Important Change
Claiming treaty benefits without a taxpayer identification number (TIN).
Generally, a foreign individual must provide a TIN to the withholding agent to get a
reduced rate of withholding under an income tax treaty. However, unexpected payments may
arise on short notice for which a payee may be unable to obtain a TIN prior to payment. In
limited circumstances, a withholding agent who has entered into a special acceptance agent
agreement with the IRS may rely on a beneficial owner withholding certificate without
regard to the requirement that it include a TIN. See U.S. Taxpayer Identification
Numbers, later, for more information.
Important Reminders
Note. This publication serves as the Small Entity
Compliance Guide required by section 212 of the Small Business Regulatory Enforcement
Fairness Act of 1996, P.L. 104-121.
Qualified intermediary employer identification number (QI-EIN). A
foreign intermediary that has received a QI-EIN may represent on Form W-8IMY that it is a
QI before it receives a fully executed agreement. The intermediary can claim that it is a
QI unless the IRS revokes its QI-EIN. The IRS will revoke a QI-EIN if the QI agreement is
not executed and returned to the IRS within a reasonable period of time.
See Foreign Intermediaries, for more information.
Withholding rate on partners. Generally, a partnership must pay a
withholding tax on effectively connected taxable income that is allocable to its foreign
partners. For 2003, the withholding rate remains 38.6%.
See Partnership Withholding on Effectively Connected Income, for more
information.
Form W-8. There are four forms in
the W-8 series. The form to use depends on the type of certification being made. As
used in this publication, the term Form W-8 refers to the appropriate document.
For more information, see Documentation, later.
- Form W-8BEN, Certificate of Foreign Status of Beneficial
Owner for United States Tax Withholding.
- Form W-8ECI, Certificate of Foreign Person's Claim for Exemption From
Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the
United States.
- Form W-8EXP, Certificate of Foreign Government or Other Foreign Organization
for United States Tax Withholding.
- Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through
Entity, or Certain U.S. Branches for United States Tax Withholding.
Electronic deposit rules. You must
use the Electronic Federal Tax Payment System (EFTPS) to make electronic deposits of all
depository tax liabilities you incur after 2002, if you meet either of the
following conditions.
- You had to make electronic deposits in 2002.
- You deposited more than $200,000 in federal depository taxes in 2001.
If you do not meet these conditions, electronic deposits are voluntary.
For more information about depositing electronically, see Publication 966, Now a
Full Range of Electronic Choices to Pay ALL Your Federal Taxes.
IRS taxpayer identification numbers for aliens. The IRS will issue an individual taxpayer identification number (ITIN) to an
alien who does not have and is not eligible to get a social security number (SSN).
An ITIN is for tax use only. It does not entitle an alien to social security benefits
or change his or her employment or immigration status under U.S. law.
For more information on ITINs, see U.S. Taxpayer Identification Numbers,
later.
Hong Kong. Hong Kong and China
continue to be treated as two separate countries for purposes of certain bilateral
agreements, the Internal Revenue Code, and the Income Tax Regulations.
Photographs of missing children. The
Internal Revenue Service is a proud partner with the National Center for Missing and
Exploited Children. Photographs of missing children selected by the Center may
appear in this publication on pages that would otherwise be blank. You can help bring
these children home by looking at the photographs and calling 1-800-THE-LOST
(1-800-843- 5678) if you recognize a child.
Introduction
This publication is for withholding agents who pay income to foreign persons, including
nonresident aliens, foreign corporations, foreign partnerships, foreign trusts, foreign
estates, foreign governments, and international organizations. Specifically, it describes
the persons responsible for withholding (withholding agents), the types of income subject
to withholding, and the information return and tax return filing obligations of
withholding agents. In addition to discussing the rules that apply generally to payments
of U.S. source income to foreign persons, it also contains sections on the withholding
that applies to the disposition of U.S. real property interests and the withholding by
partnerships on income effectively connected with the active conduct of a U.S. trade or
business.
Comments and suggestions. We
welcome your comments about this publication and your suggestions for future editions.
You can e-mail us while visiting our web site at www.irs.gov.
You can write to us at the following address:
Internal Revenue Service
Tax Forms and Publications
W:CAR:MP:FP
1111 Constitution Ave. NW
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would
include your daytime phone number, including the area code, in your correspondence.
Useful Items
You may want to see:
Publication
- 15 Circular E, Employer's Tax Guide
- 15-A Employer's Supplemental Tax Guide
- 15-B Employer's Tax Guide to Fringe Benefits
- 51 Circular A, Agricultural Employer's Tax Guide
- 519 U.S. Tax Guide for Aliens
- 901 U.S. Tax Treaties
Form (and Instructions)
- SS-4 Application for Employer Identification Number
- W-2 Wage and Tax Statement
- W-4 Employee's Withholding Allowance Certificate
- W-4P Withholding Certificate for Pension or Annuity Payments
- W-7 Application for IRS Individual Taxpayer Identification Number
- 941 Employer's Quarterly Federal Tax Return
- 1042 Annual Withholding Tax Return for U.S. Source Income of Foreign Persons
- 1042-S Foreign Person's U.S. Source Income Subject to Withholding
- 1042-T Annual Summary and Transmittal of Form 1042-S
See How To Get Tax Help, near the end of this publication for information
about getting publications and forms.
Withholding of Tax
Generally, a foreign person is subject to U.S. tax on its U.S.
source income. Most types of U.S. source income received by a foreign person are subject
to U.S. tax of 30%. A reduced rate, including exemption, may apply if there is a tax
treaty between the foreign person's country of residence and the United States. The tax is
generally withheld (NRA withholding) from the payment made to the foreign person.
The term NRA withholding is used in this publication
descriptively to refer to withholding required under sections 1441, 1442, and 1443 of the
Internal Revenue Code. Generally, NRA withholding describes the withholding regime that
requires 30% withholding on a payment of U.S. source income. Payments to all foreign
persons, including nonresident alien individuals, foreign entities and governments, may be
subject to NRA withholding.
NRA withholding does not include withholding under section 1445 of the Code (see U.S.
Real Property Interest, later) or under section 1446 of the Code (see Partnership
Withholding on Effectively Connected Income, later).
A withholding agent must withhold 30% of any payment subject to NRA withholding, made
to a payee that is a foreign person. However, a withholding agent that can reliably
associate the payment with documentation (discussed later) from a U.S. person is not
required to withhold. In addition, a withholding agent may apply a reduced rate of
withholding (including an exemption from withholding) if it can reliably associate the
payment with documentation from a beneficial owner that is a foreign person entitled to a
reduced rate of withholding.
Withholding Agent
You are a withholding agent if you are a U.S. or foreign person
that has control, receipt, custody, disposal, or payment of any item of income of a
foreign person that is subject to withholding. A withholding agent may be an individual,
corporation, partnership, trust, association, or any other entity, including any foreign
intermediary, foreign partnership, or U.S. branch of certain foreign banks and insurance
companies. You may be a withholding agent even if there is no requirement to withhold from
a payment or even if another person has withheld the required amount from the payment.
Although several persons may be withholding agents for a single payment, the full tax
is required to be withheld only once. Generally, the U.S. person who pays an amount
subject to NRA withholding is the person responsible for withholding. However, other
persons may be required to withhold. For example, a payment made by a flow-through entity
or nonqualified intermediary that knows, or has reason to know, that the full amount of
NRA withholding was not done by the person from which it receives a payment is required to
do the appropriate withholding since it also falls within the definition of a withholding
agent. In addition, withholding must be done by any qualified intermediary in accordance
with the terms of its qualified intermediary withholding agreement, discussed later.
Liability for tax. As a
withholding agent, you are personally liable for any tax required to be withheld.
This liability is independent of the tax liability of the foreign person to whom the
payment is made. If you fail to withhold and the foreign payee fails to satisfy its U.S.
tax liability, then both you and the foreign person are liable for tax, as well as
interest and any applicable penalties. The applicable tax will be collected only once. If
the foreign person satisfies its U.S. tax liability, you may still be held liable for
interest and penalties for your failure to withhold.
Determination of amount to withhold. You must withhold on the gross amount subject to NRA withholding. You
cannot reduce the gross amount by any deductions. However, see Scholarships and
Fellowship Grants, and Pay for Personal Services Performed, later, for when
a deduction for a personal exemption may be allowed.
If the determination of the source of the income or the amount subject to tax depends
on facts that are not known at the time of payment, you must withhold an amount sufficient
to ensure that at least 30% of the amount subsequently determined to be subject to
withholding is withheld. In no case, however, should you withhold more than 30% of the
total amount paid.
When to withhold. Withholding is
required at the time you make a payment of an amount subject to withholding. A
payment is made to a person if that person realizes income whether or not there is an
actual transfer of cash or other property. A payment is considered made to a person if it
is paid for that person's benefit. For example, a payment made to a creditor of a person
in satisfaction of that person's debt to the creditor is considered made to the person. A
payment is also considered made to a person if it is made to that person's agent.
A U.S. partnership should withhold when any distributions that include amounts subject
to withholding are made. However, if a foreign partner's distributive share of income
subject to withholding is not actually distributed, the U.S. partnership must withhold on
the foreign partner's distributive share of the income on the earlier of the date that a
Schedule K-1 (Form 1065) is provided or mailed to the partner or the due date for
furnishing that schedule. If the distributable amount consists of effectively connected
income, see Partnership Withholding on Effectively Connected Income, later.
A U.S. trust is required to withhold on the amount includible in the gross income of a
foreign beneficiary to the extent the trust's distributable net income consists of an
amount subject to withholding. To the extent a U.S. trust is required to distribute an
amount subject to withholding but does not actually distribute the amount, it must
withhold on the foreign beneficiary's allocable share at the time the income is required
to be reported on Form 1042-S.
Withholding and
Reporting Obligations
You are required to report payments subject to NRA withholding on Form
1042-S and to file a tax return on Form 1042. (See Returns Required, later.)
An exception from reporting may apply to individuals who are not required to withhold from
a payment and who do not make the payment in the course of their trade or business.
Form 1099 reporting and backup withholding. You may also be
responsible as a payer for reporting on Form 1099 payments made to a U.S. person. You must
withhold 30% (backup withholding rate for 2003) from a reportable payment made to a U.S.
person that is subject to Form 1099 reporting if (1) the U.S. person has not provided its
taxpayer identification number (TIN) in the manner required, (2) the IRS notifies you that
the TIN furnished by the payee is incorrect, (3) there has been a notified payee
under-reporting, or (4) there has been a payee certification failure. Generally, a TIN
must be provided by a U.S. non-exempt recipient on Form W-9. A payer files a tax return on
Form 945 for backup withholding.
You may be required to file Form 1099, and, if appropriate, backup withhold, even if
you do not make the payments directly to that U.S. person. For example, you are required
to report income paid to a foreign intermediary or flow-through entity that collects for a
U.S. person subject to Form 1099 reporting. See Identifying the Payee, later, for
more information.
 Foreign persons
who provide Form W-8BEN, Form W-8ECI, or Form W-8EXP (or applicable documentary evidence)
are exempt from backup withholding and Form 1099 reporting.
Wages paid to employees. If you are the employer of a nonresident
alien employee, you may have to withhold taxes at graduated rates. See Pay for
Personal Services Performed, later.
Effectively connected income by partnerships. A withholding agent
that is a partnership (whether U.S. or foreign) is also responsible for withholding on its
income effectively connected with a U.S. trade or business that is allocable to foreign
partners. See Partnership Withholding on Effectively Connected Income, later, for
more information.
U.S. real property interest. A
withholding agent may also be responsible for withholding if a foreign person transfers a
U.S. real property interest to the agent, or if it is a corporation, partnership,
trust or estate that distributes a U.S. real property interest to a shareholder, partner,
or beneficiary that is a foreign person. See U.S. Real Property Interest, later.
Persons Subject to NRA Withholding
NRA withholding applies only to payments made to a payee that is a
foreign person. It does not apply to payments made to U.S. persons.
Usually, you determine the payee's status as a U.S. or foreign person based on the
documentation that person provides. See Documentation, later. However, if you
have received no documentation or you cannot reliably associate all or a portion of a
payment with documentation, then you must apply certain presumption rules, discussed
later.
Identifying the Payee
Generally, the payee is the person to whom you make the payment,
regardless of whether that person is the beneficial owner of the income. However,
there are situations in which the payee is a person other than the one to whom you
actually make a payment.
U.S. agent of foreign person. If
you make a payment to a U.S. person and you have actual knowledge that the U.S.
person is receiving the payment as an agent of a foreign person, you must treat the
payment as made to the foreign person. However, if the U.S. person is a financial
institution, you may treat the institution as the payee provided you have no reason to
believe that the institution will not comply with its own obligation to withhold.
If the payment is not subject to NRA withholding (e.g., gross proceeds from the sales
of securities), you must treat the payment as made to a U.S. person and not as a payment
to a foreign person. You may be required to report the payment on Form 1099 and, if
applicable, backup withhold.
Disregarded entities. A business
entity that is not a corporation and that has a single owner may be disregarded as an
entity separate from its owner (a disregarded entity) for federal tax purposes. The
payee of a payment made to a disregarded entity is the owner of the entity.
If the owner of the entity is a foreign person, you must apply NRA withholding unless
you can treat the foreign owner as a beneficial owner entitled to a reduced rate of
withholding.
If the owner is a U.S. person, you do not apply NRA withholding. However, you may be
required to report the payment on Form 1099 and, if applicable, backup withhold. You may
assume that a foreign entity is not a disregarded entity unless you can reliably associate
the payment with documentation provided by the owner or you have actual knowledge or
reason to know that the foreign entity is a disregarded entity.
Flow-Through Entities
The payees of payments (other than income effectively connected with a
U.S. trade or business) made to a foreign flow-through entity are the owners or
beneficiaries of the flow-through entity. This rule applies for purposes of NRA
withholding and for Form 1099 reporting and backup withholding. Income that is, or is
deemed to be, effectively connected with the conduct of a U.S. trade or business of a
flow-through entity, is treated as paid to the entity.
All of the following are flow-through entities.
- A foreign partnership (other than a withholding foreign partnership).
- A foreign simple or foreign grantor trust (other than a withholding foreign trust).
- A fiscally transparent entity receiving income for which treaty benefits are claimed.
See Fiscally transparent entity, later.
Generally, you treat a payee as a flow-through entity if it provides you with a Form
W-8IMY (see Documentation, later) on which it claims such status. You may also be
required to treat the entity as a flow-through entity under the presumption rules,
discussed later.
You must determine whether the owners or beneficiaries of a flow-through entity are
U.S. or foreign persons, how much of the payment relates to each owner or beneficiary,
and, if the owner or beneficiary is foreign, whether a reduced rate of NRA withholding
applies. You make these determinations based on the documentation and other information
(contained in a withholding statement) that is associated with the flow-through entity's
Form W-8IMY. If you do not have all of the information that is required to reliably
associate a payment with a specific payee, you must apply the presumption rules. See Documentation
and Presumption Rules, later.
Withholding foreign partnerships and withholding foreign trusts are not flow-through
entities.
Foreign partnerships. A foreign
partnership is any partnership that is not organized under the laws of any state of the
United States or the District of Columbia or any partnership that is treated as
foreign under the income tax regulations. If a foreign partnership is not a withholding
foreign partnership, the payees of income are the partners of the partnership, provided
the partners are not themselves a flow-through entity or a foreign intermediary. However,
the payee is the partnership itself if the partnership is claiming treaty benefits on the
basis that it is not fiscally transparent and that it meets all the other requirements for
claiming treaty benefits. If a partner is a foreign flow-through entity or a foreign
intermediary, you apply the payee determination rules to that partner to determine the
payees.
Example 1. A nonwithholding foreign partnership has three
partners: a nonresident alien individual; a foreign corporation, and a U.S. citizen. You
make a payment of U.S. source interest to the partnership. It gives you a Form W-8IMY with
which it associates Forms W-8BEN from the nonresident alien and the foreign corporation
and a Form W-9 from the U.S. citizen. The partnership also gives you a complete
withholding statement that enables you to associate a portion of the interest payment to
each partner.
You must treat all three partners as the payees of the interest payment as if the
payment were made directly to them. Report the payment to the nonresident alien and the
foreign corporation on Forms 1042-S. Report the payment to the U.S. citizen on Form
1099-INT.
Example 2. A nonwithholding foreign partnership has two
partners: a foreign corporation, and a nonwithholding foreign partnership. The second
partnership has two partners, both nonresident alien individuals. You make a payment of
U.S. source interest to the first partnership. It gives you a valid Form W-8IMY with which
it associates a Form W-8BEN from the foreign corporation and a Form W-8IMY from the second
partnership. In addition, Forms W-8BEN from the partners are associated with the Form
W-8IMY from the second partnership. The Forms W-8IMY from the partnerships have complete
withholding statements associated with them. Because you can reliably associate a portion
of the interest payment with the Forms W-8BEN provided by the foreign corporation and the
nonresident alien individual partners as a result of the withholding statements, you must
treat them as the payees of the interest.
Example 3. You make a payment of U.S. source dividends to a
withholding foreign partnership. The partnership has two partners, both foreign
corporations. You can reliably associate the payment with a valid Form W-8IMY from the
partnership on which it represents that it is a withholding foreign partnership. You must
treat the partnership as the payee of the dividends.
Foreign simple and grantor trust. A trust is foreign unless it meets both the following tests.
- A court within the United States is able to exercise primary supervision over the
administration of the trust.
- One or more U.S. persons have the authority to control all substantial decisions of the
trust.
Generally, a foreign simple trust is a foreign trust that is required to distribute all
of its income annually. A foreign grantor trust is a foreign trust that is treated as a
grantor trust under sections 671 through 679 of the Internal Revenue Code.
The payees of a payment made to a foreign simple trust are the beneficiaries of the
trust. The payees of a payment made to a foreign grantor trust are the owners of the
trust. However, the payee is the foreign simple or grantor trust itself if the trust is
claiming treaty benefits on the basis that it is not fiscally transparent and that it
meets all the other requirements for claiming treaty benefits. If the beneficiaries or
owners are themselves flow-through entities or foreign intermediaries, you apply the payee
determination rules to that beneficiary or owner to determine the payees.
Example. A foreign simple trust has three beneficiaries: a
nonresident alien individual; a foreign corporation; and a U.S. citizen. You make a
payment of interest to the foreign trust. It gives you a Form W-8IMY with which it
associates Forms W-8BEN from the nonresident alien and the foreign corporation and a Form
W-9 from the U.S. citizen. The trust also gives you a complete withholding statement that
enables you to associate a portion of the interest payment with the forms provided by each
beneficiary. You must treat all three beneficiaries as the payees of the interest payment
as if the payment were made directly to them. Report the payment to the nonresident alien
and the foreign corporation on Forms 1042-S. Report the payment to the U.S. citizen on
Form 1099-INT.
Fiscally transparent entity. If
a reduced rate of withholding under an income tax treaty is claimed, a flow-through entity
includes any entity in which the interest holder must treat the entity as fiscally
transparent. The determination of whether an entity is fiscally transparent is made on an
item of income basis (that is, the determination is made separately for interest,
dividends, royalties, etc.). The interest holder in an entity makes the determination by
applying the laws of the jurisdiction where the interest holder is organized,
incorporated, or otherwise considered a resident. An entity is considered to be fiscally
transparent for the income to the extent the laws of that jurisdiction require the
interest holder to separately take into account on a current basis the interest holder's
share of the income, whether or not distributed to the interest holder, and the character
and source of the income to the interest holder are determined as if the income was
realized directly from the source that paid it to the entity. Subject to the standard of
knowledge rules discussed later, you generally make the determination that an entity is
fiscally transparent based on a Form W-8IMY provided by the entity.
The payees of a payment made to a fiscally transparent entity are the interest holders
of the entity.
Example. Entity A is a business organization organized under the
laws of country X that has an income tax treaty in effect with the United States. A has
two interest holders, B and C. B is a corporation organized under the laws of country Y. C
is a corporation organized under the laws of country Z. Both countries Y and Z have an
income tax treaty in effect with the United States.
A receives royalty income from U.S. sources that is not effectively connected with the
conduct of a trade or business in the United States. For U.S. income tax purposes, A is
treated as a partnership. Country X treats A as a partnership and requires the interest
holders in A to separately take into account on a current basis their respective shares of
the income paid to A even if the income is not distributed. The laws of country X provide
that the character and source of the income to A's interest holders are determined as if
the income was realized directly from the source that paid it to A. Accordingly, A is
fiscally transparent in its jurisdiction, country X.
B and C are not fiscally transparent under the laws of their respective countries
of incorporation. Country Y requires B to separately take into account on a current basis
B's share of the income paid to A, and the character and source of the income to B is
determined as if the income was realized directly from the source that paid it to A.
Accordingly, A is fiscally transparent for that income under the laws of country Y, and B
is treated as deriving its share of the U.S. source royalty income for purposes of the
U.S. - Y income tax treaty. Country Z, on the other hand, treats A as a corporation and
does not require C to take into account its share of A's income on a current basis whether
or not distributed. Therefore, A is not treated as fiscally transparent under the laws of
country Z. Accordingly, C is not treated as deriving its share of the U.S. source royalty
income for purposes of the U.S. - Z income tax treaty.
Foreign Intermediaries
Generally, if you make payments to a foreign intermediary, the payees
are the persons for whom the foreign intermediary collects the payment, such as
account holders or customers, not the intermediary itself. This rule applies for purposes
of NRA withholding and for Form 1099 reporting and backup withholding. You may, however,
treat a qualified intermediary that has assumed primary withholding responsibility for a
payment as the payee, and you are not required to withhold.
An intermediary is a custodian, broker, nominee, or any other person that acts as an
agent for another person. A foreign intermediary is either a qualified intermediary or a
nonqualified intermediary. Generally, you determine whether an entity is a qualified
intermediary or a nonqualified intermediary based on the representations the intermediary
makes on Form W-8IMY.
You must determine whether the customers or account holders of a foreign intermediary
are U.S. or foreign persons, and, if the account holder or customer is foreign, whether a
reduced rate of NRA withholding applies. You make these determinations based on the
foreign intermediary's Form W-8IMY and associated information and documentation. If you do
not have all of the information or documentation that is required to reliably associate a
payment with a payee, you must apply the presumption rules. See Documentation and
Presumption Rules, later.
Nonqualified intermediary. A
nonqualified intermediary (NQI) is any intermediary that is a foreign person and that is
not a qualified intermediary. The payees of a payment made to an NQI are the
customers or account holders on whose behalf the NQI is acting.
Example. You make a payment of interest to a foreign bank that
is a nonqualified intermediary. The bank gives you a Form W-8IMY with which it associates
the Forms W-8BEN of two foreign persons, and a Form W-9 from a U.S. person for whom the
bank is collecting the payments. The bank also associates with its Form W-8IMY a
withholding statement on which it allocates the interest payment to each account holder
and provides all other information required to be on the withholding statement. The
account holders are the payees of the interest payment. You should report the portion of
the interest paid to the two foreign persons on Forms 1042-S and the portion paid to the
U.S. person on Form 1099-INT.
Qualified intermediary. A
qualified intermediary (QI) is any foreign intermediary (or foreign branch of a U.S.
intermediary) that has entered into a qualified intermediary withholding agreement
(discussed later) with the IRS. You may treat a QI as a payee to the extent the QI assumes
primary withholding responsibility or primary Form 1099 reporting and backup withholding
responsibility for a payment. In this situation, the QI is required to withhold the tax.
You can determine whether a QI has assumed responsibility from the Form W-8IMY provided by
the QI.
A payment to a QI to the extent it does not assume primary NRA withholding
responsibility is considered made to the person on whose behalf the QI acts. If a QI does
not assume Form 1099 reporting and backup withholding responsibility, you must report on
Form 1099 and, if applicable, backup withhold as if you were making the payment directly
to the U.S. person.
QI withholding agreement. Foreign financial institutions and foreign branches of U.S. financial
institutions can enter into an agreement with the IRS to be a qualified intermediary. A QI
is entitled to certain simplified withholding and reporting rules. In general, there are
three major areas whereby intermediaries with QI status are afforded such simplified
treatment.
The QI withholding agreement and procedures necessary to complete the QI application
are set forth in Revenue Procedure 2000-12 found in Cumulative Bulletin 2000-1. Also see
Notice 2001-4.
 The revenue
procedure, notice, and other information can be found at our web site www.irs.gov.
Documentation. A QI is
not required to forward documentation obtained from foreign account holders to the U.S.
withholding agent from whom the QI receives a payment of U.S. source income. The QI
maintains such documentation at its location and provides the U.S. withholding agent with
withholding rate pools. A withholding rate pool is a payment of a single type of income
that is subject to a single rate of withholding.
A QI is required to provide the U.S. withholding agent with information regarding U.S.
persons subject to Form 1099 information reporting unless the QI assumes the primary
obligation to do Form 1099 reporting and backup withholding.
If a QI obtains documentary evidence under the know your customer rules that
apply to the QI under local law, and the documentary evidence is of a type specified in an
attachment to the QI agreement, the documentary evidence remains valid until there is a
change in circumstances or the QI knows the information is incorrect. This indefinite
validity period rule does not apply to Forms W-8 or to documentary evidence that is not of
the type specified in the attachment to the agreement.
Form 1042-S reporting. A
QI is permitted to report payments made to its direct foreign account holders on a pooled
basis rather than reporting payments to each direct account holder specifically.
Pooled basis reporting is not available for payments to certain account holders, such as a
nonqualified intermediary or a flow-through entity (discussed earlier).
Collective refund procedures. A QI may seek a refund on behalf of its direct account holders. The
direct account holders, therefore, are not required to file returns with the IRS to obtain
refunds, but rather may obtain them from the QI.
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