to withholding or re- WP acting for indirect partners. A WP may
act as a WP with respect to an indirect partner
seek a refund of tax withheld under Chapters 3 porting under Chapter 4. of the WP that is not a U.S. nonexempt recipi-
and 4 on behalf of its partners when the WP has • It agrees to make available upon request to ent. However, a WP may act as a WP for an in-
not issued a Form 1042-S to the partners that the WP (or the WP’s auditor) records that direct partner that is a U.S. nonexempt recipient
received the payment that was subject to over- establish it has provided the WP with doc- if the indirect partner is included in a
withholding. The partners, therefore, are not re- umentation for purposes of Chapters 3 and pass-through partner’s Chapter 4 withholding
quired to file claims for refund with the IRS to 4 for all of its partners, beneficiaries, or rate pool of recalcitrant account holders or U.S.
obtain refunds, but rather may obtain them from owners. payees. A WP acting as a WP for an indirect
the WP. A WP may obtain a refund of tax with- For more information on applying these partner is not required to forward to its withhold-
held under Chapter 4 to the extent permitted rules, see section 9.01 of the WP agreement in ing agent the documentation and the withhold-
under the WP agreement. section 6 of Revenue Procedure 2017-21, avail- ing statement of the pass-through partner and
Reporting of U.S. partners. A WP must able at IRS.gov/irb/2017-06_IRB#RP-2017-21. indirect partner that the WP would have other-
report its U.S. partners on Schedule K-1 to the wise been required to provide under the re-
extent required under the WP agreement. If the Agency option. A WP may apply the agency quirements of a nonwithholding foreign partner-
WP is an FFI, it also is required to report each of option to a partnership or trust under which the ship. See Not acting as a WP, later. However, a
partnership or trust agrees to act as an agent of WP must provide the withholding agent with
Page 16 Publication 515 (2020)