[Code of Federal Regulations]
[Title 26 Volume 12, Parts 1 (1.1401 to end)]
[Revised as of April 1, 2000]
>From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR]
[Page 63-220]
TITLE 26--INTERNAL REVENUE
CHAPTER I--INTERNAL REVENUE SERVICE,
TAX ON SELF-EMPLOYMENT INCOME--Table of Contents
Withholding of Tax on Nonresident Aliens and Foreign Corporations and Tax-Free Covenant Bonds
NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
Sec. 1.1441-0 Outline of regulation provisions for section 1441.
This section lists captions contained in Secs. 1.1441-1 through
1.1441-9.
Sec. 1.1441-1 Requirement for the deduction and withholding of tax on
payments to foreign persons.
(a) Purpose and scope.
(b) General rules of withholding.
(1) Requirement to withhold on payments to foreign persons.
(2) Determination of payee and payee's status.
(i) In general.
(ii) Payments to a U.S. agent of a foreign person.
(iii) Payments to wholly-owned entities.
(A) Foreign-owned domestic entity.
(B) Foreign entity.
(iv) Payments to a U.S. branch of certain foreign banks or foreign
insurance companies.
(A) U.S. branch treated as a U.S. person in certain cases.
(B) Consequences to the withholding agent.
(C) Consequences to the U.S. branch.
(D) Definition of payment to a U.S. branch.
(E) Payments to other U.S. branches.
(v) Payments to a foreign intermediary.
(A) Payments treated as made to persons for whom the intermediary
collects the payment.
(B) Payments treated as made to foreign intermediary.
(vi) Other payees.
(vii) Rules for reliably associating a payment with documentation.
(3) Presumptions regarding payee's status in the absence of
documentation.
(i) General rules.
(ii) Presumptions of status as individual, corporation, partnership,
etc.
(iii) Presumption of U.S. or foreign status.
(A) Payments to exempt recipients.
(B) Scholarships and grants.
(C) Pensions, annuities, etc.
(D) Certain payments to offshore accounts.
(iv) Grace period in the case of indicia of a foreign payee.
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(v) Special rules applicable to payments to foreign intermediaries.
(A) Reliance on claim of status as foreign intermediary.
(B) Beneficial owner documentation is lacking or unreliable.
(C) Information regarding allocation of payment is lacking or
unreliable.
(D) Certification that the foreign intermediary has furnished
documentation for all of the persons to whom the intermediary
certificate relates is lacking or unreliable.
(vi) U.S. branches and foreign flow-through entities.
(vii) Joint payees.
(viii) Rebuttal of presumptions.
(ix) Effect of reliance on presumptions and of actual knowledge or
reason to know otherwise.
(A) General rule.
(B) Actual knowledge or reason to know that amount of withholding is
greater than is required under the presumptions or that
reporting of the payment is required.
(x) Examples.
(4) List of exemptions from, or reduced rates of, withholding under
chapter 3 of the Code.
(5) Establishing foreign status under applicable provisions of chapter
61 of the Code.
(6) Rules of withholding for payments by a foreign intermediary or
certain U.S. branches.
(7) Liability for failure to obtain documentation timely or to act in
accordance with applicable presumptions.
(i) General rule.
(ii) Proof that tax liability has been satisfied.
(iii) Liability for interest and penalties.
(iv) Special effective date.
(v) Examples.
(8) Adjustments, refunds, or credits of overwithheld amounts.
(9) Payments to joint owners.
(c) Definitions.
(1) Withholding.
(2) Foreign and U.S. person.
(3) Individual.
(i) Alien individual.
(ii) Nonresident alien individual.
(4) Certain foreign corporations.
(5) Financial institution and foreign financial institution.
(6) Beneficial owner.
(i) General rule.
(ii) Special rules for flow-through entities and arrangements.
(A) General rule.
(B) Trusts and estates.
(C) Definition of a flow-through entity or arrangement.
(7) Withholding agent.
(8) Person.
(9) Source of income.
(10) Chapter 3 of the Code.
(11) Reduced rate.
(d) Beneficial owner's or payee's claim of U.S. status.
(1) In general.
(2) Payments for which a Form W-9 is otherwise required.
(3) Payments for which a Form W-9 is not otherwise required.
(4) Other payments.
(e) Beneficial owner's claim of foreign status.
(1) Withholding agent's reliance.
(i) In general.
(ii) Payments that a withholding agent may treat as made to a foreign
person that is a beneficial owner.
(A) General rule.
(B) Additional requirements.
(2) Beneficial owner withholding certificate.
(i) In general.
(ii) Requirements for validity of certificate.
(3) Intermediary, flow-through, or U.S. branch withholding certificate.
(i) In general.
(ii) Intermediary withholding certificate from a qualified intermediary.
(iii) Intermediary withholding certificate from an intermediary that is
not a qualified intermediary.
(iv) Information to the withholding agent regarding assets owned by
beneficial owners, etc.
(A) General rule.
(B) Updating the information.
(C) Examples.
(v) Withholding certificate from certain U.S. branches.
(vi) Reportable amounts.
(4) Applicable rules.
(i) Who may sign the certificate.
(ii) Period of validity.
(A) Three-year period.
(B) Indefinite validity period.
(C) Withholding certificate for effectively connected income.
(D) Change in circumstances.
(iii) Retention of withholding certificate.
(iv) Electronic transmission of information.
(v) Electronic confirmation of taxpayer identifying number on
withholding certificate.
(vi) Acceptable substitute form.
(vii) Requirement of taxpayer identifying number.
(viii) Reliance rules.
(A) Classification.
(B) Status of payee as an intermediary or as a person acting for its own
account.
(ix) Certificates to be furnished for each account unless exception
applies.
(A) Coordinated account information system in effect.
(B) Family of mutual funds.
(C) Special rule for brokers.
(5) Qualified intermediaries.
(i) General rule.
(ii) Definition of qualified intermediary.
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(iii) Withholding agreement.
(A) In general.
(B) Terms of the withholding agreement.
(iv) Assignment of primary withholding responsibility.
(v) Information to withholding agent regarding applicable withholding
rates.
(A) General rule.
(B) Categories of assets.
(C) Updating the information.
(f) Effective date.
(1) In general.
(2) Transition rules.
(i) Special rules for existing documentation.
(ii) Lack of documentation for past years.
Sec. 1.1441-2 Amounts subject to withholding.
(a) In general.
(b) Fixed or determinable annual or periodical income.
(1) In general.
(i) Definition.
(ii) Manner of payment.
(iii) Determinability of amount.
(2) Exceptions.
(3) Original issue discount.
(i) General rule.
(ii) Amounts actually known to the withholding agent.
(iii) Amounts for which certain documentation is not furnished.
(iv) Exceptions to withholding.
(4) Securities lending transactions and equivalent transactions.
(c) Other income subject to withholding.
(d) Exceptions to withholding where no money or property is paid or lack
of knowledge.
(1) General rule.
(2) Cancellation of debt.
(3) Satisfaction of liability following underwithholding by withholding
agent.
(e) Payment.
(1) General rule.
(2) Income allocated under section 482.
(3) Blocked income.
(4) Special rules for dividends.
(5) Certain interest accrued by a foreign corporation.
(6) Payments other than in U.S. dollars.
(f) Effective date.
Sec. 1.1441-3 Determination of amounts to be withheld.
(a) Withholding on gross amount.
(b) Withholding on payments on certain obligations.
(1) Withholding at time of payment of interest.
(2) No withholding between interest payment dates.
(i) In general.
(ii) Anti-abuse rule.
(c) Corporate distributions.
(1) General rule.
(2) Exception to withholding on distributions.
(i) In general.
(ii) Reasonable estimate of accumulated and current earnings and profits
on the date of payment.
(A) General rule.
(B) Procedures in case of underwithholding.
(C) Reliance by intermediary on reasonable estimate.
(D) Example.
(3) Special rules in the case of distributions from a regulated
investment company.
(i) General rule
(ii) Reliance by intermediary on reasonable estimate.
(4) Coordination with withholding under section 1445.
(i) In general.
(A) Withholding under section 1441.
(B) Withholding under both sections 1441 and 1445.
(C) Coordination with REIT withholding.
(ii) Intermediary reliance rule.
(d) Withholding on payments that include an undetermined amount of
income.
(1) In general.
(2) Withholding on certain gains.
(e) Payments other than in U.S. dollars.
(1) In general.
(2) Payments in foreign currency.
(f) Tax liability of beneficial owner satisfied by withholding agent.
(1) General rule.
(2) Example.
(g) Conduit financing arrangements
(h) Effective date.
Sec. 1.1441-4 Exemptions from withholding for certain effectively
connected income and other amounts.
(a) Certain income connected with a U.S. trade or business.
(1) In general.
(2) Withholding agent's reliance on a claim of effectively connected
income.
(i) In general.
(ii) Special rules for U.S. branches of foreign persons.
(A) U.S. branches of certain foreign banks or foreign insurance
companies.
(B) Other U.S. branches.
(3) Income on notional principal contracts.
(i) General rule.
(ii) Exception for certain payments.
(b) Compensation for personal services of an individual.
(1) Exemption from withholding.
(2) Manner of obtaining withholding exemption under tax treaty.
(i) In general.
(ii) Withholding certificate claiming withholding exemption.
(iii) Review by withholding agent.
(iv) Acceptance by withholding agent.
(v) Copies of Form 8233.
(3) Withholding agreements.
(4) Final payments exemption.
(i) General rule.
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(ii) Final payment of compensation for personal services.
(iii) Manner of applying for final payment exemption.
(iv) Letter to withholding agent.
(5) Requirement of return.
(6) Personal exemption.
(i) In general.
(ii) Multiple exemptions.
(iii) Special rule where both certain scholarship and compensation
income are received.
(c) Special rules for scholarship and fellowship income.
(1) In general.
(2) Alternate withholding election.
(d) Annuities received under qualified plans.
(e) Per diem of certain alien trainees.
(f) Failure to receive withholding certificates timely or to act in
accordance with applicable presumptions.
(g) Effective date.
(1) General rule.
(2) Transition rules.
Sec. 1.1441-5 Withholding on payments to partnerships, trusts, and
estates.
(a) Rules of withholding applicable to payments to partnerships.
(b) Domestic partnerships.
(1) Exemption from withholding on payment to domestic partnerships.
(2) Withholding by a domestic partnership.
(i) In general.
(ii) Determination by the domestic partnership of partners' status.
(iii) Reliance on a partner's claim for reduced withholding.
(iv) Rules for reliably associating a payment with documentation.
(v) Coordination with chapter 61 of the Internal Revenue Code and
section 3406.
(c) Foreign partnerships.
(1) Determination of payee.
(i) Payments treated as made to partners.
(ii) Payments treated as made to the partnership.
(iii) Rules for reliably associating a payment with documentation.
(iv) Example.
(2) Withholding foreign partnerships.
(i) Reliance on claim of withholding foreign partnership status.
(ii) Withholding agreement.
(A) In general.
(B) Terms of withholding agreement.
(iii) Withholding responsibility.
(iv) Withholding certificate from a withholding foreign partnership.
(3) Other foreign partnerships.
(i) Reliance on claim of foreign partnership status.
(ii) Reliance on claim of reduced withholding by a partnership for its
partners.
(iii) Withholding certificate from a foreign partnership that is not a
withholding foreign partnership.
(iv) Information to withholding agent regarding each partner's
distributive share.
(v) Withholding by a foreign partnership.
(d) Presumptions regarding payee's status in the absence of
documentation.
(1) In general.
(2) Determination of partnership's status as domestic or foreign in the
absence of documentation.
(3) Determination of partners' status in the absence of certain
documentation.
(i) Documentation regarding the status of a partner is lacking or
unreliable.
(ii) Information regarding the allocation of payment is lacking or
unreliable.
(iii) Certification that the foreign partnership has furnished
documentation for all of the persons to whom the intermediary
certificate relates is lacking or unreliable.
(iv) Determination by a withholding foreign partnership of the status of
its partners.
(4) Examples.
(e) Trusts and estates. [Reserved]
(f) Failure to receive withholding certificate timely or to act in
accordance with applicable presumptions.
(g) Effective date.
(1) General rule.
(2) Transition rules.
Sec. 1.1441-6 Claim of reduced withholding under an income tax treaty.
(a) In general.
(b) Reliance on claim of reduced withholding under an income tax treaty.
(1) In general.
(2) Exemption from requirement to furnish a taxpayer identifying number
and special documentary evidence rules for certain income.
(i) General rule.
(ii) Income to which special rules apply.
(3) Competent authority agreements.
(4) Eligibility for reduced withholding under an income tax treaty in
the case of a payment to a person other than an individual.
(i) General rule.
(ii) Withholding certificates.
(A) In general.
(B) Certification by qualified intermediary.
(iii) Multiple claims of treaty benefits.
(iv) Examples.
(5) Claim of benefits under an income tax treaty by a U.S. person.
(c) Proof of tax residence in a treaty country and certification of
entitlement to treaty benefits. (1) In general.
(2) Certification of taxpayer identifying number.
(i) In general.
(ii) IRS-certified TIN.
(iii) Special rules for qualified intermediaries.
(3) Certificate of residence.
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(4) Documentary evidence establishing residence in the treaty country.
(i) Individuals.
(ii) Persons other than individuals.
(5) Certifications regarding entitlement to treaty benefits.
(i) Certification regarding conditions under a Limitation on Benefits
Article.
(ii) Certification regarding whether the taxpayer is deriving the
income.
(d) Joint owners.
(e) Related party dividends under U.S.-Denmark income tax treaty.
(f) Failure to receive withholding certificate timely.
(g) Effective date.
(1) General rule.
(2) Transition rules.
Sec. 1.1441-7 General provisions relating to withholding agents.
(a) Withholding agent defined.
(b) Standards of knowledge.
(1) In general.
(2) Reason to know.
(i) In general.
(ii) Limits on reason to know in certain cases.
(3) Coordinated account information systems.
(c) Authorized agent.
(1) In general.
(2) Authorized foreign agent.
(3) Notification.
(4) Liability of U.S. withholding agent.
(5) Filing of returns.
(d) United States obligations.
(e) Assumed obligations.
(f) Conduit financing arrangements.
(g) Effective date.
Sec. 1.1441-8 Exemption from withholding for payments to foreign
governments, international organizations, foreign central banks of
issue, and the Bank for International Settlements.
(a) Foreign governments.
(b) Reliance on claim of exemption by foreign government.
(c) Income of a foreign central bank of issue or the Bank for
International
Settlements.
(1) Certain interest income.
(2) Bankers' acceptances.
(d) Exemption for payments to international organizations.
(e) Failure to receive withholding certificate timely and other
applicable procedures.
(f) Effective date.
(1) In general.
(2) Transition rules.
Sec. 1.1441-9 Exemption from withholding on exempt income of a foreign
tax-exempt organization, including foreign private foundations.
(a) Exemption from withholding for exempt income.
(b) Reliance on foreign organization's claim of exemption from
withholding.
(1) General rule.
(2) Withholding certificate.
(3) Presumptions in the absence of documentation.
(4) Reason to know.
(c) Failure to receive withholding certificate timely and other
applicable procedures.
(d) Effective date.
(1) In general.
(2) Transition rules.
[T.D. 8734, 62 FR 53421, Oct. 14, 1997]
Effective Date Note: By T.D. 8734, 62 FR 53421, Oct. 14, 1997,
Sec. 1.1441-0 was added, effective Jan. 1, 1999. By T.D. 8804, 63 FR
72183, Dec. 31, 1998, the effective date of Sec. 1.1441-0 was delayed
until Jan. 1, 2000. By T.D. 8856, 64 FR 73408, Dec. 30, 1999, the
effective date of Sec. 1.1441-0 was delayed until Jan. 1, 2001.
Sec. 1.1441-1 Requirement for the deduction and withholding of tax on
payments to foreign persons.
(a) Purpose and scope. This section, Secs. 1.1441-2 through 1.1441-
9, and 1.1443-1 provide rules for withholding under sections 1441, 1442,
and 1443 when a payment is made to a foreign person. This section
provides definitions of terms used in chapter 3 of the Internal Revenue
Code (Code) and regulations thereunder. It prescribes procedures to
determine whether an amount must be withheld under chapter 3 of the Code
and documentation that a withholding agent may rely upon to determine
the status of a payee or a beneficial owner as a U.S. person or as a
foreign person and other relevant characteristics of the payee that may
affect a withholding agent's obligation to withhold under chapter 3 of
the Code and the regulations thereunder. Special procedures regarding
payments to foreign persons that act as intermediaries are also
provided. Section 1.1441-2 defines the income subject to withholding
under section 1441, 1442, and 1443 and the regulations under these
sections. Section 1.1441-3 provides rules regarding the amount subject
to withholding. Section 1.1441-4 provides exemptions from withholding
for, among other things, certain income effectively connected with the
conduct of a trade or business in the United States, including certain
compensation for the personal services of an individual. Section 1.1441-
5 provides rules for withholding
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on payments made to flow-through entities and other similar
arrangements. Section 1.1441-6 provides rules for claiming a reduced
rate of withholding under an income tax treaty. Section 1.1441-7 defines
the term withholding agent and provides due diligence rules governing a
withholding agent's obligation to withhold. Section 1.1441-8 provides
rules for relying on claims of exemption from withholding for payments
to a foreign government, an international organization, a foreign
central bank of issue, or the Bank for International Settlements.
Sections 1.1441-9 and 1.1443-1 provide rules for relying on claims of
exemption from withholding for payments to foreign tax exempt
organizations and foreign private foundations.
(b) General rules of withholding--(1) Requirement to withhold on
payments to foreign persons. A withholding agent must withhold 30-
percent of any payment of an amount subject to withholding made to a
payee that is a foreign person unless it can reliably associate the
payment with documentation upon which it can rely to treat the payment
as made to a beneficial owner that is a U.S. person or as made to a
beneficial owner that is a foreign person entitled to a reduced rate of
withholding. However, a withholding agent making a payment to a foreign
person need not withhold where the foreign person assumes responsibility
for withholding on the payment under chapter 3 of the Code and the
regulations thereunder as a qualified intermediary (see paragraph (e)(5)
of this section), as a U.S. branch of a foreign person (see paragraph
(b)(2)(iv) of this section), as a withholding foreign partnership (see
Sec. 1.1441-5(c)(2)(i)), or as an authorized foreign agent (see
Sec. 1.1441-7(c)(1)). This section (dealing with general rules of
withholding and claims of foreign or U.S. status by a payee or a
beneficial owner), and Secs. 1.1441-4, 1.1441-5, 1.1441-6, 1.1441-8,
1.1441-9, and 1.1443-1 provide rules for determining whether
documentation is required as a condition for reducing the rate of
withholding on a payment to a foreign beneficial owner or to a U.S.
payee and if so, the nature of the documentation upon which a
withholding agent may rely in order to reduce such rate. Paragraph
(b)(2) of this section prescribes the rules for determining who the
payee is, the extent to which a payment is treated as made to a foreign
payee, and reliable association of a payment with documentation.
Paragraph (b)(3) of this section describes the applicable presumptions
for determining the payee's status as U.S. or foreign and the payee's
other characteristics (i.e., as an owner or intermediary, as an
individual, partnership, corporation, etc.). Paragraph (b)(4) of this
section lists the types of payments for which the 30-percent withholding
rate may be reduced. Because the treatment of a payee as a U.S. or a
foreign person also has consequences for purposes of making an
information return under the provisions of chapter 61 of the Code and
for withholding under other provisions of the Code, such as sections
3402, 3405 or 3406, paragraph (b)(5) of this section lists applicable
provisions outside chapter 3 of the Code that require certain payees to
establish their foreign status (e.g., in order to be exempt from
information reporting). Paragraph (b)(6) of this section describes the
withholding obligations of a foreign person making a payment that it has
received in its capacity as an intermediary. Paragraph (b)(7) of this
section describes the liability of a withholding agent that fails to
withhold at the required 30-percent rate in the absence of
documentation. Paragraph (b)(8) of this section deals with adjustments
and refunds in the case of overwithholding. Paragraph (b)(9) of this
section deals with determining the status of the payee when the payment
is jointly owned. See paragraph (c)(6) of this section for a definition
of beneficial owner. See Sec. 1.1441-7(a) for a definition of
withholding agent. See Sec. 1.1441-2(a) for the determination of an
amount subject to withholding. See Sec. 1.1441-2(e) for the definition
of a payment and when it is considered made. Except as otherwise
provided, the provisions of this section apply only for purposes of
determining a withholding agent's obligation to withhold under chapter 3
of the Code and the regulations thereunder.
(2) Determination of payee and payee's status--(i) In general.
Except as otherwise provided in this paragraph (b)(2), a
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payee is the person to whom a payment is made, regardless of whether
such person is the beneficial owner of the amount (as defined in
paragraph (c)(6) of this section). A foreign payee is a payee who is a
foreign person. A U.S. payee is a payee who is a U.S. person. Generally,
the determination by a withholding agent of the U.S. or foreign status
of a payee and of its other relevant characteristics (e.g., as a
beneficial owner or intermediary, or as an individual, corporation, or
flow-through entity) is made on the basis of a withholding certificate
that is a Form W-8 or a Form 8233 (indicating foreign status of the
payee or beneficial owner) or a Form W-9 (indicating U.S. status of the
payee). The provisions of this paragraph (b)(2), paragraph (b)(3) of
this section, and Sec. 1.1441-5 (c), (d), and (e) dealing with
determinations of payee and applicable presumptions in the absence of
documentation, apply only to payments of amounts subject to withholding
under chapter 3 of the Code (within the meaning of Sec. 1.1441-2(a)).
Similar payee and presumption provisions are set forth under
Sec. 1.6049-5(d) for payments of amounts that are not subject to
withholding under chapter 3 of the Code (or the regulations thereunder)
but that may be reportable under provisions of chapter 61 of the Code
(and the regulations thereunder). See paragraph (d) of this section for
documentation upon which the withholding agent may rely in order to
treat the payee or beneficial owner as a U.S. person. See paragraph (e)
of this section for documentation upon which the withholding agent may
rely in order to treat the payee or beneficial owner as a foreign
person. For applicable presumptions of status in the absence of
documentation, see paragraph (b)(3) of this section and Sec. 1.1441-
5(d). For definitions of a foreign person and U.S. person, see paragraph
(c)(2) of this section.
(ii) Payments to a U.S. agent of a foreign person. A withholding
agent making a payment to a U.S. person (other than to a U.S. branch
that is treated as a U.S. person pursuant to paragraph (b)(2)(iv) of
this section) and who has actual knowledge that the U.S. person receives
the payment as an agent of a foreign person must treat the payment as
made to the foreign person. However, the withholding agent may treat the
payment as made to the U.S. person if the U.S. person is a financial
institution and the withholding agent has no reason to believe that the
financial institution will not comply with its obligation to withhold.
See paragraph (c)(5) of this section for the definition of a financial
institution.
(iii) Payments to wholly-owned entities--(A) Foreign-owned domestic
entity. A payment to a wholly-owned domestic entity that is disregarded
for federal tax purposes under Sec. 301.7701-2(c)(2) of this chapter as
an entity separate from its owner and whose single owner is a foreign
person shall be treated as a payment to the owner of the entity, subject
to the provisions of paragraph (b)(2)(iv) of this section. For purposes
of this paragraph (b)(2)(iii)(A), a domestic entity means a person that
would be treated as a U.S. person if it had an election in effect under
Sec. 301.7701-3(c)(1)(i) of this chapter to be treated as a corporation.
For example, a limited liability company, A, organized under the laws of
the State of Delaware, opens an account at a U.S. bank. Upon opening of
the account, the bank requests A to furnish a Form W-9 as required under
section 6049(a) and the regulations under that section. A does not have
an election in effect under Sec. 301.7701-3(c)(1)(i) of this chapter
and, therefore, is not treated as an organization taxable as a
corporation, including for purposes of the exempt recipient provisions
in Sec. 1.6049-4(c)(1). If A has a single owner and the owner is a
foreign person (as defined in paragraph (c)(2) of this section), then A
may not furnish a Form W-9 because it may not represent that it is a
U.S. person for purposes of the provisions of chapters 3 and 61 of the
Code, and section 3406. Therefore, A must furnish a Form W-8 with the
name, address, and taxpayer identifying number (TIN) (if required) of
the foreign person who is the single owner in the same manner as if the
account were opened directly by the foreign single owner. See
Secs. 1.894-1T(d) and 1.1441-6(b)(4) for special rules where the
entity's owner is claiming a reduced rate of withholding under an income
tax treaty.
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(B) Foreign entity. A payment to a wholly-owned foreign entity that
is disregarded under Sec. 301.7701-2(c)(2) of this chapter as an entity
separate from its owner shall be treated as a payment to the single
owner of the entity, subject to the provisions of paragraph (b)(2)(iv)
of this section if the foreign entity has a U.S. branch in the United
States. For purposes of this paragraph (b)(2)(iii)(B), a foreign entity
means a person that would be treated as a foreign person if it had an
election in effect under Sec. 301.7701-3(c)(1)(i) of this chapter to be
treated as a corporation. See Secs. 1.894-1T(d) and 1.1441-6(b)(4) for
special rules where the foreign entity or its owner is claiming a
reduced rate of withholding under an income tax treaty. Thus, for
example, if the foreign entity's single owner is a U.S. person, the
payment shall be treated as a payment to a U.S. person. Therefore, based
on the saving clause in U.S. income tax treaties, such an entity may not
claim benefits under an income tax treaty even if the entity is
organized in a country with which the United States has an income tax
treaty in effect and treats the entity as a non-fiscally transparent
entity. See Sec. 1.894-1T(d)(6), Example 10. Unless it has actual
knowledge or reason to know that the foreign entity to whom the payment
is made is disregarded under Sec. 301.7701-2(c)(2) of this chapter, a
withholding agent may treat a foreign entity as an entity separate from
its owner unless it can reliably associate the payment with a
withholding certificate from the entity's owner.
(iv) Payments to a U.S. branch of certain foreign banks or foreign
insurance companies--(A) U.S. branch treated as a U.S. person in certain
cases. A payment to the U.S. branch of a foreign person is a payment to
the foreign person. However, a U.S. branch described in this paragraph
(b)(2)(iv)(A) and a withholding agent (including another U.S. branch
described in this paragraph (b)(2)(iv)(A)) may agree to treat the branch
as a U.S. person for purposes of withholding on specified payments to
the U.S. branch. Such agreement must be evidenced by a U.S. branch
withholding certificate described in paragraph (e)(3)(v) of this section
furnished by the U.S. branch to the withholding agent. A U.S. branch
described in this paragraph (b)(2)(iv)(A) is any U.S. branch of a
foreign bank subject to regulatory supervision by the Federal Reserve
Board or a U.S. branch of a foreign insurance company required to file
an annual statement on a form approved by the National Association of
Insurance Commissioner with the Insurance Department of a State, a
Territory, or the District of Columbia. The Internal Revenue Service
(IRS) may approve a list of U.S. branches that may qualify for treatment
as a U.S. person under this paragraph (b)(2)(iv)(A) (see
Sec. 601.601(d)(2) of this chapter).
(B) Consequences to the withholding agent. Any person that is
otherwise a withholding agent regarding a payment to a U.S. branch
described in paragraph (b)(2)(iv)(A) of this section shall treat the
payment in one of the following ways--
(1) As a payment to a U.S. person, in which case the withholding
agent is not responsible for withholding on such payment to the extent
it can reliably associate the payment with a withholding certificate
described in paragraph (e)(3)(v) of this section that has been furnished
by the U.S. branch under its agreement with the withholding agent to be
treated as a U.S. person;
(2) As a payment directly to the persons whose names are on
withholding certificates or other appropriate documentation forwarded by
the U.S. branch to the withholding agent when no agreement is in effect
to treat the U.S. branch as a U.S. person for such payment, to the
extent the withholding agent can reliably associate the payment with
such certificates or documentation; or
(3) As a payment to a foreign person of income that is effectively
connected with the conduct by that foreign person of a trade or business
in the United States if the withholding agent cannot reliably associate
the payment with a certificate from the U.S. branch or any other
certificate or other appropriate documentation from another person.
(C) Consequences to the U.S. branch. A U.S. branch that is treated
as a U.S. person under paragraph (b)(2)(iv)(A) of this section shall be
treated as a person
[[Page 71]]
for purposes of section 1441(a) and all other provisions of chapter 3 of
the Code and the regulations thereunder for any payment that it receives
as such. Thus, the U.S. branch shall be responsible for withholding on
the payment in accordance with the provisions under chapter 3 of the
Code and the regulations thereunder and other applicable withholding
provisions of the Code. For this purpose, it shall obtain and retain
documentation from payees or beneficial owners of the payments that it
receives as a U.S. person in the same manner as if it were a separate
entity. For example, if a U.S. branch receives a payment on behalf of
its home office and the home office is a qualified intermediary, the
U.S. branch must obtain a withholding certificate described in paragraph
(e)(3)(ii) of this section from its home office. In addition, a U.S.
branch that has not provided documentation to the withholding agent for
a payment that is, in fact, not effectively connected income is a
withholding agent with respect to that payment. See paragraph (b)(6) of
this section.
(D) Definition of payment to a U.S. branch. A payment is treated as
a payment to a U.S. branch of a foreign bank or foreign insurance
company if the payment is credited to an account maintained in the
United States in the name of a U.S. branch of the foreign person, or the
payment is made to an address in the United States where the U.S. branch
is located and the name of the U.S. branch appears on documents (in
written or electronic form) associated with the payment (e.g., the check
mailed or a letter addressed to the branch).
(E) Payments to other U.S. branches. Similar withholding procedures
may apply to payments to U.S. branches that are not described in
paragraph (b)(2)(iv)(A) of this section to the extent permitted by the
district director or the Assistant Commissioner (International). Any
such branch must establish that its situation is analogous to that of a
U.S. branch described in paragraph (b)(2)(iv)(A) of this section
regarding its registration with, and regulation by, a U.S. governmental
institution, the type and amounts of assets it is required to, or
actually maintains in the United States, and the personnel who carry out
the activities of the branch in the United States. In the alternative,
the branch must establish that the withholding and reporting
requirements under chapter 3 of the Code and the regulations thereunder
impose an undue administrative burden and that the collection of the tax
imposed by section 871(a) or 881(a) on the foreign person (or its
members in the case of a foreign partnership) will not be jeopardized by
the exemption from withholding. Generally, an undue administrative
burden will be found to exist in a case where the person entitled to the
income, such as a foreign insurance company, receives from the
withholding agent income on securities issued by a single corporation,
some of which is, and some of which is not, effectively connected with
conduct of a trade or business within the United States and the criteria
for determining the effective connection are unduly difficult to apply
because of the circumstances under which such securities are held. No
exemption from withholding shall be granted under this paragraph
(b)(2)(iv)(E) unless the person entitled to the income complies with
such other requirements as may be imposed by the district director or
the Assistant Commissioner (International) and unless the district
director or the Assistant Commissioner (International) is satisfied that
the collection of the tax on the income involved will not be jeopardized
by the exemption from withholding. The IRS may prescribe such procedures
as are necessary to make these determinations (see Sec. 601.601(d)(2) of
this chapter).
(v) Payments to a foreign intermediary--(A) Payments treated as made
to persons for whom the intermediary collects the payment. Except as
otherwise provided in paragraph (b)(2)(v)(B) of this section, a payment
to a person that the withholding agent may treat as a foreign
intermediary in accordance with the provisions of paragraph (b)(3)(v)(A)
of this section is treated as a payment made directly to the person or
persons for whom the intermediary collects the payment. Thus, for
example, a payment that the withholding agent can reliably associate
with a
[[Page 72]]
withholding certificate from a qualified intermediary (defined in
paragraph (e)(5)(ii) of this section) and that is allocable to the
category of assets described in paragraph (e)(5)(v)(B)(3) of this
section (i.e., assets allocable to persons for whom the foreign
qualified intermediary does not hold documentation as specified under
its agreement with the IRS) is treated as a payment to the persons
holding assets in that category. See paragraph (b)(3)(v)(B) of this
section for applicable presumptions in such a case. For similar rules
for payments to flow-through entities, see Sec. 1.1441-5 (c)(1)(i) and
(e).
(B) Payments treated as made to foreign intermediary. A payment to a
person that the withholding agent can reliably associate with a
withholding certificate described in paragraph (e)(3)(ii) of this
section from a qualified intermediary that has elected to assume primary
withholding responsibility in accordance with paragraph (e)(5)(iv) of
this section is treated as a payment to the qualified intermediary,
except to the extent of the portion of the payment that the withholding
agent can reliably associate with Forms W-9. See paragraphs (b)(1) and
(e)(5)(iv) of this section for consequences to the withholding agent.
(vi) Other payees. A payment to a person described in Sec. 1.6049-
4(c)(1)(ii) that the withholding agent would treat as a payment to a
foreign person without obtaining documentation for purposes of
information reporting under section 6049 (if the payment were interest)
is treated as a payment to a foreign payee for purposes of chapter 3 of
the Code and the regulations thereunder (or to a foreign beneficial
owner to the extent provided in paragraph (e)(1)(ii)(A) (6) or (7) of
this section). Further, payments that the withholding agent can reliably
associate with documentary evidence described in Sec. 1.6049-5(c)(4)
relating to the payee is treated as a payment to a foreign payee. A
payment that the withholding agent may treat as a payment to an
authorized foreign agent (as defined in Sec. 1.1441-7(c)(2)) is treated
as a payment to the agent and not to the persons for whom the agent
collects the payment. See Sec. 1.1441-5 (b)(1) and (c)(1) for payee
determinations for payments to partnerships. See Sec. 1.1441-5(e) for
payee determinations for payments to foreign trusts or foreign estates.
(vii) Rules for reliably associating a payment with documentation.
Generally, a withholding agent can reliably associate a payment with
documentation if, for that payment, it holds valid documentation to
which the payment relates, it can reliably determine how much of the
payment relates to the valid documentation (e.g., based on information
furnished in accordance with paragraph (e)(3)(iv) or (5)(v) of this
section in the case of a payment to a foreign intermediary or in
accordance with Sec. 1.1441-5(c)(3)(iv) in the case of a payment to a
foreign partnership), and it has no actual knowledge or reason to know
that any of the information or certifications stated in the
documentation are incorrect. The documentation referred to in this
paragraph (b)(2)(vii) is documentation described in paragraph (d) or (e)
of this section upon which a withholding agent may rely in order to
treat the payment as a payment made to a payee or beneficial owner that
is a U.S. or a foreign person, and to ascertain the characteristics of
the payee or beneficial owner, as may be relevant to withholding or
reporting under chapter 3 of the Code and the regulations thereunder
(e.g., beneficial owner or intermediary, corporation or partnership).
For purposes of this paragraph (b)(2)(vii), documentation also includes
a withholding certificate described in paragraph (e)(3)(ii) of this
section from a person representing to be a qualified intermediary that
has assumed primary withholding responsibility, a withholding
certificate described in paragraph (e)(3)(v) of this section from a
person representing to be a U.S. branch described in paragraph
(b)(2)(iv)(A) of this section, a withholding certificate described in
Sec. 1.1441-5(c)(2)(iv) from a person representing to be a withholding
foreign partnership, and the agreement that the withholding agent has in
effect with an authorized foreign agent in accordance with Sec. 1.1441-
7(c)(2)(i). A withholding agent that is not required to obtain
documentation with respect to a payment is considered to lack
documentation for purposes of this paragraph (b)(2)(vii). For
[[Page 73]]
example, a withholding agent paying U.S. source interest to a person
that is an exempt recipient, as defined in Sec. 1.6049-4(c)(1)(ii), is
not required to obtain documentation from that person in order to
determine whether an amount paid to that person is reportable under an
applicable information reporting provision under chapter 61 of the Code.
Therefore, the withholding agent may rely on the provisions of paragraph
(b)(3)(iii)(A) of this section to determine whether the person is
presumed to be a U.S. person (in which case, no withholding is required
under this section), or whether the person is presumed to be a foreign
person (in which case 30-percent withholding is required under this
section). See paragraph (b)(3)(v)(A) of this section for special
reliance rules in the case of a payment to a foreign intermediary and
Sec. 1.1441-5(d)(3) for special reliance rules in the case of a payment
to a foreign partnership.
(3) Presumptions regarding payee's status in the absence of
documentation--(i) General rules. A withholding agent that cannot
reliably associate a payment with documentation may rely on the
presumptions of this paragraph (b)(3) in order to determine the status
of the payee as a U.S. or a foreign person and the payee's other
relevant characteristics (e.g., as an owner or intermediary, as an
individual, trust, partnership, or corporation). The determination of
withholding and reporting requirements applicable to payments to a
person presumed to be a foreign person is governed only by the
provisions of chapter 3 of the Code and the regulations thereunder. For
the determination of withholding and reporting requirements applicable
to payments to a person presumed to be a U.S. person, see chapter 61 of
the Code, section 3402, 3405, or 3406, and the regulations under these
provisions. A presumption that a payee is a foreign payee is not a
presumption that the payee is a foreign beneficial owner. Therefore, the
provisions of this paragraph (b)(3) have no effect for purposes of
reducing the withholding rate if associating the payment with
documentation of foreign beneficial ownership is required as a condition
for such rate reduction. See paragraph (b)(3)(ix) of this section for
consequences to a withholding agent that fails to withhold in accordance
with the presumptions set forth in this paragraph (b)(3) or if the
withholding agent has actual knowledge or reason to know of facts that
are contrary to the presumptions set forth in this paragraph (b)(3). See
paragraph (b)(2)(vii) of this section for rules regarding the extent
which a withholding agent can reliably associate a payment with
documentation.
(ii) Presumptions of status as individual, corporation, partnership,
etc. A withholding agent that cannot reliably associate a payment with
documentation must presume that the payee is an individual, a trust, or
an estate, if the payee appears to be such person (i.e., based on the
payee's name or other indications). In the absence of reliable
indications that the payee is an individual, estate, or trust, the
withholding agent must presume that the payee is a corporation or one of
the persons enumerated under Sec. 1.6049-4(c)(1)(ii) (B) through (Q) if
it can be so treated under Sec. 1.6049-4(c)(1)(ii)(A)(1) or any one of
the paragraphs under Sec. 1.6049-4(c)(1)(ii) (B) through (Q) without the
need to furnish documentation. If the withholding agent cannot treat a
payee as a person described in Sec. 1.6049-4(c)(1)(ii) (A)(1) through
(Q), then the payee shall be presumed to be a partnership. The fact that
a payee is presumed to have a certain status under the provisions of
this paragraph (b)(3)(ii) does not mean that it is excused from
furnishing documentation, if documentation is otherwise required in
order to obtain a reduced rate of withholding under this section. For
example, if, for purposes of this paragraph (b)(3)(ii), a payee is
presumed to be a tax-exempt organization based on Sec. 1.6049-
4(c)(1)(ii)(B), the withholding agent cannot rely on this presumption to
reduce the rate of withholding on payments to such person (if such
person is also presumed to be a foreign person under paragraph
(b)(3)(iii)(A) of this section) because a reduction in the rate of
withholding for payments to a foreign tax-exempt organization generally
requires that a valid Form W-8 described in Sec. 1.1441-9(b)(2) be
furnished to the withholding agent.
[[Page 74]]
(iii) Presumption of U.S. or foreign status. A payment that the
withholding agent cannot reliably associate with documentation is
presumed to be made to a U.S. person, except as otherwise provided in
this paragraph (b)(3)(iii), in paragraphs (b)(3) (iv) and (v) of this
section, or in Sec. 1.1441-5 (d) or (e).
(A) Payments to exempt recipients. If a withholding agent cannot
reliably associate a payment with documentation from the payee and the
payee is an exempt recipient (as determined under the provisions of
Sec. 1.6049-4(c)(1)(ii) in the case of interest, or under similar
provisions under chapter 61 of the Code applicable to the type of
payment involved, but not including a payee that the withholding agent
may treat as a foreign intermediary in accordance with paragraph
(b)(3)(v) of this section), the payee is presumed to be a foreign person
and not a U.S. person--
(1) If the withholding agent has actual knowledge of the payee's
employer identification number and that number begins with the two
digits ``98'';
(2) If the withholding agent's communications with the payee are
mailed to an address in a foreign country;
(3) If the name of the payee indicates that the entity is the type
of entity that is on the per se list of foreign corporations contained
in Sec. 301.7701-2(b)(8)(i) of this chapter; or
(4) If the payment is made outside the United States (as defined in
Sec. 1.6049-5(e)).
(B) Scholarships and grants. A payment representing taxable
scholarship or fellowship grant income that does not represent
compensation for services (but is not excluded from tax under section
117) and that a withholding agent cannot reliably associate with
documentation is presumed to be made to a foreign person if the
withholding agent has a record that the payee has a U.S. visa that is
not an immigrant visa. See section 871(c) and Sec. 1.1441-4(c) for
applicable tax rate and withholding rules.
(C) Pensions, annuities, etc. A payment from a trust described in
section 401(a), an annuity plan described in section 401(a), an annuity
plan described in section 403(a), or a payment with respect to any
annuity, custodial account, or retirement income account described in
section 403(b) that a withholding agent cannot reliably associate with
documentation is presumed to be made to a U.S. person only if the
withholding agent has a record of a Social Security number for the payee
and relies on a mailing address described in the following sentence. A
mailing address is an address used for purposes of information reporting
or otherwise communicating with the payee that is an address in the
United States or in a foreign country with which the United States has
an income tax treaty in effect that provides that the payee, if an
individual resident in that country, would be entitled to an exemption
from U.S. tax on amounts described in this paragraph (b)(3)(iii)(C). Any
payment described in this paragraph (b)(3)(iii)(C) that is not presumed
made to a U.S. person is presumed to be made to a foreign person. A
withholding agent making a payment to a person presumed to be a foreign
person may not reduce the 30-percent amount of withholding required on
such payment unless it receives a withholding certificate described in
paragraph (e)(2)(i) of this section furnished by the beneficial owner.
For basis of reduction in the 30-percent rate, see Sec. 1.1441-4(d) or
Sec. 1.1441-6(b).
(D) Certain payments to offshore accounts. A payment that would be
subject to withholding under section 1441, 1442, or 1443 if made to a
foreign person and is exempt from backup withholding under section 3406
by reason of Sec. 31.3406(g)-1(e) of this chapter (relating to exemption
from backup withholding under section 3406 for certain payments to
offshore accounts) is presumed to be made to a foreign payee.
(iv) Grace period in the case of indicia of a foreign payee. A
withholding agent may choose, in its discretion, to apply the provisions
of Sec. 1.6049-5(d)(2)(ii) regarding a 90-day grace period for purposes
of this paragraph (b)(3) (by substituting the term withholding agent for
the term payor) to amounts described in Sec. 1.1441-6(b)(2)(ii) and to
amounts covered by a Form 8233 described in Sec. 1.1441-4(b)(2)(ii).
Thus, for these amounts, a withholding agent may, in its discretion,
choose to treat an account holder as a foreign person and withhold under
chapter 3 of the Code
[[Page 75]]
(and the regulations thereunder) while awaiting documentation. For
purposes of determining the rate of withholding under this section, the
withholding agent must withhold at the unreduced 30-percent rate at the
time that the amounts are credited to the account. However, a
withholding agent who can reliably associate the payment with a
withholding certificate that is otherwise valid within the meaning of
the applicable provisions except for the fact that it is transmitted by
facsimile may rely on that facsimile form for purposes of withholding at
the claimed reduced rate. For reporting of amounts credited both before
and after the grace period, see Sec. 1.1461-1(c)(7). The following
adjustments shall be made at the expiration of the grace period:
(A) If, at the end of the grace period, the documentation is not
furnished in the manner required under this section and the account
holder is presumed to be a U.S. person who is not an exempt recipient,
then backup withholding applies to amounts credited to the account after
the expiration of the grace period only. Amounts credited to the account
during the grace period shall be treated as owned by a foreign payee and
adjustments must be made to correct any underwithholding on such amounts
in the manner described in Sec. 1.1461-2.
(B) If, at the end of the grace period, the documentation is not
furnished in the manner required under this section and the account
holder is presumed to be a foreign person, or if documentation is
furnished that does not support the claimed rate reduction, then
adjustments must be made to correct the underwithholding on amounts
credited to the account during the grace period, based on adjustment
procedures described in Sec. 1.1461-2.
(v) Special rules applicable to payments to foreign intermediaries--
(A) Reliance on claim of status as foreign intermediary. A withholding
agent that can reliably associate a payment with a withholding
certificate described in paragraph (e)(3) (ii) or (iii) of this section
may treat the payment as made to a foreign intermediary, as represented
in the certificate. For this purpose, a U.S. person's foreign branch
that is a qualified intermediary defined in paragraph (e)(5)(ii) of this
section shall be treated as a foreign intermediary. For purposes of this
section, a payment that the withholding agent can reliably associate
with a withholding certificate described in paragraph (e)(3) (ii) or
(iii) of this section that would be valid except for the fact that some
or all of the withholding certificates or other appropriate
documentation required to be attached are lacking or are unreliable or
that information for allocating the payment among the various persons
for whom the intermediary is acting is lacking or is unreliable shall
nevertheless be treated as a payment to a foreign intermediary and the
rules of this paragraph (b)(3)(v) shall apply accordingly. A payee that
the withholding agent may not reliably treat as a foreign intermediary
under this paragraph (b)(3)(v)(A) is presumed to be an owner whose
status as an individual, trust, estate, etc., must be determined in
accordance with paragraph (b)(3)(ii) of this section, to the extent
relevant. In addition, such payee is presumed to be a U.S. or a foreign
payee based upon the presumptions described in paragraph (b)(3)(iii) of
this section. The provisions of paragraphs (b)(3)(v) (B), (C), and (D)
of this section are not relevant to a withholding agent that can
reliably associate a payment with a withholding certificate from a
person representing to be a qualified intermediary that has assumed
primary withholding responsibility in accordance with paragraph
(e)(5)(iv) of this section.
(B) Beneficial owner documentation is lacking or unreliable. Any
portion of a payment that the withholding agent may treat as made to a
foreign intermediary in accordance with paragraph (b)(3)(v)(A) of this
section but cannot reliably associate with a beneficial owner due to the
lack of a withholding certificate or other appropriate documentation for
that beneficial owner is presumed to be made to a foreign payee for whom
the foreign intermediary collects the payment (see paragraph (b)(2)(v)
of this section). For purposes of this paragraph (b)(2)(v)(B), any
payment that a foreign qualified intermediary represents to be allocable
to the category of assets described in paragraph (e)(5)(v)(B)(3) of this
section
[[Page 76]]
(i.e., assets allocable to persons for whom the qualified intermediary
does not hold documentation as specified under its agreement with the
IRS) is treated as a payment that the withholding agent cannot reliably
associate with beneficial owners. As a result, any payment allocable to
such category of assets is presumed to be made to an unidentified
foreign payee. Under paragraph (b)(1) of this section, a payment to a
foreign payee is subject to withholding at a 30-percent rate.
(C) Information regarding allocation of payment is lacking or
unreliable. If a withholding agent can reliably associate a payment with
a group of beneficial owners or payees but lacks reliable information to
determine how much of the payment is allocable to one or more of the
beneficial owners or payees in the group (because, for example, the
statement described in paragraph (e)(3)(iv) of this section has not been
furnished), the payment, to the extent it cannot reliably be allocated,
is presumed to be allocable entirely to the beneficial owner or payee in
the group with the highest applicable withholding rate or, if the rates
are equal, to the beneficial owner or payee in the group with the
highest U.S. tax liability, as the withholding agent shall estimate,
based on its knowledge and available information. If a withholding
certificate attached to an intermediary certificate is another
intermediary certificate or a certificate from a foreign partnership
described in Sec. 1.1441-5(c)(3)(iii), the rules of this paragraph
(b)(3)(v)(C) apply by treating the share of the payment allocable to the
other intermediary or to the foreign partnership as if the payment were
made directly to the other intermediary or to the foreign partnership.
(D) Certification that the foreign intermediary has furnished
documentation for all of the persons to whom the intermediary
certificate relates is lacking or unreliable. If the certification
required under paragraph (e)(3)(iii)(D) of this section (that the
attached withholding certificates and other appropriate documentation
represent all of the persons to whom the intermediary withholding
certificate relates) is lacking or is unreliable and, as a result, the
withholding agent cannot reliably determine how much of the payment is
allocable to each of the persons or group of persons for which the
withholding agent holds a withholding certificate or other appropriate
documentation, then none of the payment can reliably be associated with
any one person and the entire payment is presumed to be made to an
unidentified foreign payee for whom the intermediary collects the
payment and from which a 30-percent amount must be withheld in
accordance with paragraph (b)(1) of this section.
(vi) U.S. branches and foreign flow-through entities. The rules of
paragraphs (b)(3)(v) (B), (C), and (D) of this section shall apply to
payments to a U.S. branch described in paragraph (b)(2)(iv)(A) of this
section that has agreed to assume withholding responsibility in the same
manner that they apply to payments to a foreign intermediary. See
Sec. 1.1441-5(d) for similar rules in the case of payments to foreign
partnerships. See Sec. 1.1441-5(e) for similar rules in the case of
payments to foreign trusts or foreign estates.
(vii) Joint payees. A payment made to joint payees for whom the
withholding agent cannot reliably associate documentation for all joint
payees or can reliably associate the payment with a Form W-9 furnished
in accordance with the procedures described in Secs. 31.3406(d)-1
through 31.3406(d)-5 of this chapter from one of the joint payees is
presumed to be made to U.S. persons. For purposes of applying this
paragraph (b)(3), the grace period rules in paragraph (b)(3)(iv) of this
section shall apply only if each payee qualifies for the conditions
described in paragraph (b)(3)(iv) of this section. However, as provided
in paragraph (b)(3)(iii)(D) of this section, a payment of an amount that
would be subject to withholding under section 1441, 1442, or 1443 if
paid to a foreign person and is exempt from the application of the
provisions of section 3406 by reason of Sec. 31.3406(g)-1(e) of this
chapter (relating to exemption from backup withholding under section
3406 of the Code for certain payments made with respect to offshore
accounts), is presumed to be made to foreign persons.
(viii) Rebuttal of presumptions. A payee or beneficial owner may
rebut
[[Page 77]]
the presumptions described in this paragraph (b)(3) by providing
reliable documentation to the withholding agent or, if applicable, to
the IRS.
(ix) Effect of reliance on presumptions and of actual knowledge or
reason to know otherwise--(A) General rule. Except as otherwise provided
in paragraph (b)(3)(ix)(B) of this section, a withholding agent that
withholds on a payment under section 3402, 3405 or 3406 in accordance
with the presumptions set forth in this paragraph (b)(3) shall not be
liable for withholding under this section even it is later established
that the beneficial owner of the payment is, in fact, a foreign person.
Similarly, a withholding agent that withholds on a payment under this
section in accordance with the presumptions set forth in this paragraph
(b)(3) shall not be liable for withholding under section 3402 or 3405 or
for backup withholding under section 3406 even if it is later
established that the payee or beneficial owner is, in fact, a U.S.
person. A withholding agent that, instead of relying on the presumptions
described in this paragraph (b)(3), relies on its own actual knowledge
to withhold a lesser amount, not withhold, or not report a payment, even
though reporting of the payment or withholding a greater amount would be
required if the withholding agent relied on the presumptions described
in this paragraph (b)(3) shall be liable for tax, interest, and
penalties to the extent provided under section 1461 and the regulations
under that section. See paragraph (b)(7) of this section for provisions
regarding such liability if the withholding agent fails to withhold in
accordance with the presumptions described in this paragraph (b)(3).
(B) Actual knowledge or reason to know that amount of withholding is
greater than is required under the presumptions or that reporting of the
payment is required. Notwithstanding the provisions of paragraph
(b)(3)(ix)(A) of this section, a withholding agent may not rely on the
presumptions described in this paragraph (b)(3) to the extent it has
actual knowledge or reason to know that the status or characteristics of
the payee or of the beneficial owner are other than what is presumed
under this paragraph (b)(3) and, if based on such knowledge or reason to
know, it should withhold (under this section or another withholding
provision of the Code) an amount greater than would be the case if it
relied on the presumptions described in this paragraph (b)(3) or it
should report (under this section or under another provision of the
Code) an amount that would not otherwise be reportable if it relied on
the presumptions described in this paragraph (b)(3). In such a case, the
withholding agent must rely on its actual knowledge or reason to know
rather than on the presumptions set forth in this paragraph (b)(3).
Failure to do so and, as a result, failure to withhold the higher amount
or to report the payment, shall result in liability for tax, interest,
and penalties to the extent provided under sections 1461 and 1463 and
the regulations under those sections.
(x) Examples. The provisions of this paragraph (b)(3) are
illustrated by the following examples:
Example 1. A withholding agent, W, makes a payment of U.S. source
dividends to person X, Inc. at an address outside the United States. W
cannot reliably associate the payment to X with documentation. Under
Secs. 1.6042-3(b)(1)(vii) and 1.6049-4(c)(1)(ii)(A)(1), W may treat X as
a corporation. Thus, under the presumptions described in paragraph
(b)(3)(iii) of this section, W must presume that X is a foreign person
(because the payment is made outside the United States). However, W
knows that X is a U.S. person who is an exempt recipient. W may not rely
on its actual knowledge to not withhold under this section. If W's
knowledge is, in fact, incorrect, W would be liable for tax, interest,
and, if applicable, penalties, under section 1461. W would be permitted
to reduce or eliminate its liability for the tax by establishing, in
accordance with paragraph (b)(7) of this section, that the tax is not
due or has been satisfied. If W's actual knowledge is, in fact, correct,
W may nevertheless be liable for tax, interest, or penalties under
section 1461 for the amount that W should have withheld based upon the
presumptions. W would be permitted to reduce or eliminate its liability
for the tax by establishing, in accordance with paragraph (b)(7) of this
section, that its actual knowledge was, in fact, correct and that no tax
or a lesser amount of tax was due.
Example 2. A withholding agent, W, makes a payment of U.S. source
dividends to Y who does not qualify as an exempt recipient under
Secs. 1.6042-3(b)(1)(vii) and 1.6049-4(c)(1)(ii). W cannot reliably
associate the payment to Y with documentation. Under
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the presumptions described in paragraph (b)(3)(iii) of this section, W
must presume that Y is a U.S. person who is not an exempt recipient for
purposes of section 6042. However, W knows that Y is a foreign person. W
may not rely on its actual knowledge to withhold under this section
rather than backup withhold under section 3406. If W's knowledge is, in
fact, incorrect, W would be liable for tax, interest, and, if
applicable, penalties, under section 3403. If W's actual knowledge is,
in fact, correct, W may nevertheless be liable for tax, interest, or
penalties under section 3403 for the amount that W should have withheld
based upon the presumptions. Paragraph (b)(7) of this section does not
apply to provide relief from liability under section 3403.
Example 3. A withholding agent, W, makes a payment of U.S. source
dividends to X, Inc. W cannot reliably associate the payment to X, Inc.
with documentation. X, Inc. presents none of the indicia of foreign
status described in paragraph (b)(3)(iii)(A) of this section, but W has
actual knowledge that X, Inc. is a foreign corporation. W may treat X,
Inc. as an exempt recipient under Sec. 1.6042-3(b)(1)(vii). Because
there are no indicia of foreign status, W would, absent actual knowledge
or reason to know otherwise, be permitted to treat X, Inc. as a domestic
corporation in accordance with the presumptions of paragraph (b)(3)(iii)
of this section. However, under paragraph (b)(3)(ix)(B) of this section,
W may not rely on the presumption of U.S. status since reliance on its
actual knowledge requires that it withhold an amount greater than would
be the case under the presumptions.
Example 4. A withholding agent, W, is a plan administrator who makes
pension payments to person X with a mailing address in a foreign country
with which the United States has an income tax treaty in effect. Under
that treaty, the type of pension income paid to X is taxable solely in
the country of residence. The plan administrator has a record of X's
U.S. social security number. W has no actual knowledge or reason to know
that X is a foreign person. W may rely on the presumption of paragraph
(b)(3)(iii)(C) of this section in order to treat X as a U.S. person.
Therefore, any withholding and reporting requirements for the payment
are governed by the provisions of section 3405 and the regulations under
that section.
(4) List of exemptions from, or reduced rates of, withholding under
chapter 3 of the Code. A withholding agent that has determined that the
payee is a foreign person for purposes of paragraph (b)(1) of this
section must determine whether the payee is entitled to a reduced rate
of withholding under section 1441, 1442, or 1443. This paragraph (b)(4)
identifies items for which a reduction in the rate of withholding may
apply and whether the rate reduction is conditioned upon documentation
being furnished to the withholding agent. Documentation required under
this paragraph (b)(4) is documentation that a withholding agent must be
able to associate with a payment upon which it can rely to treat the
payment as made to a foreign person that is the beneficial owner of the
payment in accordance with paragraph (e)(1)(ii) of this section. This
paragraph (b)(4) also cross-references other sections of the Code and
applicable regulations in which some of these exceptions, exemptions, or
reductions are further explained. See, for example, paragraph
(b)(4)(viii) of this section, dealing with effectively connected income,
that cross-references Sec. 1.1441-4(a); see paragraph (b)(4)(xv) of this
section, dealing with exemptions from, or reductions of, withholding
under an income tax treaty, that cross-references Sec. 1.1441-6. This
paragraph (b)(4) is not an exclusive list of items to which a reduction
of the rate of withholding may apply and, thus, does not preclude an
exemption from, or reduction in, the rate of withholding that may
otherwise be allowed under the regulations under the provisions of
chapter 3 of the Code for a particular item of income identified in this
paragraph (b)(4).
(i) Portfolio interest described in section 871(h) or 881(c) and
substitute interest payments described in Sec. 1.871-7(b)(2) or 1.881-
2(b)(2) are exempt from withholding under section 1441(a). See
Sec. 1.871-14 for regulations regarding portfolio interest and section
1441(c)(9) for exemption from withholding. Documentation establishing
foreign status is required for interest on an obligation in registered
form to qualify as portfolio interest. See section 871(h)(2)(B)(ii) and
Sec. 1.871-14(c)(1)(ii)(C). For special documentation rules regarding
foreign-targeted registered obligations described in Sec. 1.871-
14(e)(2), see Sec. 1.871-14(e) (3) and (4) and, in particular,
Sec. 1.871-14(e)(4)(i)(A) and (ii)(A) regarding the time when the
withholding agent must receive the documentation. The documentation
furnished for purposes of qualifying interest as portfolio interest
serves as the basis for the withholding exemption for
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purposes of this section and for purposes of establishing foreign status
for purposes of section 6049. See Sec. 1.6049-5(b)(8). Documentation
establishing foreign status is not required for qualifying interest on
an obligation in bearer form described in Sec. 1.871-14(b)(1) as
portfolio interest. However, in certain cases, documentation for
portfolio interest on a bearer obligation may have to be furnished in
order to establish foreign status for purposes of the information
reporting provisions of section 6049 and backup withholding under
section 3406. See Sec. 1.6049-5(b)(7).
(ii) Bank deposit interest and similar types of deposit interest
(including original issue discount) described in section 871(i)(2)(A) or
881(d) that are from sources within the United States are exempt from
withholding under section 1441(a). See section 1441(c)(10).
Documentation establishing foreign status is not required for purposes
of this withholding exemption but may have to be furnished for purposes
of the information reporting provisions of section 6049 and backup
withholding under section 3406. See Sec. 1.6049-5(d)(3)(iii) for
exceptions to the foreign payee and exempt recipient rules regarding
this type of income. See also Sec. 1.6049-5(b)(11) for applicable
documentation exemptions for certain bank deposit interest paid on
obligations in bearer form.
(iii) Bank deposit interest (including original issue discount)
described in section 861(a)(1)(B) is exempt from withholding under
sections 1441(a) as income that is not from U.S. sources. Documentation
establishing foreign status is not required for purposes of this
withholding exemption but may have to be furnished for purposes of the
information reporting provisions of section 6049 and backup withholding
under section 3406. Reporting requirements for payments of such interest
are governed by section 6049 and the regulations under that section. See
Sec. 1.6049-5(b)(12) and alternative documentation rules under
Sec. 1.6049-5(c)(4).
(iv) Interest or original issue discount from sources within the
United States on certain short-term obligations described in section
871(g)(1)(B) or 881(a)(3) is exempt from withholding under sections
1441(a). Documentation establishing foreign status is not required for
purposes of this withholding exemption but may have to be furnished for
purposes of the information reporting provisions of section 6049 and
backup withholding under section 3406. See Sec. 1.6049-5(b)(12) for
applicable documentation for establishing foreign status and
Sec. 1.6049-5(d)(3)(iii) for exceptions to the foreign payee and exempt
recipient rules regarding this type of income. See also Sec. 1.6049-
5(b)(10) for applicable documentation exemptions for certain obligations
in bearer form.
(v) Income from sources without the United States is exempt from
withholding under sections 1441(a). Documentation establishing foreign
status is not required for purposes of this withholding exemption but
may have to be furnished for purposes of the information reporting
provisions of section 6049 or other applicable provisions of chapter 61
of the Code and backup withholding under section 3406. See, for example,
Sec. 1.6049-5(b) (6) and (12) and alternative documentation rules under
Sec. 1.6049-5(c)(4). See also paragraph (b)(5) of this section for cross
references to other applicable provisions of the regulations under
chapter 61 of the Code.
(vi) Distributions from certain domestic corporations described in
section 871(i)(2)(B) or 881(d) are exempt from withholding under section
1441(a). See section 1441(c)(10). Documentation establishing foreign
status is not required for purposes of this withholding exemption but
may have to be furnished for purposes of the information reporting
provisions of section 6042 and backup withholding under section 3406.
See Sec. 1.6042-3(b)(1) (iii) through (vi).
(vii) Dividends paid by certain foreign corporations that are
treated as income from sources within the United States by reason of
section 861(a)(2)(B) are exempt from withholding under section 884(e)(3)
to the extent that the distributions are paid out of earnings and
profits in any taxable year that the corporation was subject to branch
profits tax for that year. Documentation establishing foreign status is
not required for purposes of this withholding exemption but may have to
be furnished for purposes of the information reporting provisions of
section
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6042 and backup withholding under section 3406. See Sec. 1.6042-3(b)(1)
(iii) through (vii).
(viii) Certain income that is effectively connected with the conduct
of a U.S. trade or business is exempt from withholding under section
1441(a). See section 1441(c)(1). Documentation establishing foreign
status and status of the income as effectively connected must be
furnished for purposes of this withholding exemption to the extent
required under the provisions of Sec. 1.1441-4(a). Documentation
furnished for this purpose also serves as documentation establishing
foreign status for purposes of applicable information reporting
provisions under chapter 61 of the Code and for backup withholding under
section 3406. See, for example, Sec. 1.6041-4(a)(1).
(ix) Certain income with respect to compensation for personal
services of an individual that are performed in the United States is
exempt from withholding under section 1441(a). See section 1441(c)(4)
and Sec. 1.1441-4(b). However, such income may be subject to withholding
as wages under section 3402. Documentation establishing foreign status
must be furnished for purposes of any withholding exemption or reduction
to the extent required under Sec. 1.1441-4(b) or 31.3401(a)(6)-1 (e) and
(f) of this chapter. Documentation furnished for this purpose also
serves as documentation establishing foreign status for purposes of
information reporting under section 6041. See Sec. 1.6041-4(a)(1).
(x) Amounts described in section 871(f) that are received as
annuities from certain qualified plans are exempt from withholding under
section 1441(a). See section 1441(c)(7). Documentation establishing
foreign status must be furnished for purposes of the withholding
exemption as required under Sec. 1.1441-4(d). Documentation furnished
for this purpose also serves as documentation establishing foreign
status for purposes of information reporting under section 6041. See
Sec. 1.6041-4(a)(1).
(xi) Payments to a foreign government (including a foreign central
bank of issue) that are excludable from gross income under section
892(a) are exempt from withholding under section 1442. See Sec. 1.1441-
8(b). Documentation establishing status as a foreign government is
required for purposes of this withholding exemption. Payments to a
foreign government are exempt from information reporting under chapter
61 of the Code (see Sec. 1.6049-4(c)(1)(ii)(F)).
(xii) Payments of certain interest income to a foreign central bank
of issue or the Bank for International Settlements that are exempt from
tax under section 895 are exempt from withholding under section 1442.
Documentation establishing eligibility for such exemption is required to
the extent provided in Sec. 1.1441-8(c)(1). Payments to a foreign
central bank of issue or to the Bank for International Settlements are
exempt from information reporting under chapter 61 of the Code (see
Sec. 1.6049-4(c)(1)(ii) (H) and (M)).
(xiii) Amounts derived by a foreign central bank of issue from
bankers' acceptances described in section 871(i)(2)(C) or 881(d) are
exempt from tax and, therefore, from withholding. See section
1441(c)(10). Documentation establishing foreign status is not required
for purposes of this withholding exemption if the name of the payee and
other facts surrounding the payment reasonably indicate that the
beneficial owner of the payment is a foreign central bank of issue as
defined in Sec. 1.861-2(b)(4). See Sec. 1.1441-8(c)(2) for withholding
procedures. See also Secs. 1.6049-4(c)(1)(ii)(H) and 1.6041-3(q)(8) for
a similar exemption from information reporting.
(xiv) Payments to an international organization from investments in
the United States of stocks, bonds, or other domestic securities or from
interest on deposits in banks in the United States of funds belonging to
such international organization are exempt from tax under section 892(b)
and, thus, from withholding. Documentation establishing status as an
international organization is not required if the name of the payee and
other facts surrounding the payment reasonably indicate that the
beneficial owner of the payment is an international organization within
the meaning of section 7701(a)(18). See Sec. 1.1441-8(d). Payments to an
international organization are exempt from information reporting under
chapter 61 of the Code (see Sec. 1.6049-4(c)(1)(ii)(G)).
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(xv) Amounts may be exempt from, or subject to a reduced rate of,
withholding under an income tax treaty. Documentation establishing
eligibility for benefits under an income tax treaty is required for this
purpose as provided under Secs. 1.1441-6. Documentation furnished for
this purpose also serves as documentation establishing foreign status
for purposes of applicable information reporting provisions under
chapter 61 of the Code and for backup withholding under section 3406.
See, for example, Sec. 1.6041-4(a)(1).
(xvi) Amounts of scholarships and grants paid to certain exchange or
training program participants that do not represent compensation for
services but are not excluded from tax under section 117 are subject to
a reduced rate of withholding of 14-percent under section 1441(b).
Documentation establishing foreign status is required for purposes of
this reduction in rate as provided under Sec. 1.1441-4(c). This income
is not subject to information reporting under chapter 61 of the Code nor
to backup withholding under section 3406. The compensatory portion of a
scholarship or grant is reportable as wage income. See Sec. 1.6041-3(o).
(xvii) Amounts paid to a foreign organization described in section
501(c) are exempt from withholding under section 1441 to the extent that
the amounts are not income includible under section 512 in computing the
organization's unrelated business taxable income and are not subject to
the tax imposed by section 4948(a). Documentation establishing status as
a tax-exempt organization is required for purposes of this exemption to
the extent provided in Sec. 1.1441-9. Amounts includible under section
512 in computing the organization's unrelated business taxable income
are subject to withholding to the extent provided in section 1443(a) and
Sec. 1.1443-1(a). Gross investment income (as defined in section
4940(c)(2)) of a private foundation is subject to withholding at a 4-
percent rate to the extent provided in section 1443(b) and Sec. 1.1443-
1(b). Payments to a tax-exempt organization are exempt from information
reporting under chapter 61 of the Code and the regulations thereunder
(see Sec. 1.6049-4(c)(1)(ii)(B)(1)).
(xviii) Per diem amounts for subsistence paid by the U.S. government
to a nonresident alien individual who is engaged in any program of
training in the United States under the Mutual Security Act of 1954 are
exempt from withholding under section 1441(a). See section 1441(c)(6).
Documentation of foreign status is required under Sec. 1.1441-4(e) for
purposes of establishing eligibility for this exemption. See
Sec. 1.6041-3(p).
(xix) Interest with respect to tax-free covenant bonds issued prior
to 1934 is subject to special withholding procedures set forth in
Sec. 1.1461-1 in effect prior to January 1, 2001 (see Sec. 1.1461-1 as
contained in 26 CFR part 1, revised April 1, 1999).
(xx) Income from certain gambling winnings of a nonresident alien
individual is exempt from tax under section 871(j) and from withholding
under section 1441(a). See section 1441(c)(11). Documentation
establishing foreign status is not required for purposes of this
exemption but may have to be furnished for purposes of the information
reporting provisions of section 6041 and backup withholding under
section 3406. See Secs. 1.6041-1 and 1.6041-4(a)(1).
(xxi) Any payments not otherwise mentioned in this paragraph (b)(4)
shall be subject to withholding at the rate of 30-percent if it is an
amount subject to withholding (as defined in Sec. 1.1441-2(a)) unless
and to the extent the IRS may otherwise prescribe in published guidance
(see Sec. 601.601(d)(2) of this chapter) or unless otherwise provided in
regulations under chapter 3 of the Code.
(5) Establishing foreign status under applicable provisions of
chapter 61 of the Code. This paragraph (b)(5) identifies relevant
provisions of the regulations under chapter 61 of the Code that exempt
payments from information reporting, and therefore, from backup
withholding under section 3406, based on the payee's status as a foreign
person. Many of these exemptions require that the payee's foreign status
be established in order for the exemption to apply. The regulations
under applicable provisions of chapter 61 of the Code generally provide
that the documentation described in this section may be relied upon for
purposes of determining foreign status.
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(i) Payments to a foreign person that are governed by section 6041
(dealing with certain trade or business income) are exempt from
information reporting under Sec. 1.6041-4(a).
(ii) Payments to a foreign person that are governed by section 6041A
(dealing with remuneration for services and certain sales) are exempt
from information reporting under Sec. 1.6041A-1(d)(3).
(iii) Payments to a foreign person that are governed by section 6042
(dealing with dividends) are exempt from information reporting under
Sec. 1.6042-3(b)(1) (iii) through (vi).
(iv) Payments to a foreign person that are governed by section 6044
(dealing with patronage dividends) are exempt from information reporting
under Sec. 1.6044-3(c)(1).
(v) Payments to a foreign person that are governed by section 6045
(dealing with broker proceeds) are exempt from information reporting
under Sec. 1.6045-1(g).
(vi) Payments to a foreign person that are governed by section 6049
(dealing with interest) to a foreign person are exempt from information
reporting under Sec. 1.6049-5(b) (6) through (15).
(vii) Payments to a foreign person that are governed by section
6050N (dealing with royalties) are exempt from information reporting
under Sec. 1.6050N-1(c).
(viii) Payments to a foreign person that are governed by section
6050P (dealing with income from cancellation of debt) are exempt from
information reporting under section 6050P or the regulations under that
section except to the extent provided in Notice 96-61 (1996-2 C.B. 227);
see also Sec. 601.601(b)(2) of this chapter.
(6) Rules of withholding for payments by a foreign intermediary or
certain U.S. branches. A foreign intermediary described in paragraph
(e)(3)(i) of this section or a U.S. branch described in paragraph
(b)(2)(iv) of this section that receives an amount subject to
withholding (as defined in Sec. 1.1441-2(a)) shall be deemed to have
satisfied any obligation it has under chapter 3 of the Code and the
regulations thereunder to withhold and report the amount when it, in
turn, pays such amount to another person (whether or not the beneficial
owner) to the extent that the payment is associated with a valid
withholding certificate described in paragraph (e)(3) (ii), (iii), or
(v) of this section that it has furnished to another withholding agent
and the intermediary does not know and has no reason to know that the
correct amount has not been withheld under chapter 3 of the Code and the
regulations thereunder. See Sec. 1.1441-5(c)(3)(v) for a similar rule
for payments by certain foreign partnerships.
(7) Liability for failure to obtain documentation timely or to act
in accordance with applicable presumptions--(i) General rule. A
withholding agent that cannot reliably associate a payment with
documentation on the date of payment and that does not withhold under
this section, or withholds at less than the 30-percent rate prescribed
under section 1441(a) and paragraph (b)(1) of this section, is liable
under section 1461 for the tax required to be withheld under chapter 3
of the Code and the regulations thereunder, without the benefit of a
reduced rate unless--
(A) The withholding agent has appropriately relied on the
presumptions described in paragraph (b)(3) of this section (including
the grace period described in paragraph (b)(3)(iv) of this section) in
order to treat the payee as a U.S. person or, if applicable, on the
presumptions described in Sec. 1.1441-4(a) (2)(i) or (3) to treat the
payment as effectively connected income; or
(B) The withholding agent can demonstrate to the satisfaction of the
district director or the Assistant Commissioner (International) that the
proper amount of tax, if any, was in fact paid to the IRS; or
(C) No documentation is required under section 1441 or this section
in order for a reduced rate of withholding to apply.
(ii) Proof that tax liability has been satisfied. Proof of payment
of tax may be established for purposes of paragraph (b)(7)(i)(B) of this
section on the basis of a Form 4669 (or such other form as the IRS may
prescribe in published guidance (see Sec. 601.601(d)(2) of this
chapter)), establishing the amount of tax, if any, actually paid by or
for the beneficial owner on the income. Proof that a reduced rate of
withholding was, in
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fact, appropriate under the provisions of chapter 3 of the Code and the
regulations thereunder may also be established after the date of payment
by the withholding agent on the basis of a valid withholding certificate
or other appropriate documentation furnished after that date. However,
in the case of a withholding certificate or other appropriate
documentation received after the date of payment (or after the grace
period specified in paragraph (b)(3)(iv) of this section), the district
director or the Assistant Commissioner (International) may require
additional proof if it is determined that the delays in obtaining the
withholding certificate affect its reliability.
(iii) Liability for interest and penalties. A withholding agent that
has failed to withhold other than based on appropriate reliance on the
presumptions described in paragraph (b)(3) of this section or in
Sec. 1.1441-4(a) (2)(i) or (3) is not relieved from liability for
interest under section 6601. Such liability exists even if there is no
underlying tax liability due. The interest on the amount that should
have been withheld shall be imposed as prescribed under section 6601
beginning on the last date for paying the tax due under section 1461
(which, under section 6601, is the due date for filing the withholding
agent's return of tax). The interest shall stop accruing on the earlier
of the date that the required withholding certificate or other
documentation is provided to the withholding agent and to the extent of
the amount of tax that is determined not to be due based on
documentation provided, or the date, and to the extent, that the unpaid
tax liability under section 871, 881 or under section 1461 is satisfied.
Further, in the event that a tax liability is assessed against the
beneficial owner under section 871, 881, or 882 and interest under
section 6601(a) is assessed against, and collected from, the beneficial
owner, the interest charge imposed on the withholding agent shall be
abated to that extent so as to avoid the imposition of a double interest
charge. However, the withholding agent is not relieved of any applicable
penalties. See section 1464.
(iv) Special effective date. See paragraph (f)(2)(ii) of this
section for the special effective date applicable to this paragraph
(b)(7).
(v) Examples. The provisions of paragraph (b)(7) of this section are
illustrated by the following examples:
Example 1. On June 15, 2001, a withholding agent pays U.S. source
interest on an obligation in registered form (issued after July 18,
1984) to a foreign corporation that it cannot reliably associate with a
Form W-8 or other appropriate documentation upon which to rely to treat
the beneficial owner as a foreign person. The withholding agent does not
withhold from the payment. On September 30, 2003, the withholding agent
receives from the foreign corporation a valid Form W-8 described in
paragraph (e)(2)(ii) of this section. Thus, the interest qualifies as
portfolio interest retroactively to June 15, 2001 (the date of payment).
See Sec. 1.871-14(c)(3). The foreign corporation does not file a U.S.
federal income tax return and does not pay the tax owed. The withholding
agent is not liable under section 1461 for the 30-percent tax on the
interest income because the receipt of the Form W-8 exempts the interest
from tax for purposes of sections 881(a) and 1461. The withholding
agent, however, is liable for interest on the amount of withholding that
should have been deducted from the payment on June 15, 2001 and
deposited. Under paragraph (b)(7)(iii) of this section, the period
during which interest may be assessed against the withholding agent runs
from March 15, 2002 (the due date for the Form 1042 relating to the
payment) until September 30, 2003 (i.e., the date that appropriate
documentation is furnished to the withholding agent).
Example 2. On June 15, 2001, a withholding agent pays U.S. source
dividends to a foreign corporation that it cannot reliably associate
with a Form W-8 or other appropriate documentation upon which to rely to
treat the beneficial owner as a foreign person. The withholding agent
does not withhold from the payment. On September 30, 2003, the
withholding agent receives from the foreign corporation a valid Form W-8
described in paragraph (e)(2)(ii) of this section claiming a reduced 15-
percent rate of withholding under a U.S. income tax treaty. The dividend
qualifies for the reduced treaty rate retroactively to June 15, 2001
(the date of payment). The foreign corporation does not file a U.S.
federal income tax return and does not pay the tax owed. Under section
1461, the withholding agent is liable only for a 15-percent tax on the
dividend income because the receipt of the Form W-8 allows the tax rate
to be reduced for purposes of sections 881(a) and 1461 from 30 percent
to 15 percent. The withholding agent, however, is liable for interest on
the full 30-percent amount that should have been deducted and withheld
from the
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payment on June 15, 2001, and deposited, over a period running from
March 15, 2002 (the due date for the Form 1042 relating to the payment)
until September 30, 2003 (the date that the appropriate documentation is
furnished to the withholding agent supporting a reduction in rate under
a tax treaty). Additional interest may be assessed relating to the
outstanding 15-percent tax liability (i.e., the portion of the 30-
percent total tax liability that is not reduced under the treaty). Such
additional interest runs from March 15, 2002, until such date as that
15-percent tax liability is satisfied by the withholding agent or the
taxpayer (subject to abatement in order to avoid a double interest
charge).
(8) Adjustments, refunds, or credits of overwithheld amounts. If the
amount withheld under section 1441, 1442, or 1443 is greater than the
tax due by the withholding agent or the taxpayer, adjustments may be
made in accordance with the procedures described in Sec. 1.1461-2(a).
Alternatively, refunds or credits may be claimed in accordance with the
procedures described in Sec. 1.1464-1, relating to refunds or credits
claimed by the beneficial owner, or Sec. 1.6414-1, relating to refunds
or credits claimed by the withholding agent. If an amount was withheld
under section 3406 or is subsequently determined to have been paid to a
foreign person, see paragraph (b)(3)(vii) of this section and
Sec. 31.6413(a)-3(a)(1) of this chapter.
(9) Payments to joint owners. A payment to joint owners that
requires documentation in order to reduce the rate of withholding under
chapter 3 of the Code and the regulations thereunder does not qualify
for such reduced rate unless the withholding agent can reliably
associate the payment with documentation from each owner.
Notwithstanding the preceding sentence, a payment to joint owners
qualifies as a payment exempt from withholding under this section if any
one of the owners provides a certificate of U.S. status on a Form W-9 in
accordance with paragraph (d) (2) or (3) of this section or the
withholding agent can associate the payment with a withholding
certificate upon which it can rely to treat the payment as made to a
U.S. beneficial owner under paragraph (d)(4) of this section. See
Sec. 31.3406(h)-2(a)(3)(i)(B) of this chapter.
(c) Definitions--(1) Withholding. The term withholding means the
deduction and withholding of tax at the applicable rate from the
payment.
(2) Foreign and U.S. person. The term foreign person means a
nonresident alien individual, a foreign corporation, a foreign
partnership, a foreign trust, a foreign estate, and any other person
that is not a U.S. person described in the next sentence. For purposes
of the regulations under chapter 3 of the Code, the term foreign person
also means, with respect to a payment by a withholding agent, a foreign
branch of a U.S. person that furnishes an intermediary withholding
certificate described in paragraph (e)(3)(ii) of this section. A U.S.
person is a person described in section 7701(a)(30), the U.S. government
(including an agency or instrumentality thereof), a State (including an
agency or instrumentality thereof), or the District of Columbia
(including an agency or instrumentality thereof).
(3) Individual--(i) Alien individual. The term alien individual
means an individual who is not a citizen or a national of the United
States. See Sec. 1.1-1(c).
(ii) Nonresident alien individual. The term nonresident alien
individual means a person described in section 7701(b)(1)(B), an alien
individual who is a resident of a foreign country under the residence
article of an income tax treaty and Sec. 301.7701(b)-7(a)(1) of this
chapter, or an alien individual who is a resident of Puerto Rico, Guam,
the Commonwealth of Northern Mariana Islands, the U.S. Virgin Islands,
or American Samoa as determined under Sec. 301.7701(b)-1(d) of this
chapter. An alien individual who has made an election under section 6013
(g) or (h) to be treated as a resident of the United States is
nevertheless treated as a nonresident alien individual for purposes of
withholding under chapter 3 of the Code and the regulations thereunder.
(4) Certain foreign corporations. For purposes of this section, a
corporation created or organized in Guam, the Commonwealth of Northern
Mariana Islands, the U.S. Virgin Islands, and American Samoa, is not
treated as a foreign corporation if the requirements of sections
881(b)(1) (A), (B), and (C) are met for such corporation. Further, a
payment made to a foreign government
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or an international organization shall be treated as a payment made to a
foreign corporation for purposes of withholding under chapter 3 of the
Code and the regulations thereunder.
(5) Financial institution and foreign financial institution. For
purposes of the regulations under chapter 3 of the Code, the term
financial institution means a person described in Sec. 1.165-
12(c)(1)(iv) (not including a person providing pension or other similar
benefits or a regulated investment company or other mutual fund, unless
otherwise indicated) and the term foreign financial institution means a
financial institution that is a foreign person, as defined in paragraph
(c)(2) of this section.
(6) Beneficial owner--(i) General rule. In the case of a payment of
income, the term beneficial owner means the person who is the owner of
the income for tax purposes and who beneficially owns that income. A
person shall be treated as the owner of the income to the extent that it
is required under U.S. tax principles to include the amount paid in
gross income under section 61 (determined without regard to an exclusion
or exemption from gross income under the Code). Beneficial ownership of
income is determined under the provisions of section 7701(l) and the
regulations under that section and any other applicable general U.S. tax
principles, including principles governing the determination of whether
a transaction is a conduit transaction. Thus, a person receiving income
in a capacity as a nominee, agent, custodian for another person is not
the beneficial owner of the income. In the case of a scholarship, the
student receiving the scholarship is the beneficial owner of that
scholarship. In the case of a payment of an amount that is not income,
the beneficial owner determination shall be made under this paragraph
(c)(6) as if the amount was income.
(ii) Special rules for flow-through entities and arrangements--(A)
General rule. The beneficial owners of income paid to a partnership or
other flow-through arrangements described in paragraph (c)(6)(ii)(C) of
this section are those persons who, under U.S. tax principles, are the
owners of the income for tax purposes in their separate or individual
capacities and who beneficially own that income. For example, a
partnership (first tier) that is a partner in another partnership
(second tier) is not the beneficial owner of income paid to the second
tier partnership since the first tier partnership is not the owner of
the income under U.S. tax principles. Rather, the partners of the first
tier partnership are the beneficial owners (to the extent they are not
themselves partnerships and are not conduits within the meaning of
section 7701(l) and the regulations under that section). See
Sec. 1.1441-5(b) for applicable withholding procedures for payments to a
domestic partnership. See also Sec. 1.1441-5(c)(3)(ii) for applicable
withholding procedures for payments to a foreign partnership where one
of the partners (at any level in the chain of tiers) is a domestic
partnership. See Sec. 1.1441-6(b)(4) for rules governing the eligibility
of a payment to an entity or other arrangement for a reduced rate of
withholding under an income tax treaty.
(B) Trusts and estates. The provisions of paragraphs (c)(6)(i) and
(ii)(A) of this section shall not apply to a trust or an estate, whether
domestic or foreign. The beneficial owner of income paid to a trust or
to an estate shall be determined under the provisions of Sec. 1.1441-
3(f) and (g) in effect prior to January 1, 2001 (see Sec. 1.1441-3(f)
and (g) as contained in 26 CFR part 1, revised April 1, 1999).
(C) Definition of a flow-through entity or arrangement. For purposes
of this paragraph (c)(6)(ii), a flow-through entity means a partnership,
estate, or trust. A flow-though arrangement is a contractual arrangement
that does not involve an entity and is treated as a partnership for U.S.
tax purposes or is a wholly-owned entity that is disregarded for federal
tax purposes under Sec. 301.7701-2(c)(2) of this chapter as an entity
separate from its owner. The term partnership means any entity or
arrangement (as defined in Sec. 301.7701-2(c)(1) of this chapter) whose
tax regime is governed by subchapter K of chapter 1 of the Code.
(7) Withholding agent. For a definition of the term withholding
agent and applicable rules, see Sec. 1.1441-7.
(8) Person. For purposes of the regulations under chapter 3 of the
Code, the
[[Page 86]]
term person shall mean a person described in section 7701(a)(1) and the
regulations under that section and a U.S. branch to the extent treated
as a U.S. person under paragraph (b)(2)(iv) of this section. For
purposes of the regulations under chapter 3 of the Code, the term person
does not include a wholly-owned entity that is disregarded for federal
tax purposes under Sec. 301.7701-2(c)(2) of this chapter as an entity
separate from its owner. See paragraph (b)(2)(iii) of this section for
procedures applicable to payments to such entities.
(9) Source of income. The source of income is determined under the
provisions of part I (section 861 and following) , subchapter N, chapter
1 of the Code and the regulations under those provisions.
(10) Chapter 3 of the Code. For purposes of the regulations under
sections 1441, 1442, and 1443, any reference to chapter 3 of the Code
shall not include references to sections 1445 and 1446, unless the
context indicates otherwise.
(11) Reduced rate. For purposes of regulations under chapter 3 of
the Code, and other withholding provisions of the Code, the term reduced
rate, when used in regulations under chapter 3 of the Code, shall
include an exemption from tax.
(d) Beneficial owner's or payee's claim of U.S. status--(1) In
general. Under paragraph (b)(1) of this section, a withholding agent is
not required to withhold under chapter 3 of the Code on payments to a
U.S. payee, to a person presumed to be a U.S. payee in accordance with
the provisions of paragraph (b)(3) of this section, or to a person that
the withholding agent may treat as a U.S. beneficial owner of the
payment. Absent actual knowledge or reason to know otherwise, a
withholding agent may rely on the provisions of this paragraph (d) in
order to determine whether to treat a payee or beneficial owner as a
U.S. person.
(2) Payments for which a Form W-9 is otherwise required. A
withholding agent may treat as a U.S. person a payee who is required to
furnish a Form W-9 and who furnishes it in accordance with the
procedures described in Secs. 31.3406(d)-1 through 31.3406(d)-5 of this
chapter (including the requirement that the payee furnish its taxpayer
identifying number (TIN)) if the withholding agent meets all the
requirements described in Sec. 31.3406(h)-3(e) of this chapter regarding
reliance by a payor on a Form W-9.
(3) Payments for which a Form W-9 is not otherwise required. In the
case of a payee who is not required to furnish a Form W-9 under section
3406, the withholding agent may rely on a certificate of U.S. status
described in this paragraph (d)(3). A certificate of U.S. status is a
certificate described in Sec. 31.3406(h)-3(c)(2) of this chapter
(relating to forms for exempt recipients) or a Form W-9 (or a substitute
form or such other form as the IRS may prescribe) that is signed under
penalties of perjury by the payee and contains the name, permanent
residence address, and TIN of the payee. The procedures described in
Sec. 31.3406(h)-2(a) of this chapter shall apply to payments to joint
payees. A withholding agent that receives a Form W-9 in order to satisfy
this paragraph (d)(3) must retain the form in accordance with the
provisions of Sec. 31.3406(h)-3(g) of this chapter, if applicable, or of
paragraph (e)(4)(iii) of this section (relating to the retention of
withholding certificates) if Sec. 31.3406(h)-3(g) of this chapter does
not apply. The rules of this paragraph (d)(3) are only intended to
provide a method by which a withholding agent may determine that a payee
is not a foreign person and do not otherwise impose a requirement that
documentation be furnished by a person who is otherwise treated as an
exempt recipient for purposes of the applicable information reporting
provisions under chapter 61 of the Code (e.g., Sec. 1.6049-4(c)(1)(ii)
for payments of interest).
(4) Other payments. This paragraph (d)(4) describes the
documentation upon which a withholding agent may rely in order to treat
a payment as made to a U.S. person that is a beneficial owner for
purposes of paragraph (b)(1) of this section. The withholding agent may
treat the payment as made to a U.S. beneficial owner only if it can
reliably associate the payment with documentation prior to the payment,
if
[[Page 87]]
it complies with the electronic confirmation procedures described in
paragraph (e)(4)(v) of this section, if required, and if it has not been
notified by the IRS that any of the information on the withholding
certificate or other documentation is incorrect or unreliable. In the
case of a Form W-9 that is required to be furnished for a reportable
payment that may be subject to backup withholding, the payor may be
notified in accordance with section 3406(a)(1)(B) and the regulations
under that section. See applicable procedures under that section and the
regulations under that section for payors who have been notified with
regard to such a Form W-9. Payors who have been notified in relation to
other Forms W-9, including under section 6724(b) pursuant to section
6721, may rely on the withholding certificate or other documentation
only to the extent provided under procedures as prescribed by the IRS
(see Sec. 601.601(d)(2) of this chapter). A withholding agent may treat
a payment as made to a U.S. beneficial owner--
(i) To the extent the withholding agent can reliably associate the
payment with a Form W-9 described in paragraph (d) (2) or (3) of this
section attached to a valid intermediary, flow-through, or U.S. branch
withholding certificate described in paragraph (e)(3)(i) of this
section;
(ii) To the extent the withholding agent can reliably associate a
payment to a qualified intermediary with the category of assets
described in paragraph (e)(5)(v)(B)(2) of this section that the
qualified intermediary has represented, in accordance with paragraphs
(e) (3)(ii)(E) and (5)(v) of this section as being allocable to U.S.
persons based on the Forms W-9 that they have furnished; or
(iii) To the extent the withholding agent can reliably associate the
payment with a Form W-8 from a U.S. branch described in paragraph
(e)(3)(v) of this section that evidences an agreement between the U.S.
branch and the withholding agent to treat the U.S. branch as U.S.
person.
(e) Beneficial owner's claim of foreign status--(1) Withholding
agent's reliance--(i) In general. Absent actual knowledge or reason to
know otherwise, a withholding agent may treat a payment as made to a
foreign beneficial owner in accordance with the provisions of paragraph
(e)(1)(ii) of this section. See paragraph (e)(4)(viii) of this section
for applicable reliance rules. See paragraph (b)(4) of this section for
a description of payments for which a claim of foreign status is
relevant for purposes of claiming a reduced rate of withholding for
purposes of section 1441, 1442, or 1443. See paragraph (b)(5) of this
section for a list of payments for which a claim of foreign status is
relevant for other purposes, such as claiming an exemption from
information reporting under chapter 61 of the Code.
(ii) Payments that a withholding agent may treat as made to a
foreign person that is a beneficial owner--(A) General rule. The
withholding agent may treat a payment as made to a foreign person that
is a beneficial owner if it complies with the requirements described in
paragraph (e)(1)(ii)(B) of this section and, then, only to the extent--
(1) That the withholding agent can reliably associate the payment
with a beneficial owner withholding certificate described in paragraph
(e)(2) of this section furnished by the person whose name is on the
certificate or attached to a valid foreign intermediary, flow-through
entity, or U.S. branch withholding certificate described in paragraph
(e)(3)(v) of this section;
(2) That the payment is made outside the United States (within the
meaning of Sec. 1.6049-5(e)) with respect to an offshore account (within
the meaning of Sec. 1.6049-5(c)(1)) and the withholding agent can
reliably associate the payment with documentary evidence described in
Secs. 1.1441-6(c)(3) or (4), or 1.6049-5(c)(1) relating to the
beneficial owner;
(3) That the withholding agent can reliably associate the payment
with the category of assets described in paragraph (e)(5)(v)(B)(1) of
this section that the qualified intermediary has represented, in
accordance with paragraphs (e) (3)(ii)(E) and (5)(v) of this section as
being allocable to foreign persons for whom the qualified intermediary
is holding valid documentation;
[[Page 88]]
(4) That the withholding agent can reliably associate the payment
with a withholding certificate described in Sec. 1.1441-5(c)(3)(iii)
from a foreign partnership claiming that the payment is effectively
connected income;
(5) That the withholding agent identifies the payee as a U.S. branch
described in paragraph (b)(2)(iv) of this section, the payment to which
it treats as effectively connected income in accordance with
Sec. 1.1441-4(a) (2)(ii) or (3);
(6) That the withholding agent identifies the payee as an
international organization (or any wholly-owned agency or
instrumentality thereof) as defined in section 7701(a)(18) that has been
designated as such by executive order (pursuant to 22 U.S.C. 288 through
288(f)); or
(7) That the withholding agent pays interest from bankers'
acceptances and identifies the payee as a foreign central bank of issue
(as defined in Sec. 1.861-2(b)(4)).
(B) Additional requirements. In order for a payment described in
paragraph (e)(1)(ii)(A) of this section to be treated as made to a
foreign beneficial owner, the withholding agent must hold the
documentation (if required) prior to the payment, comply with the
electronic confirmation procedures described in paragraph (e)(4)(v) of
this section (if required), and must not have been notified by the IRS
that any of the information on the withholding certificate or other
documentation is incorrect or unreliable. If the withholding agent has
been so notified, it may rely on the withholding certificate or other
documentation only to the extent provided under procedures prescribed by
the IRS (see Sec. 601.601(d)(2) of this chapter). See paragraph
(b)(2)(vii) of this section for rules regarding reliable association of
a payment with a withholding certificate or other appropriate
documentation.
(2) Beneficial owner withholding certificate--(i) In general. A
beneficial owner withholding certificate is a statement by which the
beneficial owner of the payment represents that it is a foreign person
and, if applicable, claims a reduced rate of withholding under section
1441. A separate withholding certificate must be submitted to each
withholding agent. If the beneficial owner receives more than one type
of payment from a single withholding agent, the beneficial owner may
have to submit more than one withholding certificate to the single
withholding agent for the different types of payments as may be required
by the applicable forms and instructions, or as the withholding agent
may require (such as to facilitate the withholding agent's compliance
with its obligations to determine withholding under this section or the
reporting of the amounts under Sec. 1.1461-1 (b) and (c)). For example,
if a beneficial owner claims that some but not all of the income it
receives is effectively connected with the conduct of a trade or
business in the United States, it may be required to submit two separate
withholding certificates, one for income that is not effectively
connected and one for income that is so connected. See Sec. 1.1441-
6(b)(4)(ii) for special rules for determining who must furnish a
beneficial owner withholding certificate when a benefit is claimed under
an income tax treaty. See paragraph (e)(4)(ix) of this section for
reliance rules in the case of certificates held by another person or at
a different branch location of the same person.
(ii) Requirements for validity of certificate. A beneficial owner
withholding certificate is valid only if it is provided on a Form W-8,
or a Form 8233 in the case of personal services income described in
Sec. 1.1441-4(b) or certain scholarship or grant amounts described in
Sec. 1.1441-4(c) (or a substitute form described in paragraph (e)(4)(vi)
of this section, or such other form as the IRS may prescribe). A Form W-
8 is valid only if its validity period has not expired, it is signed
under penalties of perjury by the beneficial owner, and it contains all
of the information required on the form. The required information is the
beneficial owner's name, permanent residence address, and TIN (if
required), the country under the laws of which the beneficial owner is
created, incorporated, or governed (if a person other than an
individual), the classification of the entity, and such other
information as may be required by the regulations under section 1441 or
by the form or accompanying instructions in addition to, or in lieu of,
the
[[Page 89]]
information described in this paragraph (e)(2)(ii). A person's permanent
residence address is an address in the country where the person claims
to be a resident for purposes of that country's income tax. In the case
of a certificate furnished in order to claim a reduced rate of
withholding under an income tax treaty, the residence must be determined
in the manner prescribed under the applicable treaty. See Sec. 1.1441-
6(b)(4)(i). The address of a financial institution with which the
beneficial owner maintains an account, a post office box, or an address
used solely for mailing purposes is not a residence address for this
purpose. If the beneficial owner is an individual who does not have a
tax residence in any country, the permanent residence address is the
place at which the beneficial owner normally resides. If the beneficial
owner is not an individual and does not have a tax residence in any
country, then the permanent residence address is the place at which the
person maintains its principal office. See paragraph (e)(4)(vii) of this
section for circumstances in which a TIN is required on a beneficial
owner withholding certificate. See paragraph (f)(2)(i) of this section
for continued validity of certificates during a transition period.
(3) Intermediary, flow-through, or U.S. branch withholding
certificate--(i) In general. An intermediary withholding certificate is
a Form W-8 by which a payee represents that it is a foreign person and
that it is an intermediary with respect to a payment and not the
beneficial owner. A flow-through withholding certificate is a Form W-8
furnished by a flow-through entity under Sec. 1.1441-5(c)(2) or (3) for
a partnership or under Sec. 1.1441-5(e) for a foreign estate or trust.
See paragraph (c)(6)(ii)(C) of this section for a definition of a flow-
through entity. A U.S. branch certificate is a Form W-8 by which the
payee represents that it is a U.S. branch described in paragraph
(b)(2)(iv) (A) or (E) of this section and that the payment is not
effectively connected with the conduct of its trade or business in the
United States. An intermediary withholding certificate is used by an
intermediary either to make representations regarding the status of
beneficial owners of the amount paid or to transmit appropriate
documentation to the withholding agent. A flow-through certificate is
used by a flow-through entity to establish its status as a foreign
person or the status of its partners or beneficiaries, if required, and,
if applicable, to claim a reduced rate of withholding. An intermediary
means, with respect to a payment that it receives, a person that, for
that payment, acts as a custodian, broker, nominee, or otherwise as an
agent for another person, regardless of whether such other person is the
beneficial owner of the amount paid, a flow-through entity, or another
intermediary. See paragraph (e)(4)(viii) of this section for applicable
reliance rules.
(ii) Intermediary withholding certificate from a qualified
intermediary. An intermediary withholding certificate from a person
representing to be a qualified intermediary (described in paragraph
(e)(5)(ii) of this section) is valid only if it is furnished on a Form
W-8 (or an acceptable substitute form or such other form as the IRS may
prescribe), it is signed under penalties of perjury by an officer of the
qualified intermediary with authority to sign for the intermediary, its
validity has not expired, and it contains the following information,
statement, and certifications:
(A) The name, permanent residence address (as described in paragraph
(e)(2)(ii) of this section), and the employer identification number of
the intermediary, and the country under the laws of which the
intermediary is created, incorporated, or governed.
(B) A certification that the person whose name is on the Form W-8 is
not acting for its own account and is acting as a qualified intermediary
within the meaning of paragraph (e)(5)(ii) of this section.
(C) A certification that the intermediary has obtained the
appropriate certificates (such as Forms W-8 or W-9) or other appropriate
documentation in the manner required in its withholding agreement with
the IRS for those account holders that are covered by the certificate
and whose assets are identified as being allocable to the categories
described in paragraph (e)(5)(v)(B) (1) or (2) (in accordance with
paragraph (e)(5)(v) of this section or otherwise).
[[Page 90]]
(D) A certification whether the qualified intermediary is assuming
primary withholding responsibility for the amounts to which the
certificate relates.
(E) A statement attached to the certificate that provides such
information as may be required by the form and accompanying
instructions, including sufficient information for the withholding agent
to determine the amount required to be withheld from amounts paid to the
intermediary and reported to the IRS. See paragraph (e)(5)(v) of this
section for requirement of a statement and rules applicable thereto.
(F) Any other information or certification as may be required by the
form or accompanying instructions in addition to, or in lieu of, the
information and certifications described in this paragraph (e)(3)(ii).
(iii) Intermediary withholding certificate from an intermediary that
is not a qualified intermediary. An intermediary withholding certificate
from a person that does not represent to be a qualified intermediary
within the meaning of paragraph (e)(5)(ii) of this section is valid only
if it is furnished on a Form W-8 (or an acceptable substitute form, or
such other form as the IRS may prescribe), it is signed under penalties
of perjury by a person authorized to sign for the intermediary, it
contains the information, statement, and certifications described in
this paragraph (e)(3)(iii), its validity has not expired, and the
withholding certificates and other appropriate documentation for all the
persons to whom the certificate relates are attached to the certificate.
Appropriate documentation consists of beneficial owner withholding
certificates described in paragraph (e)(2)(i) of this section,
intermediary withholding certificates described in paragraph (e)(3)(i)
of this section, flow-through certificates described in Sec. 1.1441-
5(c)(2)(iv), (3)(iii), and (e), documentary evidence described in
Sec. 1.1441-6(b)(2)(i) or in Sec. 1.6049-5(c)(1) related to the
beneficial owner (or documentary evidence described in Sec. 1.6049-
5(c)(4) for purposes of information reporting under chapter 61 of the
Code), and other documentation or certificate applicable under other
provisions of the Code or regulations that certify or establish the
status of the payee or beneficial owner as a U.S. or a foreign person.
If the intermediary is acting on behalf of another intermediary that is
not a qualified intermediary or on behalf of a partnership that is not a
withholding foreign partnership described in Sec. 1.1441-5(c)(2)(i),
then the intermediary must attach to its own withholding certificate the
intermediary withholding certificate or the partnership withholding
certificate to which all the withholding certificates and other
appropriate documentation required to be attached under this paragraph
(e)(3)(iii) or in Sec. 1.1441-5(c)(3)(iii) or (e) are also attached.
Nothing in this paragraph (e)(3)(iii) shall require an intermediary to
furnish original documentation. Copies of certificates or documentary
evidence may be passed up to the U.S. withholding agent, in which case
the intermediary must retain the original documentation for the same
time period that the copy is required to be retained by the withholding
agent under paragraph (e)(4)(iii) of this section and must provide it to
the withholding agent upon request. For purposes of this paragraph
(e)(3)(iii), a valid intermediary withholding certificate also includes
a statement described in Sec. 1.871-14(c)(2)(v) furnished in order for
interest to qualify as portfolio interest for purposes of sections
871(h) and 881(c) or in order for amounts described in Sec. 1.1441-
6(b)(2)(ii) to qualify as amounts paid to a foreign person. The
information and certification required on a Form W-8 described in this
paragraph (e)(3)(iii) (or on an acceptable substitute form or such other
form as the IRS may prescribe) are as follows:
(A) The name and permanent resident address (as described in
paragraph (e)(2)(ii) of this section) of the intermediary, and the
country under the laws of which the intermediary is created,
incorporated, or governed.
(B) A certification that the person whose name is on the Form W-8 is
not acting for its own account and is using the certificate as a form to
transmit withholding certificates and other appropriate documentation
for the payment to which the form relates.
[[Page 91]]
(C) If furnishing an intermediary certificate to transmit
withholding certificates or other appropriate documentation for more
than one person, a statement attached to the Form W-8 that provides such
information as may be required by the form and accompanying
instructions, including sufficient information for the withholding agent
to determine the amount required to be withheld from amounts paid to the
intermediary. See paragraph (e)(3)(iv) of this section for rules
applicable to such a statement.
(D) A certification either that the attached withholding
certificates and other appropriate documentation represent all of the
persons to whom the intermediary withholding certificate relates or that
the amounts allocable to persons covered by the intermediary withholding
certificate and for whom withholding certificates or other appropriate
documentation are lacking or unreliable are separately identified.
(E) Any other information or certification as may be required by the
form or accompanying instructions in addition to, or in lieu of, the
information and certification described in this paragraph (e)(3)(iii).
(iv) Information to the withholding agent regarding assets owned by
beneficial owners, etc.--(A) General rule. An intermediary that has not
represented that it is acting as a qualified intermediary within the
meaning of paragraph (e)(5)(ii) of this section must provide information
sufficient for the withholding agent to determine the proportion of each
payment of reportable amounts (as described in paragraph (e)(3)(vi) of
this section) that is allocable to each person to whom the intermediary
withholding certificate relates, including persons for whom the
intermediary has not attached a withholding certificate or other
appropriate documentation. The withholding agent may rely on such
information in order to determine the amount of withholding on the
payment and how to r