Publication 515
taxmap/pubs/p515-002.htm#en_us_publink1000224819Generally, you must withhold 30% from the gross amount paid to
a foreign payee unless you can reliably associate the payment with valid
documentation that establishes either of the following.
- The payee is a U.S. person.
- The payee is a foreign person that is the beneficial owner
of the income and is entitled to a reduced rate of withholding.
Generally, you must get the documentation before you make the
payment. The documentation is not valid if you know, or have reason to know,
that it is unreliable or incorrect. See
Standards of Knowledge, later.
If you cannot reliably associate a payment with valid documentation,
you must use the presumption rules discussed later. For example, if you do not
have documentation or you cannot determine the portion of a payment that is
allocable to specific documentation, you must use the presumption rules.
The specific types of documentation are discussed in this section.
However, you should also see the discussion,
Withholding on Specific Income, as well as the instructions to the particular forms. As the
withholding agent, you also may want to see the Instructions for the Requester
of Forms W-8BEN, W-8ECI, W-8EXP, and W-8IMY.
Under section 1446 of the Code, a partnership must withhold tax
on its effectively connected income allocable to a foreign partner. Generally, a
partnership determines if a partner is a foreign partner and the partner's tax
classification based on the withholding certificate provided by the partner.
This is the same documentation that is filed for NRA withholding, but may
require additional information as discussed under each of the forms in this
section.
taxmap/pubs/p515-002.htm#en_us_publink1000224821
If you make a payment to joint owners, you need to get documentation from each
owner.
taxmap/pubs/p515-002.htm#en_us_publink1000224822Generally, you can treat the payee as a U.S. person if the payee
gives you a Form W-9. The Form W-9 can be used only by a U.S. person and must
contain the payee's taxpayer identification number (TIN). If there is more than
one owner, you may treat the total amount as paid to a U.S. person if any one of
the owners gives you a Form W-9. See
U.S. Taxpayer Identification Numbers, later. U.S. persons are not subject to NRA withholding, but
may be subject to Form 1099 reporting and backup withholding.
Generally, a foreign person that is a beneficial owner of the
income should give you a Form W-8. Until further notice, you can rely upon Forms
W-8 that contain a P.O. box as a permanent residence address provided you do not
know, or have reason to know, that the person providing the form is a U.S.
person and that a street address is available. You may rely on Forms W-8 for
which there is a U.S. mailing address provided you received the form prior to
December 31, 2001.
If certain requirements are met, the foreign person can give
you documentary evidence, rather than a Form W-8. You can rely on documentary
evidence in lieu of a Form W-8 for a payment made in a U.S. possession.
taxmap/pubs/p515-002.htm#en_us_publink1000224824Other documentation may be required to claim an exemption from,
or a reduced rate of, withholding on pay for personal services. The nonresident
alien individual may have to give you a Form W-4 or a Form 8233, Exemption From
Withholding on Compensation for Independent (and Certain Dependent) Personal
Services of a Nonresident Alien Individual. These forms are discussed in
Pay for Personal Services Performed under
Withholding on Specific Income.If all the appropriate requirements have been established on
a Form W-8BEN, W-8ECI, W-8EXP or, if applicable, on documentary evidence, you
may treat the payee as a foreign beneficial owner.
taxmap/pubs/p515-002.htm#en_us_publink1000224826This form is used by a foreign person to:
- Establish foreign status;
- Claim that such person is the beneficial owner of the income
for which the form is being furnished or a partner in a partnership subject to
section 1446 withholding; and
- If applicable, claim a reduced rate of, or exemption from,
withholding under an income tax treaty.
Form W-8BEN also may be used to claim that the foreign person
is exempt from Form 1099 reporting and backup withholding for income that is not
subject to NRA withholding. For example, a foreign person may provide a Form
W-8BEN to a broker to establish that the gross proceeds from the sale of
securities are not subject to Form 1099 reporting or backup withholding.
taxmap/pubs/p515-002.htm#en_us_publink1000224827You may apply a reduced rate of withholding to a foreign person
that provides a Form W-8BEN claiming a reduced rate of withholding under an
income tax treaty only if the person provides a U.S. TIN and certifies that:
- It is a resident of a treaty country;
- It is the beneficial owner of the income;
- If it is an entity, it derives the income within the meaning
of section 894 of the Internal Revenue Code (it is not fiscally transparent);
and
- It meets any limitation on benefits provision contained in
the treaty, if applicable.
If the foreign beneficial owner claiming a treaty benefit is
related to you, the foreign beneficial owner also must certify on Form W-8BEN
that it will file Form 8833, Treaty-Based Return Position Disclosure Under
Section 6114 or 7701(b), if the amount subject to NRA withholding received
during a calendar year exceeds, in the aggregate, $500,000.
An entity derives income for which it is claiming treaty benefits
only if the entity is not treated as fiscally transparent for that income. See
Fiscally transparent entity discussed earlier under
Flow-Through Entities.
Limitations on benefits provisions generally prohibit third country
residents from obtaining treaty benefits. For example, a foreign corporation may
not be entitled to a reduced rate of withholding unless a minimum percentage of
its owners are citizens or residents of the United States or the treaty country.
The exemptions from, or reduced rates of, U.S. tax vary under
each treaty. You must check the provisions of the tax treaty that apply. Tables
at the end of this publication show the countries with which the United States
has income tax treaties and the rates of withholding that apply in cases where
all conditions of the particular treaty articles are satisfied.
If you know, or have reason to know, that an owner of income
is not eligible for treaty benefits claimed, you must not apply the treaty rate.
You are not, however, responsible for misstatements on a Form W-8, documentary
evidence, or statements accompanying documentary evidence for which you did not
have actual knowledge, or reason to know that the statements were incorrect.
taxmap/pubs/p515-002.htm#en_us_publink1000224828A foreign person does not have to provide a TIN to claim a reduced
rate of withholding under a treaty if the requirements for the following
exceptions are met.
A Form W-8BEN provided to claim treaty benefits does not need
a U.S. TIN if the foreign beneficial owner is claiming the benefits on income
from marketable securities. For this purpose, income from a marketable security
consists of the following items.
- Dividends and interest from stocks and debt obligations that
are actively traded.
- Dividends from any redeemable security issued by an investment
company registered under the Investment Company Act of 1940 (mutual fund).
- Dividends, interest, or royalties from units of beneficial
interest in a unit investment trust that are (or were upon issuance) publicly
offered and are registered with the SEC under the Securities Act of 1933.
- Income related to loans of any of the above securities.
If a payment is made outside the United States to an offshore
account, a payee may give you documentary evidence, rather than Form W-8BEN.
Generally, a payment is made outside the United States if you
complete the acts necessary to effect the payment outside the United States.
However, an amount paid by a bank or other financial institution on a deposit or
account usually will be treated as paid at the branch or office where the amount
is credited. An offshore account is an account maintained at an office or branch
of a U.S. or foreign bank or other financial institution at any location outside
the United States.
You may rely on documentary evidence given to you by a nonqualified
intermediary or a flow-through entity with its Form W-8IMY. This rule applies
even though you make the payment to a nonqualified intermediary or flow-through
entity in the United States. Generally, the nonqualified intermediary or
flow-through entity that gives you documentary evidence also will have to give
you a withholding statement, discussed later.
taxmap/pubs/p515-002.htm#en_us_publink1000224831You may apply a reduced rate of withholding to income from marketable
securities (discussed earlier) paid outside the United States to an offshore
account if the beneficial owner gives you documentary evidence in place of a
Form W-8BEN. To claim treaty benefits, the documentary evidence must be one of
the following:
- A certificate of residence that:
- Is issued by a tax official of the treaty country of which
the foreign beneficial owner claims to be a resident,
- States that the person has filed its most recent income
tax return as a resident of that country, and
- Is issued within 3 years prior to being presented to you.
- Documentation for an individual that:
- Includes the individual's name, address, and photograph,
- Is an official document issued by an authorized governmental
body, and
- Is issued no more than 3 years prior to being presented
to you.
- Documentation for an entity that:
- Includes the name of the entity,
- Includes the address of its principal office in the treaty
country, and
- Is an official document issued by an authorized governmental
body.
In addition to the documentary evidence, a foreign beneficial
owner that is an entity must provide a statement that it derives the income for
which it claims treaty benefits and that it meets one or more of the conditions
set forth in a limitation on benefits article, if any, (or similar provision)
contained in the applicable treaty.
This form is used by a foreign person to:
- Establish foreign status,
- Claim that such person is the beneficial owner of the income
for which the form is being furnished, and
- Claim that the income is effectively connected with the conduct
of a trade or business in the United States. (See
Effectively Connected Income, later.)
Effectively connected income for which a valid Form W-8ECI has
been provided is generally not subject to NRA withholding.
If a partner submits this form to a partnership, the income claimed
to be effectively connected with the conduct of a U.S. trade or business is
subject to withholding under section 1446. If the partner has made, or will
make, an election under section 871(d) or 882(d), the partner must submit Form
W-8ECI, and attach a copy of the election, or a statement of intent to elect, to
the form.
 | If the partner's only effectively connected income is the
income allocated from the partnership and the partner is not making the election
under section 871(d) or 882(d), the partner should provide Form W-8BEN to the
partnership.
|
taxmap/pubs/p515-002.htm#en_us_publink1000224834This form is used by a foreign government, international organization,
foreign central bank of issue, foreign tax-exempt organization, foreign private
foundation, or government of a U.S. possession to:
- Establish foreign status,
- Claim that such person is the beneficial owner of the income
for which the form is being furnished, and
- Claim a reduced rate of, or an exemption from, withholding
as such an entity.
If the government or organization is a partner in a partnership
carrying on a trade or business in the United States, the effectively connected
income allocable to the partner is subject to withholding under section 1446.
taxmap/pubs/p515-002.htm#en_us_publink1000224835Payments made to a foreign intermediary or foreign flow-through
entity are treated as made to the payees on whose behalf the intermediary or
entity acts. The Form W-8IMY provided by a foreign intermediary or flow-through
entity must be accompanied by additional information for you to be able to
reliably associate the payment with a payee. The additional information required
depends on the type of intermediary or flow-through entity and the extent of the
withholding responsibilities it assumes.
taxmap/pubs/p515-002.htm#en_us_publink1000224836This form is used by foreign intermediaries and foreign flow-through
entities, as well as certain U.S. branches, to:
- Represent that a foreign person is a qualified intermediary
or nonqualified intermediary,
- Represent, if applicable, that the qualified intermediary
is assuming primary NRA withholding responsibility and/or primary Form 1099
reporting and backup withholding responsibility,
- Represent that a foreign partnership or a foreign simple or
grantor trust is a withholding foreign partnership or a withholding foreign
trust,
- Represent that a foreign flow-through entity is a nonwithholding
foreign partnership, or a nonwithholding foreign trust and that the income is
not effectively connected with the conduct of a trade or business in the United
States,
- Represent that the provider is a U.S. branch of a foreign
bank or insurance company and either is agreeing to be treated as a U.S. person,
or is transmitting documentation of the persons on whose behalf it is acting, or
- Represent that, for purposes of section 1446, it is an upper-tier
foreign partnership or a foreign grantor trust and that the form is being used
to transmit the required documentation. For information on qualifying as an
upper-tier foreign partnership, see Regulations section 1.1446-5.
Generally, a QI is any foreign intermediary that has entered
into a QI withholding agreement (discussed earlier) with the IRS. A foreign
intermediary that has received a QI employer identification number (QI-EIN) may
represent on Form W-8IMY that it is a QI before it receives a fully executed
agreement. The intermediary can claim that it is a QI until the IRS revokes its
QI-EIN. The IRS will revoke a QI-EIN if the QI agreement is not executed and
returned to the IRS within a reasonable period of time after the agreement was
sent to the intermediary for signature.
taxmap/pubs/p515-002.htm#en_us_publink1000224838Payments made to a QI that does not assume NRA withholding responsibility
are treated as paid to its account holders and customers. However, a QI is not
required to provide you with documentation it obtains from its foreign account
holders and customers. Instead, it provides you with a withholding statement
that contains withholding rate pool information. A withholding rate pool is a
payment of a single type of income, determined in accordance with the categories
of income reported on Form 1042-S that is subject to a single rate of
withholding. A qualified intermediary is required to provide you with
information regarding U.S. persons subject to Form 1099 reporting and to provide
you withholding rate pool information separately for each such U.S. person
unless it has assumed Form 1099 reporting and backup withholding responsibility.
For the alternative procedure for providing rate pool information for U.S.
non-exempt persons, see the Form W-8IMY instructions.
The withholding statement must:
- Designate those accounts for which it acts as a qualified
intermediary,
- Designate those accounts for which it assumes primary NRA
withholding responsibility and/or primary Form 1099 and backup withholding
responsibility, and
- Provide sufficient information for you to allocate the payment
to a withholding rate pool.
The extent to which you must have withholding rate pool information
depends on the withholding and reporting obligations assumed by the QI.
taxmap/pubs/p515-002.htm#en_us_publink1000224839If a QI does not assume primary NRA withholding responsibility
or primary Form 1099 reporting and backup withholding responsibility for the
payment, you can reliably associate the payment with valid documentation only to
the extent you can reliably determine the portion of the payment that relates to
each withholding rate pool for foreign payees. Unless the alternative procedure
applies, the qualified intermediary must provide you with a separate withholding
rate pool for each U.S. person subject to Form 1099 reporting and/or backup
withholding. The QI must provide a Form W-9 or, in the absence of the form, the
name, address, and TIN, if available, for such person.
taxmap/pubs/p515-002.htm#en_us_publink1000224840If you make a payment to a QI that assumes primary NRA withholding
responsibility (but not primary Form 1099 reporting and backup withholding
responsibility), you can reliably associate the payment with valid documentation
only to the extent you can reliably determine the portion of the payment that
relates to the withholding rate pool for which the QI assumes primary NRA
withholding responsibility and the portion of the payment attributable to
withholding rate pools for each U.S. person, unless the alternative procedure
applies, subject to Form 1099 reporting and/or backup withholding. The QI must
provide a Form W-9 or, in absence of the form, the name, address, and TIN, if
available, for such person.
taxmap/pubs/p515-002.htm#en_us_publink1000224841If you make a payment to a QI that assumes both primary NRA withholding
responsibility and primary Form 1099 reporting and backup withholding
responsibility, you can reliably associate a payment with valid documentation
provided that you receive a valid Form W-8IMY. It is not necessary to associate
the payment with withholding rate pools.
taxmap/pubs/p515-002.htm#en_us_publink1000224842You make a payment of dividends to a QI. It has five customers:
two are foreign persons who have provided documentation entitling them to a 15%
rate of withholding on dividends; two are foreign persons subject to a 30% rate
of withholding on dividends; and one is a U.S. individual who provides it with a
Form W-9. Each customer is entitled to 20% of the dividend payment. The QI does
not assume any primary withholding responsibility. The QI gives you a Form
W-8IMY with which it associates the Form W-9 and a withholding statement that
allocates 40% of the dividend to a 15% withholding rate pool, 40% to a 30%
withholding rate pool, and 20% to the U.S. individual. You should report on
Forms 1042-S 40% of the payment as made to a 15% rate dividend pool and 40% of
the payment as made to a 30% rate dividend pool. The portion of the payment
allocable to the U.S. individual (20%) is reportable on Form 1099-DIV.
taxmap/pubs/p515-002.htm#en_us_publink1000224843A QI may apply special rules to a smaller partnership or trust
(Joint Account Provision) only if the partnership or trust meets the following
conditions.
- It is a foreign partnership or foreign simple or grantor trust.
- It is a direct account holder of the QI.
- It does not have any partner, beneficiary, or owner that is
a U.S. person or a pass- through partner, beneficiary, or owner.
For information on these rules, see section 4A.01 of the QI agreement.
This is found in Appendix 3 of Revenue Procedure 2003-64. Also see Revenue
Procedure 2004-21.
taxmap/pubs/p515-002.htm#en_us_publink1000224844
A QI may apply special rules to a related partnership or trust only if the
partnership or trust meets the following conditions.
- It is a foreign partnership or foreign simple or grantor trust.
- It is either:
- A direct account holder of the QI, or
- An indirect account holder of the QI that is a direct partner,
beneficiary, or owner of a partnership or trust to which the QI has applied this
rule.
For information on these rules, see section 4A.02 of the QI
agreement. This is found in Appendix 3 of Revenue Procedure 2003-64. Also see
Revenue Procedure 2005-77.
If you are making a payment to an NQI, foreign flow-through entity,
or U.S. branch that is using Form W-8IMY to transmit information about the
branch's account holders or customers, you can treat the payment (or a portion
of the payment) as reliably associated with valid documentation from a specific
payee only if, prior to making the payment:
- You can allocate the payment to a valid Form W-8IMY,
- You can reliably determine how much of the payment relates
to valid documentation provided by a payee (a person that is not itself a
foreign intermediary, flow-through entity, or U.S. branch), and
- You have sufficient information to report the payment on Form
1042-S or Form 1099, if reporting is required.
The NQI, flow-through entity, or U.S. branch must give you certain
information on a withholding statement that is associated with the Form W-8IMY.
A withholding statement must be updated to keep the information accurate prior
to each payment.
taxmap/pubs/p515-002.htm#en_us_publink1000224846Generally, a withholding statement must contain the following
information.
- The name, address, and TIN (if any, or if required) of each
person for whom documentation is provided.
- The type of documentation (documentary evidence, Form W-8,
or Form W-9) for every person for whom documentation has been provided.
- The status of the person for whom the documentation has been
provided, such as whether the person is a U.S. exempt recipient (U.S. person
exempt from Form 1099 reporting), U.S. non-exempt recipient (U.S. person subject
to Form 1099 reporting), or a foreign person. For a foreign person, the
statement must indicate whether the person is a beneficial owner or a foreign
intermediary, flow-through entity, or a U.S. branch.
- The type of recipient the person is, based on the recipient
codes used on Form 1042-S.
- Information allocating each payment, by income type, to each
payee (including U.S. exempt and U.S. non-exempt recipients) for whom
documentation has been provided.
- The rate of withholding that applies to each foreign person
to whom a payment is allocated.
- A foreign payee's country of residence.
- If a reduced rate of withholding is claimed, the basis for
a reduced rate of withholding (for example, portfolio interest, treaty benefit,
etc.).
- In the case of treaty benefits claimed by entities, whether
the applicable limitation on benefits statement and the statement that the
foreign person derives the income for which treaty benefits are claimed, have
been made.
- The name, address, and TIN (if any) of any other NQI, flow-through
entity, or U.S. branch from which the payee will directly receive a payment.
- Any other information a withholding agent requests to fulfill
its reporting and withholding obligations.
Under this alternative procedure the NQI can give you the information
that allocates each payment to each foreign and U.S. exempt recipient by January
31 following the calendar year of payment, rather than prior to the payment
being made as otherwise required. To take advantage of this procedure, the NQI
must: (a) inform you, on its withholding statement, that it is using the
alternative procedure; and (b) obtain your consent. You must receive the
withholding statement with all the required information (other than item 5)
prior to making the payment.
| This alternative procedure cannot be used for payments to
U.S. non-exempt recipients. Therefore, an NQI must always provide you with
allocation information for all U.S. non-exempt recipients prior to a payment
being made. |
taxmap/pubs/p515-002.htm#en_us_publink1000224849If an NQI uses the alternative procedure, it must provide you
with withholding rate pool information, as opposed to individual allocation
information, prior to the payment of a reportable amount. A withholding rate
pool is a payment of a single type of income (as determined by the income
categories on Form 1042-S) that is subject to a single rate of withholding. For
example, an NQI that has foreign account holders receiving royalties and
dividends, both subject to the 15% rate, will provide you with information for
two withholding rate pools (one for royalties and one for dividends). The NQI
must provide you with the payee specific allocation information (information
allocating each payment to each payee) by January 31 following the calendar year
of payment.
taxmap/pubs/p515-002.htm#en_us_publink1000224850If an NQI fails to provide you with the payee specific allocation
information for a withholding rate pool by January 31, you must not apply the
alternative procedure to any of the NQI's withholding rate pools from that date
forward. You must treat the payees as undocumented and apply the presumption
rules, discussed later. An NQI is deemed to have failed to provide specific
allocation information if it does not give you such information for more than
10% of any one withholding rate pool.
However, if you receive such information by February 14, you
may make the appropriate adjustments to repay any excess withholding incurred
between February 1 and on or before February 14.
If the NQI fails to allocate more than 10% of the payment to
a withholding rate pool by February 14 following the calendar year of payment,
you must file a Form 1042-S for each account holder in the pool on a pro-rata
basis. For example, if there are four account holders in a withholding rate pool
that receives a $100 payment and the NQI fails to allocate more than $10 of the
payment, you must file four Forms 1042-S, one for each account holder in the
pool, showing $25 of income to each. You must also check the "Pro-rata Basis
Reporting" box at the top of each form. If, however, the nonqualified
intermediary provides allocation information for 90% or more of the payment to a
withholding rate pool, the pro-rata reporting method is not required. Instead,
you must file a Form 1042-S for each account holder for whom you have allocation
information and report the unallocated portion of the payment on a Form 1042-S
issued to "unknown recipient."
taxmap/pubs/p515-002.htm#en_us_publink1000224851If you are making payments to a WP, you do not have to withhold
if the WP is acting in that capacity. The WP must assume NRA withholding
responsibility for amounts (subject to NRA withholding) that are distributed to,
or included in the distributive share of, any direct partner. The WP must
withhold the amount required to be withheld. A WP must provide you with a Form
W-8IMY that certifies that the WP is acting in that capacity and a written
statement identifying the amounts for which it is so acting. The Form W-8IMY
must contain the WP-EIN.
taxmap/pubs/p515-002.htm#en_us_publink1000224852The WP must withhold on the date it makes a distribution of an
amount subject to NRA withholding to a direct foreign partner based on the Forms
W-8 or W-9 it receives from its partners. If the partner's distributive share
has not been distributed, the WP must withhold on the partner's distributive
share on the earlier of the date that the partnership must mail or otherwise
provide to the partner a Schedule K-1 (Form 1065) or the due date for furnishing
the statement (whether or not the WP is required to furnish the statement).
The WP may determine the amount of withholding based on a reasonable
estimate of the partner's distributive share of income subject to withholding
for the year. The WP must correct the estimated withholding to reflect the
actual distributive share on the earlier of the dates mentioned in the preceding
paragraph. If that date is after the due date (including extensions) for filing
the WP's Forms 1042 and 1042-S for the calendar year, the WP may withhold and
report any adjustments in the following calendar year.
taxmap/pubs/p515-002.htm#en_us_publink1000224853The WP must file Form 1042 even if no amount was withheld. In
addition to the information that is required for the Form 1042, the WP must
attach a statement showing the amounts of any over- or under-withholding
adjustments and an explanation of those adjustments.
taxmap/pubs/p515-002.htm#en_us_publink1000224854The WP can elect to report payments made to its direct partners
on a pooled basis rather than reporting payments to each direct partner. This
election must be made when the WP withholding agreement is executed. If the
election was not made, the WP must file separate Forms 1042-S for each direct
partner whose distributive share included an amount subject to NRA withholding.
taxmap/pubs/p515-002.htm#en_us_publink1000224855Under a special rule, a WP that has made a pooled reporting election
can treat partners of certain smaller partnerships and beneficiaries or owners
of certain smaller trusts (Joint Account Provision) as direct partners. These
rules only apply to a partnership or trust that meets the following conditions.
- It is a foreign partnership or foreign simple or grantor trust.
- It is a direct partner of the WP.
- It does not have any partner, beneficiary, or owner that is
a U.S. person or a pass- through partner, beneficiary, or owner.
For more information on applying these rules, see section 10.01
of the WP agreement found in Appendix 1 of Revenue Procedure 2003-64. Also see
Revenue Procedure 2004-21.
Under a special rule, a WP that has made a pooled reporting election
can treat direct partners of certain related partnerships and direct
beneficiaries or owners of certain related trusts as direct partners. These
rules only apply to a partnership or trust that meets the following conditions.
- It is a foreign partnership or foreign simple or grantor trust.
- It is either:
- A direct partner of the WP, or
- An indirect partner of the WP that is a partner, beneficiary,
or owner of a partnership or trust to which the WP has applied this rule.
For more information on applying these rules see section 10.02
of the WP agreement found in Appendix 1 of Revenue Procedure 2003-64. Also see
Revenue Procedure 2005-77.
A foreign partnership that is not acting as a WP is a nonwithholding
foreign partnership. This occurs if a WP is not acting in that capacity for some
or all of the amounts it receives from you. Also, a WP generally is a
nonwithholding foreign partnership for amounts distributed to, or included in
the distributive share of, passthrough partners or indirect partners.
You must treat payments made to a nonwithholding foreign partnership as made to
the partners of the partnership. The partnership must provide you with a Form
W-8IMY (with Part VI completed), a withholding statement identifying the
amounts, the withholding certificates or documentary evidence of the partners,
and the information shown earlier under
Withholding statement under
Nonqualified Intermediaries.If you are making payments to a WT, you do not have to withhold
if the WT is acting in that capacity. The WT must assume NRA withholding
responsibility for amounts (subject to NRA withholding) that are distributed to,
or included in the distributive share of, any direct beneficiary or owner. The
WT must withhold the amount required to be withheld. A WT must provide you with
a Form W-8IMY that certifies that the WT is acting in that capacity and a
written statement identifying the amounts for which it is so acting. The Form
W-8IMY must contain the WT-EIN.
taxmap/pubs/p515-002.htm#en_us_publink1000224859The WT must withhold on the date it makes a distribution of an
amount subject to NRA withholding to a direct foreign beneficiary or owner. If
the beneficiary's or owner's distributive share has not been distributed, the WT
must withhold on the beneficiary's or owner's distributive share on the earlier
of the date that the trust must mail or otherwise provide to the beneficiary or
owner a Schedule K-1 (Form 1041) or the due date for furnishing the statement
(whether or not the WT is required to furnish the statement).
The WT may determine the amount of withholding based on a reasonable
estimate of the beneficiary's or owner's distributive share of income subject to
withholding for the year. The WT must correct the estimated withholding to
reflect the actual distributive share on the earlier of the dates mentioned in
the preceding paragraph. If that date is after the due date (including
extensions) for filing the WT's Forms 1042 and 1042-S for the calendar year, the
WT may withhold and report any adjustments in the following calendar year.
taxmap/pubs/p515-002.htm#en_us_publink1000224860The WT must file Form 1042 even if no amount was withheld. In
addition to the information that is required for the Form 1042, the WT must
attach a statement showing the amounts of any over- or under-withholding
adjustments and an explanation of those adjustments.
taxmap/pubs/p515-002.htm#en_us_publink1000224861A WT can elect to report payments made to its direct beneficiaries
or owners on a pooled basis rather than reporting payments to each direct
beneficiary or owner. This election must be made when the WT withholding
agreement is executed. If the election was not made, the WT must file separate
Forms 1042-S for each direct beneficiary or owner whose distributive share
included an amount subject to NRA withholding.
taxmap/pubs/p515-002.htm#en_us_publink1000224862Under a special rule, a WT that has made a pooled reporting election
can treat partners of certain smaller partnerships and beneficiaries or owners
of certain smaller trusts (Joint Account Provision) as direct beneficiaries or
owners. These rules only apply to a partnership or trust that meets the
following conditions.
- It is a foreign partnership or foreign simple or grantor trust.
- It is a direct partner, beneficiary, or owner of the WT.
- It does not have any partner, beneficiary, or owner that is
a U.S. person or a pass- through partner, beneficiary, or owner.
For more information on applying these rules, see section 10.01
of the WT agreement found in Appendix 2 of Revenue Procedure 2003-64. Also see
Revenue Procedure 2004-21.
Under a special rule, a WT that has made a pooled reporting election
can treat direct partners of certain related partnerships and direct
beneficiaries or owners of certain related trusts as direct beneficiaries or
owners. These rules only apply to a partnership or trust that meets the
following conditions.
- It is a foreign partnership or foreign simple or grantor trust.
- It is either:
- A direct beneficiary or owner of the WT, or
- An indirect beneficiary or owner of the WT that is a partner,
beneficiary, or owner of a partnership or trust to which the WP has applied this
rule.
For more information on applying these rules, see section 10.02
of the WP agreement found in Appendix 2 of Revenue Procedure 2003-64. Also see
Revenue Procedure 2005-77.
A foreign trust that is not acting as a WT is a nonwithholding foreign trust.
This occurs if a WT is not acting in that capacity for some or all of the
amounts it receives from you. Also, a WT generally is a nonwithholding foreign
trust for amounts distributed to, or included in the distributive share of,
passthrough beneficiaries or owners or indirect beneficiaries or owners.
Generally, you must treat payments made to a nonwithholding foreign
trust as made to the beneficiaries of a simple trust or the owners of a grantor
trust. The trust must provide you with a Form W-8IMY (with Part VI completed), a
withholding statement identifying the amounts, the withholding certificates or
documentary evidence of the beneficiaries or owners, and the information shown
earlier under
Withholding statement under
Nonqualified Intermediaries.
You must withhold in accordance with the presumption rules (discussed
later) if you know or have reason to know that a Form W-8 or documentary
evidence provided by a payee is unreliable or incorrect. If you rely on an agent
to obtain documentation, you are considered to know, or have reason to know, the
facts that are within the knowledge of your agent.
taxmap/pubs/p515-002.htm#en_us_publink1000224866Generally, you are considered to have reason to know that a claim
of U.S. status or of a reduced rate of withholding is incorrect if statements
contained in the withholding certificate or other documentation, or other
relevant facts of which you have knowledge, would cause a reasonably prudent
person in your position to question the claims made.
Financial institutions (including a regulated investment company)
are treated as having reason to know documentation is unreliable or incorrect
for payments on marketable securities only in the circumstances discussed next.
If the documentation is considered unreliable or incorrect, you must get new
documentation. However, you may rely on the original docu- mentation if you
receive the additional statements and/or documentation discussed.
The circumstances, discussed next, also apply to a withholding
agent that is not a financial institution or making a payment on marketable
securities. However, these withholding agents are not limited to these
circumstances in determining if they have reason to know that documentation is
unreliable or incorrect. These withholding agents cannot base their
determination on the receipt of additional statements or documents. They need to
get new documentation.
taxmap/pubs/p515-002.htm#en_us_publink1000224867You have reason to know that a Form W-8 provided by a direct
account holder that is a foreign person is unreliable or incorrect if:
- The Form W-8 is incomplete with respect to any item on the
form that is relevant to the claims made by the account holder;
- The Form W-8 contains any information that is inconsistent
with the account holder's claim;
- The Form W-8 lacks information necessary to establish entitlement
to a reduced rate of withholding, if a reduced rate is claimed; or
- You have information not contained on the form that is inconsistent
with the claims made on the form.
You have reason to know that a Form W-8BEN or Form W-8EXP is
unreliable or incorrect to establish a direct account holder's status as a
foreign person if:
- The Form W-8 has a permanent residence address in the United
States;
- The Form W-8 has a mailing address in the United States;
- You have a residence or mailing address as part of your account
information that is an address in the United States;
- The person providing the certificate notifies you of a new
residence or mailing address in the United States; or
- If the Form W-8 is provided with respect to an offshore account,
the account holder has standing instructions directing you to pay amounts from
its account to an address or account maintained in the United States.
Note.Items (2) and (3) do not apply if the U.S. mailing address is
provided on a Form W-8 received before December 31, 2001.
You may, however, rely on a Form W-8 as establishing the account
holder's foreign status if any of the following apply:
- You receive the Form W-8 from an individual and:
- You possess or obtain documentary evidence (that does not
contain a U.S. address) that was provided within the last three years, was valid
when provided, supports the claim of foreign status, and the beneficial owner
provides you with a reasonable explanation in writing supporting the account
holder's foreign status; or
- If the account is maintained at your office outside the
United States, you are required to report annually a payment to the account
holder on a tax information statement filed with the tax authority of the
country in which your office is located and that country has an income tax
treaty in effect with the United States.
- You receive the Form W-8 from an entity that is not a flow-through
entity and:
- You have in your possession or obtain documentation that
substantiates that the entity is organized or created under foreign law, or
- If the account is maintained at your office outside the
United States, you are required to report annually a payment to the account
holder on a tax information statement filed with the tax authority of the
country in which your office is located and that country has an income tax
treaty in effect with the United States.
- The account holder has provided standing instructions to make
payments with respect to its offshore account to a U.S. account or U.S. address
if the account holder provides a reasonable explanation in writing that supports
the account holder's foreign status.
You have reason to know that a Form W-8BEN provided by a direct
account holder to claim a reduced rate of withholding under a treaty is
unreliable or incorrect for purposes of establishing the account holder's
residency in a treaty country if:
- The permanent residence address on the Form W-8BEN is not
in the treaty country or the beneficial owner notifies you of a new permanent
residence address that is not in the treaty country,
- The permanent residence address on the Form W-8BEN is in the
treaty country but the withholding certificate (or your account information)
contains a mailing address that is not in the treaty country, or
- The account holder has standing instructions for you to pay
amounts from its account to an address or an account not in the treaty country.
You may, however, rely on a Form W-8BEN as establishing an account
holder's claim of a reduced rate of withholding under a treaty if any of the
following apply.
- The permanent residence address is not in the treaty country
and:
- The account holder provides a reasonable explanation for
the permanent residence address outside the treaty country, or
- You possess or obtain documentary evidence that establishes
residency in a treaty country.
- The mailing address is not in the treaty country and:
- You possess or obtain additional documentation (that does
not contain an address outside the treaty country) supporting the beneficial
owner's claim of residence in the treaty country,
- You possess or obtain documentation that establishes that
the beneficial owner is an entity organized in a treaty country,
- You know that the address outside the treaty country is
a branch of a bank or insurance company that is a resident of the treaty
country, or
- You obtain a written statement from the beneficial owner
that reasonably establishes its entitlement to treaty benefits.
- You have instructions to pay amounts outside the treaty country
and the account holder gives you a reasonable explanation, in writing,
establishing residence in the applicable treaty country.
You have reason to know that documentary evidence provided by
a direct account holder that is a foreign person is unreliable or incorrect if:
- The documentary evidence does not reasonably establish the
identity of the person presenting the documentary evidence;
- The documentary evidence contains information that is inconsistent
with the account holder's claim of a reduced rate of withholding; or
- You have account information that is inconsistent with the
account holder's claim of a reduced rate of withholding, or the documentary
evidence lacks information necessary to establish a reduced rate of withholding.
For example, the documentary evidence does not contain, or is not supplemented
by, statements regarding the derivation of the income or compliance with
limitations on benefits provisions in the case of an entity claiming treaty
benefits.
You have reason to know that documentary evidence is unreliable
or incorrect to establish a direct account holder's status as a foreign person
if:
- The only mailing or residence address on documentary evidence
provided after December 31, 2000, is an address at a financial institution
(unless the financial institution is the beneficial owner), an in-care-of
address, or a P.O. box;
- You have a mailing or residence address for the account holder
in the United States or if the account holder notifies you of a new address in
the United States; or
- The account holder has standing instructions directing you
to pay amounts from the account to an address or account maintained in the
United States.
You may, however, rely on documentary evidence as establishing
an account holder's foreign status if any of the following apply.
- The mailing or residence address is in the United States,
you receive the documentary evidence from an individual, and
- You possess or obtain additional documentary evidence (that
does not contain a U.S. address) supporting the claim of foreign status and a
reasonable explanation in writing supporting the account holder's foreign
status,
- You possess or obtain a Form W-8 that contains a permanent
residence address and mailing address outside the United States (or if a mailing
address is inside the United States the account holder provides a reasonable
explanation, in writing, supporting the account holder's foreign status, or the
Form W-8 was received before December 31, 2001), or
- The account is maintained at your office outside the United
States and you are required to report annually a payment to the account holder
on a tax information statement filed with the tax authority of the country in
which your office is located and that country has an income tax treaty in effect
with the United States.
- The mailing or residence address is in the United States,
you receive the documentary evidence from an entity (other than a flow-through
entity) and:
- You possess or obtain documentation to substantiate that
the entity is actually organized under the laws of a foreign country,
- You obtain a valid Form W-8 that contains a permanent residence
address and mailing address outside the United States (or if a mailing address
is inside the United States, the account holder provides additional documentary
evidence sufficient to establish the account holder's foreign status, or the
Form W-8 was received before December 31, 2001), or
- The account is maintained at an office outside the United
States and you are required to report annually a payment to the account holder
on a tax information statement filed with the tax authority of the country in
which your office is located and that country has an income tax treaty in effect
with the United States.
- You have instructions to pay amounts to an address or an account
in the United States and the account holder provides you with a reasonable
explanation, in writing, that supports the account holder's foreign status.
You have reason to know that documentary evidence provided by
a direct account holder to claim a reduced rate of withholding under a treaty is
unreliable or incorrect for purposes of establishing the account holder's
residency in a treaty country if:
- You have a mailing or residence address for the account holder
that is outside the applicable treaty country,
- The only address that you have (whether in or outside the
treaty country) is a P.O. box, an in-care-of address, or the address of a
financial institution (that is not the beneficial owner of the income), or
- The account holder has standing instructions for you to pay
amounts from its account to an address or account not in the treaty country.
You may, however, rely on documentary evidence as establishing
an account holder's claim of a reduced rate of withholding under a treaty if any
of the following apply.
- The mailing or residence address is outside the treaty country
and:
- You possess or obtain additional documentary evidence supporting
the account holder's claim of residence in the treaty country (and the
documentary evidence does not contain an address outside the treaty country, a
P.O. box, an in-care-of address, or the address of a financial institution),
- You possess or obtain documentary evidence that establishes
that the account holder is an entity organized in a treaty country, or
- You obtain a valid Form W-8BEN that contains a permanent
residence address and a mailing address in the applicable treaty country.
- You have instructions to pay amounts outside the treaty country
and the account holder gives you a reasonable explanation, in writing,
establishing residence in the applicable treaty country.
A financial institution that receives documentation from a payee
through an NQI, a flow-through entity, or a U.S. branch of a foreign bank or
insurance company subject to U.S. or state regulatory supervision has reason to
know that the documentary evidence is unreliable or incorrect if a reasonably
prudent person in the financial institution's position would question the claims
made. This standard requires, but is not limited to, compliance with the
following rules.
taxmap/pubs/p515-002.htm#en_us_publink1000224875You must review the withholding statement provided with Form
W-8IMY and may not rely on information in the statement to the extent the
information does not support the claims made for a payee. You may not treat a
payee as a foreign person if a U.S. address is provided for the payee. You may
not treat a person as a resident of a country with which the United States has
an income tax treaty if the address for the person is outside the treaty
country.
You may, however, treat a payee as a foreign person and may treat
a foreign person as a resident of a treaty country if a reasonable explanation
is provided, in writing, by the NQI, flow-through entity, or U.S. branch.
taxmap/pubs/p515-002.htm#en_us_publink1000224876If you receive a Form W-8 for a payee in association with a Form
W-8IMY, you must review each Form W-8 and verify that the information is
consistent with the information on the withholding statement. If there is a
discrepancy, you may rely on the Form W-8, if valid, and instruct the NQI,
flow-through entity, or U.S. branch to correct the withholding statement, or,
alternatively, you may apply the presumption rules, discussed later, to the
payee.
taxmap/pubs/p515-002.htm#en_us_publink1000224877If you receive documentary evidence for a payee in association
with a Form W-8IMY, you must review the documentary evidence provided by the
NQI, flow-through entity, or U.S. branch to determine that there is no obvious
indication that the payee is a U.S. person subject to Form 1099 reporting or
that the documentary evidence does not establish the identity of the person who
provided the documentation (for example, the documentary evidence does not
appear to be an identification document).
taxmap/pubs/p515-002.htm#en_us_publink1000224878If you cannot reliably associate a payment with valid documentation,
you must apply certain presumption rules or you may be liable for tax, interest,
and penalties. If you comply with the presumption rules, you are not liable for
tax, interest, and penalties even if the rate of withholding that should have
been applied based on the payee's actual status is different from that presumed.
The presumption rules apply to determine the status of the person
you pay as a U.S. or foreign person and other relevant characteristics, such as
whether the payee is a beneficial owner or intermediary, and whether the payee
is an individual, corporation, partnership, or trust. You are not permitted to
apply a reduced rate of NRA withholding based on a payee's presumed status if
documentation is required to establish a reduced rate of withholding. For
example, if the payee of interest is presumed to be a foreign person, you may
not apply the portfolio interest exception or a reduced rate of withholding
under a tax treaty since both exceptions require documentation.
If you rely on your actual knowledge about a payee's status and
withhold an amount less than that required under the presumption rules or do not
report a payment that is subject to reporting under the presumption rules, you
may be liable for tax, interest, and penalties. You should, however, rely on
your actual knowledge if doing so results in withholding an amount greater than
would apply under the presumption rules or in reporting an amount that would not
be subject to reporting under the presumption rules.
The presumption rules, in the absence of documentation, for the
subject matter are discussed in the regulation section indicated on Chart A.
Chart A. Presumption Rules in the Absence of Documentation
| For the presumption rules related to: | See regulations section: |
| Payee's status | 1.1441-1(b)(3); 1.6049-5(d) |
| Effectively connected income | 1.1441-4(a)(2) |
| Partnership and its partners | 1.1441-5(d); 1.1446-1(c)(3) |
| Estate or trust and its beneficiaries or owner | 1.1441-5(e)(6) |
Foreign tax-exempt organizations
(including private foundations)
| 1.1441-9(b)(3) |
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