Page 53 - Withholding Taxes for Foreign Entities

10:50 - 14-Feb-2020
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The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
• A brief description of the real property in- Financial institution (FI). A “financial institu- port its accounts and payees, a passive NFFE
terest for which the original application for tion” (FI) is any institution that is a depository in- is an NFFE that is not an active NFFE (as de-
a withholding certificate was provided. stitution, custodial institution, investment entity, scribed in the applicable IGA).
• The basis for the amendment including insurance company (or holding company of an
any change in the facts supporting the insurance company) that issues cash value in- Qualified derivatives dealer (QDD). A “quali-
original application for a withholding certifi- surance or annuity contracts, or a holding com- fied derivatives dealer” (QDD) is a QI that is an
cate and any change in the terms of the pany or treasury center that is part of an expan- eligible entity (as defined in Regulations section
withholding certificate. ded affiliated group of certain FFIs, and 1.1441-1(e)(6)(ii)) that agrees to meet the re-
includes a financial institution as defined under quirements of Regulations section 1.1441-1(e)
The statement must be signed and accom- an applicable Model 1 IGA or Model 2 IGA. See (6)(i) and the QI agreement.
panied by a penalties of perjury statement. Regulations section 1.1471-5(e)(1).
Recalcitrant account holder. A “recalcitrant
Foreign financial institution (FFI). Except as account holder” is an account holder (other than
If an amending statement is provided, the otherwise provided for certain foreign branches an account holder that is an FFI or is presumed
time in which the IRS must act upon the appli- of a U.S. financial institution or territory financial to be an FFI) of a participating FFI or registered
cation is extended by 30 days. If the amending institutions, a “foreign financial institution” (FFI) deemed-compliant FFI that has failed to provide
statement substantially changes the original ap- means a financial institution that is a foreign en- the FFI maintaining its account with the informa-
plication, the time for acting upon the applica- tity. The term “FFI” also includes a foreign tion required under Regulations section
tion is extended by 60 days. If an amending branch of a U.S. financial institution with a QI 1.1471-5(g).
statement is received after the withholding cer- agreement in effect.
tificate has been signed, but before it has been Registered deemed-compliant FFI. A “regis-
mailed to the applicant, the IRS will have a Model 1 IGA. A “Model 1 IGA” means an tered deemed-compliant FFI” is an FFI descri-
90-day extension of time in which to act. agreement between the United States or the bed in Regulations section 1.1471-5(f)(1) and
Treasury Department and a foreign government includes a reporting Model 1 FFI and a QI
Definitions or one or more foreign agencies to implement branch of a U.S. financial institution that is a re-
porting Model 1 FFI.
FATCA through reporting by financial institu-
tions to such foreign government or agency
Chapter 4 withholding rate pool. A “Chap- thereof, followed by automatic exchange of the Reporting Model 1 FFI. A “reporting Model 1
ter 4 withholding rate pool” means a pool of reported information with the IRS. For a list of FFI” is an FI, including a foreign branch of a
payees that are nonparticipating FFIs provided jurisdictions treated as having an IGA in effect, U.S. financial institution, treated as a reporting
on a Chapter 4 withholding statement (as de- go to Treasury.gov/Resource-Center/Tax- financial institution under a Model 1 IGA.
scribed in Regulations section 1.1471-3(c)(3) Policy/Treaties/Pages/FATCA.aspx.
(iii)(B)(3)) to which a withholdable payment is Reporting Model 2 FFI. A “reporting Model 2
allocated. The term also means a pool of pay- Model 2 IGA. A “Model 2 IGA” means an FFI” is an FFI described in a Model 2 IGA that
ees provided on an FFI withholding statement agreement or arrangement between the United has agreed to comply with the requirements of
(as described in Regulations section States or the Treasury Department and a for- an FFI agreement with respect to a branch.
1.1471-3(c)(iii)(B)(2)) to which a withholdable eign government or one or more foreign agen-
payment is allocated to (a) a pool of payees cies to implement FATCA through reporting by Territory financial institution. A “territory fi-
consisting of each class of recalcitrant account financial institutions directly to the IRS in ac- nancial institution” is a financial institution that is
holders described in Regulations section cordance with the requirements of the FFI incorporated or organized under the laws of any
1.1471-4(d)(6) (or with respect to an FFI that is agreement, as modified by an applicable Model U.S. territory, excluding a territory entity that is a
a QI, a single pool of recalcitrant account hold- 2 IGA, supplemented by the exchange of infor- financial institution only because it is an invest-
ers), including a separate pool of account hold- mation between such foreign government or ment entity as defined in Regulations section
ers to which the escrow procedures for dormant agency thereof and the IRS. For a list of juris- 1.1471-5(e)(4).
accounts apply; or (b) a pool of payees that are dictions treated as having an IGA in effect, go to
U.S. persons as described in Regulations sec- Treasury.gov/Resource-Center/Tax-Policy/ Withholdable payment. A “withholdable pay-
tion 1.1471-3(c)(3)(iii)(B)(2) (including such a Treaties/Pages/FATCA.aspx. ment” is a payment described in Regulations
pool allocated to a reportable amount on a with- section 1.1473-1(a). See Income Subject to
holding statement provided solely for Chapter 3 Non-financial foreign entity (NFFE). A Withholding, earlier, for a discussion of which
purposes). “non-financial foreign entity” (NFFE) is a foreign payments qualify as withholdable payments.
entity that is not a financial institution. An NFFE
Deemed-compliant FFI. A “deemed-compli- includes a territory NFFE, as defined in Regula-
ant FFI” means an FFI that is treated, pursuant tions section 1.1471-1(b)(132), and a foreign Tax Treaties
to section 1471(b)(2) and Regulations section entity treated as an NFFE pursuant to a Model 1
1.1471-5(f), as meeting the requirements of IGA or Model 2 IGA. The United States has bilateral income tax trea-
section 1471(b). The term “deemed-compliant ties, also known as “conventions,” with a num-
FFI” includes a nonreporting IGA FFI (as de- Nonparticipating FFI. A “nonparticipating FFI” ber of foreign countries under which residents
fined in Regulations section 1.1471-1(b)(83)). is an FFI other than a participating FFI, a (sometimes limited to citizens) of those coun-
deemed-compliant FFI, or an exempt beneficial tries are taxed at a reduced rate or are exempt
Dividend equivalents. Generally, a “dividend owner. from U.S. income taxes on certain income re-
equivalent” is any payment that references the ceived from within the United States.
payment of a dividend from an underlying se- Participating FFI. A “participating FFI” is an
curity pursuant to a securities lending or FFI that has agreed to comply with the require- Income that is exempt under a treaty is not
sale-repurchase transaction, SNPC, or speci- ments of an FFI agreement with respect to all subject to withholding at source under the statu-
fied ELI. This applies without regard to whether branches of the FFI, other than a branch that is tory rules discussed in this publication.
there is an actual distribution of cash or prop- a reporting Model 1 FFI or a U.S. branch. The
erty. term "participating FFI" also includes a reporting Obtaining treaty information. You can obtain
Model 2 FFI and a QI branch of a U.S. financial the full text of these treaties, and accompanying
Exempt beneficial owner. An “exempt benefi- institution, unless such branch is a reporting technical explanations, at IRS.gov/Businesses/
cial owner” is any person described in Regula- Model 1 FFI. International-Businesses/United-States-
tions sections 1.1471-6(b) through (g) and in- Income-Tax-Treaties-A-to-Z.
cludes any person treated as an exempt Passive NFFE. A “passive NFFE” is an NFFE Detailed information about treaty provisions
beneficial owner under an applicable Model 1 that is not an excepted NFFE. With respect to a can be found at IRS.gov/Individuals/
IGA or Model 2 IGA. reporting Model 2 FFI filing a Form 8966 to re- International-Taxpayers/Tax-Treaties.

Publication 515 (2020) Page 51