§1471 — Withholdable payments to foreign financial institutions

Statute Text — 26 U.S.C. §1471

Treasury Regulations

• Treas. Reg. §1.1471-0Outline of regulation provisions for sections 1471 through 1474 Show full text ▾ Collapse ▴

  This section lists the table of contents for §§ 1.1471-1 through 1.1474-7 and § 301.1474-1 of this chapter.

  (a) Scope of chapter 4 of the Internal Revenue Code.

  (b) Definitions.

  (1) Account.

  (2) Account holder.

  (3) Active NFFE.

  (4) AML due diligence.

  (5) Annuity contract.

  (6) Assumes primary withholding responsibility.

  (7) Backup withholding.

  (8) Beneficial owner.

  (9) Blocked account.

  (10) Branch.

  (11) Broker.

  (12) Cash value.

  (13) Cash value insurance contract.

  (14) Certified deemed-compliant FFI.

  (15) Change in circumstances.

  (16) Chapter 3.

  (17) Chapter 4.

  (18) Chapter 4 reportable amount.

  (19) Chapter 4 status.

  (20) Chapter 4 withholding rate pool.

  (21) Clearing organization.

  (22) Complex trust.

  (23) Consolidated obligations.

  (24) Custodial account.

  (25) Custodial institution.

  (26) Customer master file.

  (27) Deemed-compliant FFI.

  (28) Deferred annuity contract.

  (29) Depository account.

  (30) Depository institution.

  (31) Direct reporting NFFE.

  (32) Documentary evidence.

  (33) Documentation.

  (34) Dormant account.

  (35) Effective date of the FFI agreement.

  (36) EIN.

  (37) Election to be withheld upon.

  (38) Electronically searchable information.

  (39) Entity.

  (40) Entity account.

  (41) Excepted NFFE.

  (42) Exempt beneficial owner.

  (43) Exempt recipient.

  (44) Expanded affiliated group.

  (45) FATF.

  (46) FATF-compliant jurisdiction.

  (47) FFI.

  (48) FFI agreement.

  (49) Financial account.

  (50) Financial institution.

  (51) Flow-through entity.

  (52) Flow-through withholding certificate.

  (53) Foreign entity.

  (54) Foreign passthru payment.

  (55) Foreign payee.

  (56) Foreign person.

  (57) GIIN.

  (58) Grandfathered obligation.

  (59) Grantor trust.

  (60) Gross proceeds.

  (61) Group annuity contract.

  (62) Group insurance contract.

  (63) Immediate annuity.

  (64) Individual account.

  (65) Insurance company.

  (66) Insurance contract.

  (67) Intergovernmental agreement (IGA).

  (68) Intermediary.

  (69) Intermediary withholding certificate.

  (70) Investment entity.

  (71) Investment-linked annuity contract.

  (72) Investment-linked insurance contract.

  (73) IRS FFI list.

  (74) Life annuity contract.

  (75) Life insurance contract.

  (76) Limited branch.

  (77) Limited FFI.

  (78) Model 1 IGA.

  (79) Model 2 IGA.

  (80) NFFE.

  (81) Non-exempt recipient.

  (82) Nonparticipating FFI.

  (83) Nonreporting IGA FFI.

  (84) Non-U.S. account.

  (85) NQI.

  (86) NWP.

  (87) NWT.

  (88) Offshore obligation.

  (89) Owner.

  (90) Owner-documented FFI.

  (91) Participating FFI.

  (92) Participating FFI group.

  (93) Partnership.

  (94) Passive NFFE.

  (95) Passthru payment.

  (96) Payee.

  (97) Payment with respect to an offshore obligation.

  (98) Payor.

  (99) Permanent residence address.

  (100) Person.

  (101) Preexisting account.

  (102) Preexisting entity account.

  (103) Preexisting individual account.

  (104) Preexisting obligation.

  (105) Pre-FATCA Form W-8.

  (106) Prima facie FFI.

  (107) QI.

  (108) QI agreement.

  (109) QI branch of a U.S. financial institution.

  (110) Recalcitrant account holder.

  (111) Registered deemed-compliant FFI.

  (112) Relationship manager.

  (113) Reportable payment.

  (114) Reporting Model 1 FFI.

  (115) Reporting Model 2 FFI.

  (116) Responsible officer.

  (117) Restricted distributor.

  (118) Simple trust.

  (119) Specified insurance company.

  (120) Specified U.S. person.

  (121) Sponsored FFI.

  (122) Sponsored FFI group.

  (123) Sponsored direct reporting NFFE.

  (124) Sponsoring entity.

  (125) Standardized industry coding system.

  (126) Standing instructions to pay amounts.

  (127) Subject to withholding.

  (128) Substantial U.S. owner.

  (129) Territory entity.

  (130) Territory financial institution.

  (131) Territory financial institution treated as a U.S. person.

  (132) Territory NFFE.

  (133) TIN.

  (134) U.S. account.

  (135) U.S. branch treated as a U.S. person.

  (136) U.S. financial institution.

  (137) U.S. indicia.

  (138) U.S. owned foreign entity.

  (139) U.S. payee.

  (140) U.S. payor.

  (141) U.S. person.

  (142) U.S. source FDAP income.

  (143) U.S. territory.

  (144) U.S. withholding agent.

  (145) Withholdable payment.

  (146) Withholding.

  (147) Withholding agent.

  (148) Withholding certificate.

  (149) WP.

  (150) Written statement.

  (151) WT.

  (c) Effective/applicability date.

  (a) Requirement to withhold on payments to FFIs.

  (1) General rule of withholding.

  (2) Special withholding rules.

  (i) Requirement to withhold on payments of U.S. source FDAP income to participating FFIs and deemed-compliant FFIs that are NQIs, NWPs, or NWTs, and U.S. branches acting as intermediaries.

  (ii) Residual withholding responsibility of intermediaries and flow-through entities.

  (iii) Requirement to withhold if a participating FFI or registered deemed-compliant FFI makes an election to be withheld upon.

  (A) Election to be withheld upon for U.S. source FDAP income.

  (B) Election to be withheld upon for gross proceeds.

  (iv) Withholding obligation of a territory financial institution.

  (v) Withholding obligation of a foreign branch of a U.S. financial institution.

  (vi) Payments of gross proceeds.

  (3) Coordination of withholding under sections 1471(a) and (b).

  (4) Payments for which no withholding is required.

  (i) Exception to withholding if the withholding agent lacks control, custody, or knowledge.

  (A) In general.

  (B) Example.

  (ii) Exception to withholding for certain payments made prior to July 1, 2016 (transitional).

  (iii) Payments to a participating FFI.

  (iv) Payments to a deemed-compliant FFI.

  (v) Payments to an exempt beneficial owner.

  (vi) Payments to a territory financial institution.

  (vii) Payments to an account held with a clearing organization with FATCA-compliant membership.

  (viii) Payments to certain excepted accounts.

  (5) Withholding requirements if source or character of payment is unknown.

  (b) Grandfathered obligations.

  (1) Grandfathered treatment of outstanding obligations.

  (2) Definitions.

  (i) Grandfathered obligation.

  (ii) Obligation.

  (iii) Date outstanding.

  (iv) Material modification.

  (3) Application to flow-through entities.

  (i) Partnerships.

  (ii) Simple trusts.

  (iii) Grantor trusts.

  (4) Determination by withholding agent of grandfathered treatment.

  (i) In general.

  (ii) Determination of material modification.

  (iii) Record retention.

  (c) Effective/applicability date.

  (a) Payee defined.

  (1) In general.

  (2) Payee with respect to a financial account.

  (3) Exceptions.

  (i) Certain foreign agents or intermediaries.

  (ii) Foreign flow-through entity.

  (iii) U.S. intermediary or agent of a foreign person.

  (iv) Territory financial institution.

  (v) Disregarded entity or limited branch.

  (vi) U.S. branch of treated as a U.S. person.

  (vii) Foreign branch of a U.S. person.

  (b) Determination of payee's status.

  (1) Determining whether a payment is received by an intermediary.

  (2) Determination of entity type.

  (3) Determination of whether the payment is made to a QI, WP, or WT.

  (4) Determination of whether the payee is receiving effectively connected income.

  (c) Rules for reliably associating a payment with a withholding certificate or other appropriate documentation.

  (1) In general.

  (2) Reliably associating a payment with documentation if a payment is made through an intermediary or flow-through entity that is not the payee.

  (i) In general.

  (ii) Exception to entity account documentation rules for an offshore account of an intermediary or flow-through entity.

  (3) Requirements for validity of certificates.

  (i) Form W-9.

  (ii) Beneficial owner withholding certificate (Form W-8BEN).

  (iii) Withholding certificate of an intermediary, flow-through entity, or U.S. branch (Form W-8IMY).

  (A) In general.

  (B) Withholding statement.

  (1) In general.

  (2) Special requirements for an FFI withholding statement.

  (3) Special requirements for a chapter 4 withholding statement.

  (4) Special requirements for an exempt beneficial owner withholding statement.

  (5) Nonqualified intermediary withholding statement.

  (C) Failure to provide allocation information.

  (D) Special rules applicable to a withholding certificate of a QI that assumes primary withholding responsibility under chapter 3.

  (E) Special rules applicable to a withholding certificate of a QI that does not assume primary withholding responsibility under chapter 3.

  (F) Special rules applicable to a withholding certificate of a territory financial institution that agrees to be treated as a U.S. person.

  (G) Special rules applicable to a withholding certificate of a territory financial institution that does not agree to be treated as a U.S. person.

  (H) Rules applicable to a withholding certificate of a U.S. branch.

  (iv) Certificate for exempt status (Form W-8EXP).

  (v) Certificate for effectively connected income (Form W-8ECI).

  (4) Requirements for written statements.

  (5) Requirements for documentary evidence.

  (i) Foreign status.

  (A) Certificate of residence.

  (B) Individual government identification.

  (C) QI documentation.

  (D) Entity government documentation.

  (E) Third-party credit report.

  (ii) Chapter 4 status.

  (A) General documentary evidence.

  (B) Preexisting obligation documentary evidence.

  (C) Payee-specific documentary evidence.

  (6) Applicable rules for withholding certificates, written statements, and documentary evidence.

  (i) Who may sign the withholding certificate or written statement.

  (ii) Period of validity.

  (A) General rule.

  (B) Indefinite validity.

  (C) Indefinite validity in the case of certain offshore obligations.

  (D) Exception for certificate for effectively connected income.

  (E) Change in circumstances.

  (1) Defined.

  (2) Obligation to notify withholding agent of a change in circumstances.

  (3) Withholding agent's obligation with respect to a change in circumstances.

  (iii) Record retention.

  (A) In general.

  (B) Exception for documentary evidence received with respect to offshore obligations.

  (iv) Electronic transmission of withholding certificate, written statement, and documentary evidence.

  (v) Acceptable substitute withholding certificate.

  (A) In general.

  (B) Non-IRS form for individuals.

  (vi) Electronic confirmation of TIN on withholding certificate.

  (vii) Reliance on a prior version of a withholding certificate.

  (7) Curing documentation errors.

  (i) Curing inconsequential errors on a withholding certificate.

  (ii) Documentation received after the time of payment.

  (8) Documentation furnished on account-by-account basis unless exception provided for sharing documentation within expanded affiliated group.

  (i) Single branch systems.

  (ii) Universal account systems.

  (iii) Shared account systems.

  (iv) Document sharing for gross proceeds.

  (v) Preexisting account.

  (9) Reliance on documentation collected by or certifications provided by other persons.

  (i) Shared documentation system maintained by an agent.

  (ii) Third-party data providers.

  (iii) Reliance on certification provided by introducing brokers.

  (iv) Reliance on documentation and certifications provided between principals and agents.

  (A) In general.

  (B) Reliance upon certification of the principal.

  (C) Document sharing.

  (D) Examples.

  (v) Reliance upon documentation for accounts acquired in merger or bulk acquisition for value.

  (d) Documentation requirements to establish payee's chapter 4 status.

  (1) Reliance on pre-FATCA Form W-8.

  (2) Identification of U.S. persons.

  (i) In general.

  (ii) Reliance on documentary evidence.

  (iii) Preexisting obligations.

  (3) Identification of individuals that are foreign persons.

  (i) In general.

  (ii) Exception for offshore obligations.

  (4) Identification of participating FFIs and registered deemed-compliant FFIs.

  (i) In general.

  (ii) Exception for payments made prior to January 1, 2017, with respect to preexisting obligations (transitional).

  (iii) Exception for offshore obligations.

  (iv) Exceptions for payments to reporting Model 1 FFIs.

  (v) Reason to know.

  (vi) Sponsored investment entities and sponsored controlled foreign corporations.

  (A) In general.

  (B) Payments made prior to January 1, 2017 (transitional).

  (C) Payments made after December 31, 2016, to payees documented prior to January 1, 2017.

  (5) Identification of certified deemed-compliant FFIs.

  (i) In general.

  (ii) Sponsored, closely-held investment vehicles.

  (A) In general.

  (B) Offshore obligations.

  (iii) Certain investment entities that do not maintain financial accounts.

  (A) In general.

  (B) Offshore obligations.

  (6) Identification of owner-documented FFIs.

  (i) In general.

  (ii) Auditor's letter substitute.

  (iii) Documentation for owners and debt holders of payee.

  (iv) Content of FFI owner reporting statement.

  (v) Exception for preexisting obligations (transitional).

  (vi) Exception for offshore obligations.

  (vii) Exception for certain offshore obligations of $1,000,000 or less.

  (7) Nonreporting IGA FFIs.

  (i) In general.

  (ii) Exception for offshore obligations.

  (8) Identification of nonparticipating FFIs.

  (i) In general.

  (ii) Special documentation rules for payments made to an exempt beneficial owner through a nonparticipating FFI.

  (9) Identification of exempt beneficial owners.

  (i) Identification of foreign governments, governments of U.S. territories, international organizations, and foreign central banks of issue.

  (A) In general.

  (B) Exception for offshore obligations.

  (C) Exception for preexisting offshore obligations.

  (ii) Identification of retirement funds.

  (A) In general.

  (B) Exception for offshore obligations.

  (C) Exception for preexisting offshore obligations.

  (iii) Identification of entities wholly owned by exempt beneficial owners.

  (10) Identification of territory financial institutions.

  (i) Identification of territory financial institutions that are beneficial owners.

  (A) In general.

  (B) Exception for preexisting offshore obligations.

  (ii) Identification of territory financial institutions acting as intermediaries or that are flow-through entities.

  (iii) Reason to know.

  (11) Identification of excepted NFFEs.

  (i) Identification of excepted nonfinancial group entities.

  (A) In general.

  (B) Exception for offshore obligations.

  (ii) Identification of excepted nonfinancial start-up companies.

  (A) In general.

  (B) Exception for offshore obligations.

  (C) Exception for preexisting offshore obligations.

  (iii) Identification of excepted nonfinancial entities in liquidation or bankruptcy.

  (A) In general.

  (B) Exception for offshore obligations.

  (C) Exception for preexisting offshore obligations.

  (iv) Identification of section 501(c) organizations.

  (A) In general.

  (B) Reason to know.

  (v) Identification of non-profit organizations.

  (A) In general.

  (B) Exception for offshore obligations.

  (C) Exception for preexisting offshore obligations.

  (D) Reason to know.

  (vi) Identification of NFFEs that are publicly traded corporations.

  (A) Exception for offshore obligations.

  (B) Exception for preexisting offshore obligations.

  (vii) Identification of NFFE affiliates.

  (A) Exception for offshore obligations.

  (B) Exception for preexisting offshore obligations.

  (viii) Identification of excepted territory NFFEs.

  (A) Exception for payments made prior to January 1, 2017, with respect to preexisting obligations of $1,000,000 or less (transitional).

  (B) Exception for offshore obligations.

  (C) Exception for preexisting offshore obligations of $1,000,000 or less.

  (ix) Identification of active NFFEs.

  (A) Exception for offshore obligations.

  (B) Exception for preexisting offshore obligations.

  (C) Limit on reason to know.

  (x) Identifying a direct reporting NFFE (other than a sponsored direct reporting NFFE).

  (A) In general.

  (B) Exception for offshore obligations.

  (C) Special rule for preexisting offshore obligations.

  (xi) Identifying a sponsored direct reporting NFFE.

  (A) In general.

  (1) Payments made prior to January 1, 2017 (transitional).

  (2) Payments made after December 31, 2016, to payees documented prior to January 1, 2017.

  (B) Exception for offshore obligations.

  (xii) Identification of excepted inter-affiliate FFI.

  (A) In general.

  (B) Offshore obligations.

  (C) Reason to know.

  (12) Identification of passive NFFEs.

  (i) Exception for offshore obligations.

  (ii) Special rule for preexisting offshore obligations.

  (iii) Required owner certification for passive NFFEs.

  (A) In general.

  (B) Exception for preexisting obligations of $1,000,000 or less (transitional).

  (e) Standards of knowledge.

  (1) In general.

  (2) Notification by the IRS.

  (3) GIIN verification.

  (i) In general.

  (ii) Special rules for reporting Model 1 FFIs.

  (iii) Special rules for direct reporting NFFEs.

  (iv) Special rules for sponsored direct reporting NFFEs and sponsoring entities.

  (A) Sponsored direct reporting NFFEs.

  (B) Sponsoring entities (transitional).

  (4) Reason to know.

  (i) Reason to know regarding an entity's chapter 4 status.

  (ii) Reason to know applicable to withholding certificates.

  (A) In general.

  (B) Withholding certificate provided by an FFI.

  (iii) Reason to know applicable to written statements.

  (iv) Reason to know applicable to documentary evidence.

  (A) In general.

  (B) Standards of knowledge applicable to certain types of documentary evidence.

  (v) Specific standards of knowledge applicable when only documentary evidence is a code or classification described in paragraph (c)(5)(ii)(B) of this section.

  (A) U.S. indicia for entities.

  (B) Documentation required to cure U.S. indicia.

  (vi) Specific standards of knowledge applicable to documentation received from intermediaries and flow-through entities.

  (A) In general.

  (B) Limits on reason to know with respect to documentation received from participating FFIs and registered deemed-compliant FFIs that are intermediaries or flow-through entities.

  (vii) Limits on reason to know.

  (A) Scope of review for preexisting obligations of entities.

  (B) Reason to know there are U.S. indicia associated with preexisting obligations.

  (C) Reason to know there are U.S. indicia associated with preexisting offshore obligations.

  (D) Limits on reason to know for multiple obligations belonging to a single person.

  (viii) Reasonable explanation supporting claim of foreign status.

  (5) Conduit financing arrangements.

  (6) Additional guidance.

  (f) Presumptions regarding chapter 4 status of the person receiving the payment in the absence of documentation.

  (1) In general.

  (2) Presumptions of classification as an individual or entity and entity as the beneficial owner.

  (3) Presumptions of U.S. or foreign status.

  (4) Presumption of chapter 4 status for a foreign entity.

  (5) Presumption of chapter 4 status of payee with respect to a payment to an intermediary or flow-through entity.

  (6) Presumption of effectively connected income for payments to certain U.S. branches.

  (7) Joint payees.

  (i) In general.

  (ii) Exception for offshore obligations.

  (8) Rebuttal of presumptions.

  (9) Effect of reliance on presumptions and of actual knowledge or reason to know otherwise.

  (i) In general.

  (ii) 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.

  (g) Effective/applicability date.

  (a) In general.

  (1) Withholding.

  (2) Identification and documentation of account holders.

  (3) Reporting.

  (4) Expanded affiliated group.

  (5) Verification.

  (6) Event of default.

  (7) Refunds.

  (b) Withholding requirements.

  (1) In general.

  (2) Withholding determination.

  (3) Satisfaction of withholding requirements.

  (i) In general.

  (ii) Withholding not required.

  (iii) Election to withhold under section 3406.

  (4) Foreign passthru payments.

  (5) Withholding on limited FFIs and limited branches.

  (i) Limited FFIs.

  (ii) Limited branches.

  (6) Special rule for dormant accounts.

  (7) Withholding requirements for U.S. branches of FFIs treated as U.S. persons.

  (c) Due diligence for the identification and documentation of account holders and payees.

  (1) Scope of paragraph.

  (2) General rules for the identification and documentation of account holders and payees.

  (i) Overview.

  (ii) Standards of knowledge.

  (A) In general.

  (B) Limits on reason to know with respect to certain accounts acquired in merger of bulk acquisition.

  (1) In general.

  (2) Participating FFIs and certain deemed-compliant FFIs that apply the due diligence rules, and U.S. financial institutions.

  (iii) Change in circumstances.

  (A) Obligation to identify a change in circumstances.

  (B) Definition of change in circumstances.

  (C) Requirements following a change in circumstances.

  (iv) Record retention.

  (v) Documentation rules for U.S. branches of FFIs that are treated as U.S. persons.

  (3) Identification and documentation procedure for entity accounts and payees.

  (i) In general.

  (ii) Timeframe for applying identification and documentation procedure for entity accounts and payees.

  (iii) Documentation exception for certain preexisting entity accounts.

  (A) Accounts to which this exception applies.

  (B) Aggregation of entity accounts.

  (C) Election to forgo exception.

  (4) Identification and documentation procedure for individual accounts other than preexisting accounts.

  (i) In general.

  (ii) Reliance on third-party for identification of individual accounts other than preexisting accounts.

  (iii) Alternative identification and documentation procedure for certain cash value insurance or annuity contracts.

  (A) Group cash value insurance contracts or group annuity contracts.

  (B) Accounts held by beneficiaries of a cash value insurance contract that is a life insurance contract.

  (5) Identification and documentation procedure for preexisting individual accounts.

  (i) In general.

  (ii) Special rule for preexisting individual accounts previously documented as U.S. accounts for purposes of chapter 3 or 61.

  (iii) Exceptions for certain low value preexisting individual accounts.

  (A) Accounts to which an exception applies.

  (B) Aggregation of accounts.

  (C) Election to forgo exception.

  (iv) Specific identification and documentation procedures for preexisting individual accounts.

  (A) In general.

  (B) U.S. indicia and relevant documentation rules.

  (1) U.S. indicia.

  (2) Documentation to be retained upon identifying U.S. indicia.

  (i) Designation of account holder as a U.S. citizen or resident.

  (ii) Unambiguous indication of a U.S. place of birth.

  (iii) U.S. address or U.S. mailing address.

  (iv) Only U.S. telephone numbers.

  (v) U.S. telephone numbers and non-U.S. telephone numbers.

  (vi) Standing instructions to pay amounts.

  (vii) Power of attorney or signatory authority granted to a person with a U.S. address or “in-care-of” address or “hold mail” address.

  (C) Electronic search for identifying U.S. indicia.

  (D) Enhanced review for identifying U.S. indicia in the case of certain high-value accounts.

  (1) In general.

  (2) Relationship manager inquiry.

  (3) Additional review of non-electronic records.

  (4) Limitations on the enhanced review in the case of comprehensive electronically searchable information.

  (E) Exception for preexisting individual accounts previously documented as held by foreign individuals.

  (6) Examples.

  (7) Certifications of responsible officer.

  (d) Account reporting.

  (1) Scope of paragraph.

  (2) Reporting requirements in general.

  (i) Accounts subject to reporting.

  (ii) Financial institution required to report an account.

  (A) In general.

  (B) Special reporting of account holders of territory financial institutions.

  (C) Special reporting of account holders of a sponsored FFI.

  (D) Special reporting of accounts held by owner-documented FFIs.

  (E) Requirement to identify the GIIN of a branch that maintains an account.

  (F) Reporting by participating FFIs and registered deemed-compliant FFIs (including QIs, WPs, WTs, and certain U.S. branches not treated as U.S. persons) for accounts of nonparticipating FFIs (transitional).

  (G) Combined reporting on Form 8966 following merger or bulk acquisition.

  (iii) Special U.S. account reporting rules for U.S. payors.

  (A) Special reporting rule for U.S. payors other than U.S. branches.

  (B) Special reporting rules for U.S. branches treated as U.S. persons.

  (C) Rules for U.S. branches of FFIs not treated as U.S. persons.

  (3) Reporting of accounts under section 1471(c)(1).

  (i) In general.

  (ii) Accounts held by specified U.S. persons.

  (iii) Accounts held by U.S. owned foreign entities.

  (iv) Special reporting of accounts held by owner-documented FFIs.

  (v) Form for reporting accounts under section 1471(c)(1).

  (vi) Time and manner of filing.

  (vii) Extensions in filing.

  (4) Descriptions applicable to reporting requirements of § 1.1471-4(d)(3).

  (i) Address.

  (ii) Account number.

  (iii) Account balance or value.

  (A) In general.

  (B) Currency translation of account balance or value.

  (iv) Payments made with respect to an account.

  (A) Depository accounts.

  (B) Custodial accounts.

  (C) Other accounts.

  (D) Transfers and closings of deposit, custodial, insurance, and annuity financial accounts.

  (E) Amount and character of payments subject to reporting.

  (F) Currency translation.

  (v) Record retention requirements.

  (5) Election to perform chapter 61 reporting.

  (i) In general.

  (A) Election under section 1471(c)(2).

  (B) Election to report in a manner similar to section 6047(d).

  (ii) Additional information to be reported.

  (iii) Special reporting of accounts held by owner-documented FFIs.

  (iv) Branch reporting.

  (v) Time and manner of making the election.

  (vi) Revocation of election.

  (vii) Filing of information under election.

  (6) Reporting on recalcitrant account holders.

  (i) In general.

  (ii) Definition of dormant account.

  (iii) End of dormancy.

  (iv) Forms.

  (v) Time and manner of filing.

  (vi) Extensions in filing.

  (vii) Record retention requirements.

  (7) Special reporting rules with respect to the 2014 and 2015 calendar years.

  (i) In general.

  (ii) Participating FFIs that report under § 1.1471-4(d)(3).

  (A) Reporting with respect to the 2014 calendar year.

  (B) Reporting with respect to the 2015 calendar year.

  (iii) Participating FFIs that report under § 1.1471-4(d)(5).

  (iv) Forms for reporting.

  (A) In general.

  (B) Special determination date and timing for reporting with respect to the 2014 calendar year.

  (8) Reporting requirements of QIs, WPs and WTs.

  (9) Examples.

  (e) Expanded affiliated group requirements.

  (1) In general.

  (2) Limited branches.

  (i) In general.

  (ii) Branch defined.

  (iii) Limited branch defined.

  (iv) Conditions for limited branch status.

  (v) Term of limited branch status (transitional).

  (vi) Exception from restriction on opening U.S. accounts and nonparticipating FFI accounts.

  (3) Limited FFI.

  (i) In general.

  (ii) Limited FFI defined.

  (iii) Conditions for limited FFI status.

  (iv) Period for limited FFI status (transitional).

  (v) Exception from registration requirement.

  (A) Conditions for exception.

  (B) Confirmation requirements of lead FI.

  (vi) Exception from restriction on opening U.S. accounts and nonparticipating FFI accounts.

  (4) Special rule for QIs.

  (f) Verification.

  (1) In general.

  (2) Compliance program.

  (i) In general.

  (ii) Consolidated compliance program.

  (A) In general.

  (B) Requirements of compliance FI.

  (1) Periodic certification.

  (i) In general.

  (ii) Late-joining electing FFIs.

  (2) Preexisting account certification.

  (3) Certification of compliance.

  (i) In general.

  (ii) Certification of effective internal controls.

  (iii) Qualified certification.

  (iv) Material failures defined.

  (4) IRS review of compliance.

  (i) General inquiries.

  (ii) Inquiries regarding substantial non-compliance.

  (g) Event of default.

  (1) Defined.

  (2) Notice of event of default.

  (3) Remediation of event of default.

  (h) Collective credit or refund procedures for overpayments.

  (1) In general.

  (2) Persons for which a collective refund is not permitted.

  (3) Payments for which a collective refund is permitted.

  (4) Procedural and other requirements for collective refund.

  (i) Legal prohibitions on reporting U.S. accounts and withholding.

  (1) In general.

  (2) Requesting waiver or closure of a U.S. account.

  (3) Legal prohibitions preventing withholding.

  (i) In general.

  (ii) Block or transfer accounts or obligations.

  (j) Effective/applicability date.

  (1) In general.

  (2) Special applicability date.

  (a) U.S. accounts.

  (1) In general.

  (2) Definition of U.S. account.

  (3) Account holder.

  (i) In general.

  (ii) Financial accounts held by agents that are not financial institutions.

  (iii) Jointly held accounts.

  (iv) Account holder for insurance and annuity contracts.

  (v) Examples.

  (4) Exceptions to U.S. account status.

  (i) Exception for certain individual accounts of participating FFIs.

  (ii) Election to forgo exception.

  (iii) Example.

  (b) Financial accounts.

  (1) In general.

  (i) Depository account.

  (ii) Custodial account.

  (iii) Equity or debt interest.

  (A) Equity or debt interests in an investment entity.

  (B) Certain equity or debt interests in a holding company or treasury center.

  (C) Equity or debt interests in other financial institutions.

  (iv) Insurance and annuity contracts.

  (2) Exceptions.

  (i) Certain savings accounts.

  (A) Retirement and pension accounts.

  (B) Non-retirement savings accounts.

  (C) Rollovers.

  (D) Coordination with section 6038D.

  (E) Account that is tax-favored.

  (ii) Certain term life insurance contracts.

  (iii) Account held by an estate.

  (iv) Certain escrow accounts.

  (v) Certain annuity contracts.

  (vi) Account or product excluded under an intergovernmental agreement.

  (3) Definitions.

  (i) Depository account.

  (A) In general.

  (B) Exceptions.

  (ii) Custodial account.

  (iii) Equity interest in certain entities.

  (A) Partnership.

  (B) Trust.

  (iv) Regularly traded on an established securities market.

  (v) Value of interest determined, directly or indirectly, primarily by reference to assets that give rise (or could give rise) to withholdable payments.

  (A) Equity interest.

  (B) Debt interest.

  (vi) Return earned on the interest (including upon a sale, exchange, or redemption) determined, directly or indirectly, primarily by reference to one or more investment entities or passive NFFEs.

  (A) Equity interest.

  (B) Debt interest.

  (vii) Cash value insurance contract.

  (A) In general.

  (B) Cash value.

  (C) Amounts excluded from cash value.

  (D) Policyholder dividend.

  (4) Account balance or value.

  (i) In general.

  (ii) Special rule for immediate annuity.

  (A) Immediate annuities without minimum benefit guarantees.

  (B) Immediate annuities with a minimum benefit guarantee.

  (C) Net present value of amounts payable in future periods.

  (iii) Account aggregation requirements.

  (A) In general.

  (B) Aggregation rule for relationship managers.

  (C) Examples.

  (iv) Currency translation of balance or value.

  (5) Account maintained by financial institution.

  (c) U.S. owned foreign entity.

  (d) Definition of FFI.

  (e) Definition of financial institution.

  (1) In general.

  (2) Banking or similar business.

  (i) In general.

  (ii) Exception for certain lessors and lenders.

  (iii) Application of section 581.

  (iv) Effect of local regulation.

  (3) Holding financial assets for others as a substantial portion of its business.

  (i) Substantial portion.

  (A) In general.

  (B) Special rule for start-up entities.

  (ii) Income attributable to holding financial assets and related financial services.

  (iii) Effect of local regulation.

  (4) Investment entity.

  (i) In general.

  (ii) Financial assets.

  (iii) Primarily conducts as a business.

  (A) In general.

  (B) Special rule for start-up entities.

  (iv) Primarily attributable to investing, reinvesting, or trading in financial assets.

  (A) In general.

  (B) Special rule for start-up entities.

  (v) Examples.

  (5) Exclusions.

  (i) Excepted nonfinancial group entities.

  (A) In general.

  (B) Nonfinancial group.

  (C) Holding company.

  (D) Treasury center.

  (E) Captive finance company.

  (ii) Excepted nonfinancial start-up companies or companies entering a new line of business.

  (A) In general.

  (B) Exception for investment funds.

  (iii) Excepted nonfinancial entities in liquidation or bankruptcy.

  (iv) Excepted inter-affiliate FFI.

  (v) Section 501(c) entities.

  (vi) Non-profit organizations.

  (6) Reserving activities of an insurance company.

  (f) Deemed-compliant FFIs.

  (1) Registered deemed-compliant FFIs.

  (i) Registered deemed-compliant FFI categories.

  (A) Local FFIs.

  (B) Nonreporting members of participating FFI groups.

  (C) Qualified collective investment vehicles.

  (D) Restricted funds.

  (E) Qualified credit card issuers and servicers.

  (F) Sponsored investment entities and controlled foreign corporations.

  (ii) Procedural requirements for registered deemed-compliant FFIs.

  (iii) Deemed-compliant FFI that is merged or acquired.

  (iv) IRS review of compliance by registered deemed-compliant FFIs.

  (A) General inquiries.

  (B) Inquiries regarding substantial non-compliance.

  (2) Certified deemed-compliant FFIs.

  (i) Nonregistering local bank.

  (ii) FFIs with only low-value accounts.

  (iii) Sponsored, closely-held investment vehicles.

  (iv) Limited life debt investment entities (transitional).

  (v) Certain investment entities that do not maintain financial accounts.

  (3) Owner-documented FFIs.

  (i) In general.

  (ii) Requirements of owner-documented FFI status.

  (4) Definition of a restricted distributor.

  (g) Recalcitrant account holders.

  (1) Scope.

  (2) Recalcitrant account holder.

  (3) Start of recalcitrant account holder status.

  (i) Preexisting accounts identified under the procedures described in § 1.1471-4(c) for identifying U.S. accounts.

  (A) In general.

  (B) Accounts other than high-value accounts.

  (C) High-value accounts.

  (D) Preexisting accounts that become high-value accounts.

  (ii) Accounts that are not preexisting accounts and accounts requiring name/TIN correction.

  (iii) Accounts with changes in circumstances.

  (4) End of recalcitrant account holder status.

  (h) Passthru payment.

  (1) Defined.

  (2) Foreign passthru payment.

  (i) Expanded affiliated group.

  (1) Scope of paragraph.

  (2) Expanded affiliated group defined.

  (3) Member of expanded affiliated group.

  (4) Ownership test.

  (i) Corporations.

  (A) Stock not to include certain preferred stock.

  (B) Valuation.

  (ii) Partnerships.

  (iii) Trusts.

  (5) Treatment of warrants, options, and obligations convertible into equity for determining ownership.

  (6) Exception for FFIs holding certain capital investments.

  (7) Seed capital.

  (8) Anti-abuse rule.

  (9) Exception for limited life debt investment entities.

  (10) Partnerships, trusts, and other non-corporate entities.

  (j) Sponsoring entity verification.

  (1) In general.

  (2) Compliance program.

  (3) Certification of compliance.

  (i) Certification requirement.

  (A) In general.

  (B) Extension of time for the certification period ending on December 31, 2017.

  (ii) Late-joining sponsored FFIs.

  (iii) Certification period.

  (iv) Additional certifications or information.

  (v) Certifications regarding sponsoring entity and sponsored FFI requirements.

  (vi) Certifications regarding internal controls.

  (A) Certification of effective internal controls.

  (B) Qualified certification.

  (vii) Material failures defined.

  (4) IRS review of compliance.

  (i) General inquiries.

  (ii) Inquiries regarding substantial non-compliance.

  (iii) Compliance procedures for a sponsored FFI subject to a Model 2 IGA.

  (5) Preexisting account certification.

  (6) Sponsorship agreement.

  (k) Sponsoring entity event of default.

  (1) Defined.

  (2) Notice of event of default.

  (3) Remediation of event of default.

  (4) Termination.

  (i) In general.

  (ii) Termination of sponsoring entity.

  (iii) Termination of sponsored FFI.

  (iv) Reconsideration of notice of default or notice of termination.

  (v) Sponsoring entity of sponsored FFIs subject to a Model 2 IGA.

  (l) Trustee-documented trust verification.

  (1) Compliance program.

  (2) Certification of compliance.

  (i) Certification requirement.

  (A) In general.

  (B) Extension of time for the certification period ending on December 31, 2017.

  (ii) Late-joining trustee-documented trusts.

  (iii) Certification period.

  (iv) Certifications.

  (3) IRS review of compliance by trustees of trustee-documented trusts.

  (i) General inquiries.

  (ii) Inquiries regarding substantial non-compliance.

  (m) Applicability date.

  (a) In general.

  (b) Any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing.

  (1) Integral part.

  (2) Controlled entity.

  (3) Inurement to the benefit of private persons.

  (c) Any international organization or any wholly owned agency or instrumentality thereof.

  (d) Foreign central bank of issue.

  (1) In general.

  (2) Separate instrumentality.

  (3) Bank for International Settlements.

  (4) Income on certain transactions.

  (e) Governments of U.S. territories.

  (f) Certain retirement funds.

  (1) Treaty-qualified retirement fund.

  (2) Broad participation retirement fund.

  (3) Narrow participation retirement funds.

  (4) Fund formed pursuant to a plan similar to a section 401(a) plan.

  (5) Investment vehicles exclusively for retirement funds.

  (6) Pension fund of an exempt beneficial owner.

  (7) Example.

  (g) Entities wholly owned by exempt beneficial owners.

  (h) Exception for commercial activities.

  (1) General rule.

  (2) Limitation.

  (i) Effective/applicability date.

  (a) In general.

  (b) Withholdable payments made to an NFFE.

  (1) In general.

  (2) Transitional relief.

  (c) Exceptions.

  (1) Payments to an excepted NFFE.

  (i) Publicly traded corporation.

  (A) Regularly traded.

  (B) Special rules regarding the regularly traded requirement.

  (1) Year of initial public offering.

  (2) Classes of stock treated as meeting the regularly traded requirement.

  (3) Anti-abuse rule.

  (C) Established securities market.

  (1) In general.

  (2) Foreign exchange with multiple tiers.

  (3) Computation of dollar value of stock traded.

  (ii) Certain affiliated entities related to a publicly traded corporation.

  (iii) Certain territory entities.

  (iv) Active NFFEs.

  (A) Passive income.

  (B) Exceptions from passive income treatment.

  (C) Methods of measuring assets.

  (v) Excepted nonfinancial entities.

  (vi) Direct reporting NFFEs.

  (vii) Sponsored direct reporting NFFEs.

  (2) Payments made to an exempt beneficial owner.

  (3) Definition of direct reporting NFFE.

  (4) Election to be treated as a direct reporting NFFE.

  (i) Manner of making election.

  (ii) Effective date of election.

  (iii) Revocation of election by NFFE.

  (iv) Revocation of election by Commissioner.

  (v) Event of default.

  (vi) Notice of event of default.

  (vii) Remediation of event of default.

  (5) Election by a direct reporting NFFE to be treated as a sponsored direct reporting NFFE.

  (i) Definition of sponsored direct reporting NFFE.

  (ii) Requirements for sponsoring entity of a sponsored direct reporting NFFE.

  (iii) Revocation of status as sponsoring entity.

  (iv) Liability of sponsoring entity.

  (d) Rules for determining payee and beneficial owner.

  (1) In general.

  (2) Payments made to a NFFE that is a QI, WP, or WT.

  (3) Payments made to a partner or beneficiary of an NFFE that is an NWP or NWT.

  (4) Payments made to a beneficial owner that is an NFFE.

  (5) Absence of valid documentation.

  (e) Information reporting requirements.

  (1) Reporting on withholdable payments.

  (2) Reporting on substantial U.S. owners.

  (f) Sponsoring entity verification.

  (1) In general.

  (2) Certification of compliance.

  (i) Certification requirement.

  (A) In general.

  (B) Extension of time for the certification period ending on December 31, 2017.

  (ii) Late-joining sponsored direct reporting NFFEs.

  (iii) Certification period.

  (iv) Certifications.

  (3) IRS review of compliance.

  (i) General inquiries.

  (ii) Inquiries regarding substantial non-compliance.

  (4) Sponsorship agreement.

  (g) Sponsoring entity event of default.

  (1) Defined.

  (2) Notice of event of default.

  (3) Remediation of event of default.

  (4) Termination.

  (i) In general.

  (ii) Termination of sponsoring entity.

  (iii) Termination of sponsored direct reporting NFFE.

  (iv) Reconsideration of notice of default or notice of termination.

  (h) Effective/applicability date.

  (a) Definition of withholdable payment.

  (1) In general.

  (2) U.S. source FDAP income defined.

  (i) In general.

  (A) FDAP income defined.

  (B) U.S. source.

  (C) Exceptions to withholding on U.S. source FDAP income not applicable under chapter 4.

  (ii) Special rule for certain interest.

  (iii) Original issue discount.

  (iv) REMIC residual interests.

  (v) Withholding liability of payee that is satisfied by withholding agent.

  (vi) Special rule for sales of interest bearing debt obligations.

  (vii) Payment of U.S. source FDAP income.

  (A) Amount of payment of U.S. source FDAP income.

  (B) When payment of U.S. source FDAP income is made.

  (3) Gross proceeds defined.

  (i) Sale or other disposition.

  (A) In general.

  (B) Special rule for sales effected by brokers.

  (C) Special rule for gross proceeds from sales settled by a clearing organization.

  (ii) Property of a type that can produce interest or dividend payments that would be U.S. source FDAP income.

  (A) In general.

  (B) Contracts producing dividend equivalent payments.

  (C) Regulated investment company distributions.

  (iii) Payment of gross proceeds.

  (A) When gross proceeds are paid.

  (B) Amount of gross proceeds.

  (4) Payments not treated as withholdable payments.

  (i) Certain short-term obligations.

  (ii) Effectively connected income.

  (iii) Excluded nonfinancial payments.

  (iv) Gross proceeds from sales of excluded property.

  (v) Fractional shares.

  (vi) Offshore payments of U.S. source FDAP income prior to 2017 (transitional).

  (vii) Collateral arrangements prior to 2017 (transitional).

  (viii) Certain dividend equivalents.

  (5) Special payment rules for flow-through entities, complex trusts, and estates.

  (i) In general.

  (ii) Partnerships.

  (iii) Simple trusts.

  (iv) Complex trusts and estates.

  (v) Grantor trusts.

  (vi) Special rule for an NWP or NWT.

  (vii) Special rules for determining when gross proceeds are treated as paid to a partner, owner, or beneficiary of a flow-through entity.

  (6) Reporting of withholdable payments.

  (7) Example.

  (b) Substantial U.S. owner.

  (1) Definition.

  (2) Indirect ownership of foreign entities.

  (i) Indirect ownership of stock.

  (ii) Indirect ownership in a foreign partnership or ownership of a beneficial interest in a foreign trust.

  (iii) Ownership and holdings through options.

  (iv) Determination of proportionate interest.

  (v) Interests owned or held by a related person.

  (3) Beneficial interest in a foreign trust.

  (i) In general.

  (ii) Determining the 10 percent threshold in the case of a beneficial interest in a foreign trust.

  (4) Exceptions.

  (i) De minimis amount or value exception.

  (ii) Trusts wholly owned by certain U.S. persons.

  (5) Special rule for certain financial institutions.

  (6) Determination dates for substantial U.S. owners.

  (7) Examples.

  (c) Specified U.S. person.

  (d) Withholding agent.

  (1) In general.

  (2) Participating FFIs and registered deemed-compliant FFIs as withholding agents.

  (3) Grantor trusts as withholding agents.

  (4) Deposit and return requirements.

  (5) Multiple withholding agents.

  (6) Exception for certain individuals.

  (e) Foreign entity.

  (f) Effective/applicability date.

  (a) Payment and returns of tax withheld.

  (1) In general.

  (2) Withholding agent liability.

  (3) Use of agents.

  (i) In general.

  (ii) Authorized agent.

  (iii) Liability of withholding agent acting through an agent.

  (4) Liability for failure to obtain documentation timely or to act in accordance with applicable presumptions.

  (i) In general.

  (ii) Withholding satisfied by another withholding agent.

  (b) Payment of withheld tax.

  (1) In general.

  (2) Special rule for foreign passthru payments and payments of gross proceeds that include an undetermined amount of income subject to tax.

  (c) Income tax return.

  (1) In general.

  (2) Participating FFIs, registered deemed-compliant FFIs, and U.S. branches treated as U.S. persons.

  (3) Amended returns.

  (d) Information returns for payment reporting.

  (1) Filing requirement.

  (i) In general.

  (ii) Recipient.

  (A) Defined.

  (B) Persons that are not recipients.

  (2) Amounts subject to reporting.

  (i) In general.

  (ii) Exception to reporting.

  (iii) Coordination with chapter 3.

  (3) Required information.

  (4) Method of reporting.

  (i) Payments by U.S. withholding agent to recipients.

  (A) Payments to certain entities that are beneficial owners.

  (B) Payments to participating FFIs, deemed-compliant FFIs, and certain QIs.

  (C) Amounts paid to a U.S. branch.

  (D) Amounts paid to territory financial institutions that are flow-through entities or acting as intermediaries.

  (E) Amounts paid to NFFEs.

  (ii) Payments made by withholding agents to certain entities that are not recipients.

  (A) Entities that provide information for a withholding agent to perform specific payee reporting.

  (B) Nonparticipating FFI that is a flow-through entity or intermediary.

  (C) Disregarded entities.

  (iii) Reporting by participating FFIs and deemed-compliant FFIs (including QIs, WPs, and WTs) and U.S. branches not treated as U.S. persons.

  (A) In general.

  (B) Special reporting requirements of participating FFIs, deemed-compliant FFIs, FFIs that make an election under section 1471(b)(3), and U.S. branches not treated as U.S. persons.

  (C) Reporting by a U.S. branch treated as a U.S. person.

  (iv) Reporting by territory financial institutions.

  (v) Nonparticipating FFIs.

  (vi) Other withholding agents.

  (vii) Combined Form 1042-S reporting.

  (e) Reporting in electronic form.

  (f) Indemnification of withholding agent.

  (g) Extensions of time to file Forms 1042 and 1042-S.

  (h) Penalties.

  (i) Additional reporting requirements with respect to U.S. owned foreign entities and owner-documented FFIs.

  (1) Reporting by certain withholding agents with respect to owner-documented FFIs.

  (2) Reporting by certain withholding agents with respect to U.S. owned foreign entities that are NFFEs.

  (3) Cross reference to reporting by participating FFIs.

  (4) Extensions of time to file.

  (j) Applicability date.

  (a) Adjustments of overwithheld tax.

  (1) In general.

  (2) Overwithholding.

  (3) Reimbursement of tax.

  (i) General rule.

  (ii) Record maintenance.

  (4) Set-offs.

  (5) Examples.

  (b) Withholding of additional tax when underwithholding occurs.

  (c) Effective/applicability date.

  (a) Creditable tax.

  (b) Amounts paid to persons that are not the beneficial owners.

  (c) Effective/applicability date.

  (a) Tax paid.

  (b) Effective/applicability date.

  (a) Refund and credit.

  (1) In general.

  (2) Limitation to refund and credit for a nonparticipating FFI.

  (3) Requirement to provide additional documentation for certain beneficial owners.

  (i) In general.

  (ii) Claim of reduced withholding under an income tax treaty.

  (iii) Additional documentation to be furnished to the IRS for certain NFFEs.

  (b) Tax repaid to payee.

  (c) Effective/applicability date.

  (a) In general.

  (b) Coordination of withholding for amounts subject to withholding under sections 1441, 1442, and 1443.

  (1) In general.

  (2) When withholding is applied.

  (3) Special rule for certain substitute dividend payments.

  (c) Coordination with amounts subject to withholding under section 1445.

  (1) In general.

  (2) Determining the amount of the distribution from certain domestic corporations subject to section 1445 or chapter 4 withholding.

  (d) Coordination with section 1446.

  (1) In general.

  (2) Determining the amount of distribution subject to section 1446.

  (e) Example.

  (f) Coordination with section 3406.

  (g) Effective/applicability date.

  (a) Confidentiality of information.

  (b) Exception for disclosure of participating FFIs.

  (c) Effective/applicability date.

  (a) Financial institutions filing certain information returns.

  (b) Waiver.

  (c) Failure to file.

  (d) Meaning of terms.

  (1) Magnetic media or electronic form.

  (2) Financial institution.

  (e) Applicability date.

• Treas. Reg. §1.1471-0(a)Financial institutions filing certain information returns. Show full text ▾ Collapse ▴

  Financial institutions filing certain information returns.

• Treas. Reg. §1.1471-0(b)Waiver. Show full text ▾ Collapse ▴

  Waiver.

• Treas. Reg. §1.1471-0(c)Failure to file. Show full text ▾ Collapse ▴

  Failure to file.

• Treas. Reg. §1.1471-0(d)Meaning of terms. Show full text ▾ Collapse ▴

  Meaning of terms.

  (1) Magnetic media or electronic form.

  (2) Financial institution.

• Treas. Reg. §1.1471-0(e)Applicability date. Show full text ▾ Collapse ▴

  Applicability date.

• Treas. Reg. §1.1471-0(f)Coordination with section 3406. Show full text ▾ Collapse ▴

  Coordination with section 3406.

• Treas. Reg. §1.1471-0(g)Effective/applicability date. Show full text ▾ Collapse ▴

  Effective/applicability date.

• Treas. Reg. §1.1471-0(h)Penalties. Show full text ▾ Collapse ▴

  Penalties.

• Treas. Reg. §1.1471-0(i)In general. Show full text ▾ Collapse ▴

  In general.

  (ii) Claim of reduced withholding under an income tax treaty.

  (iii) Additional documentation to be furnished to the IRS for certain NFFEs.

• Treas. Reg. §1.1471-0(j)Applicability date. Show full text ▾ Collapse ▴

  Applicability date.

• Treas. Reg. §1.1471-0(k)Sponsoring entity event of default. Show full text ▾ Collapse ▴

  Sponsoring entity event of default.

  (1) Defined.

  (2) Notice of event of default.

  (3) Remediation of event of default.

  (4) Termination.

• Treas. Reg. §1.1471-0(l)Trustee-documented trust verification. Show full text ▾ Collapse ▴

  Trustee-documented trust verification.

  (1) Compliance program.

  (2) Certification of compliance.

• Treas. Reg. §1.1471-0(m)Applicability date. Show full text ▾ Collapse ▴

  Applicability date.

• Treas. Reg. §1.1471-0(v)Nonparticipating FFIs. Show full text ▾ Collapse ▴

  Nonparticipating FFIs.

  (vi) Other withholding agents.

  (vii) Combined Form 1042-S reporting.

• Treas. Reg. §1.1471-0(x)Identifying a direct reporting NFFE (other than a sponsored direct reporting NFFE). Show full text ▾ Collapse ▴

  Identifying a direct reporting NFFE (other than a sponsored direct reporting NFFE).

  (A) In general.

  (B) Exception for offshore obligations.

  (C) Special rule for preexisting offshore obligations.

  (xi) Identifying a sponsored direct reporting NFFE.

  (A) In general.

  (1) Payments made prior to January 1, 2017 (transitional).

  (2) Payments made after December 31, 2016, to payees documented prior to January 1, 2017.

  (B) Exception for offshore obligations.

  (xii) Identification of excepted inter-affiliate FFI.

  (A) In general.

  (B) Offshore obligations.

  (C) Reason to know.

  (12) Identification of passive NFFEs.

• Treas. Reg. §1.1471-1Scope of chapter 4 and definitions Show full text ▾ Collapse ▴

  (a) Scope of chapter 4 of the Internal Revenue Code. Sections 1.1471-1 through 1.1474-7 provide rules for withholding when a withholding agent makes a payment to an FFI or NFFE and prescribe the requirements for and definitions relevant to FFIs and NFFEs to which withholding will not apply. Section 1.1471-1 provides definitions for terms used in chapter 4 of the Internal Revenue Code (Code) and the regulations thereunder. Section 1.1471-2 provides rules for withholding under section 1471(a) on payments to FFIs, including the exception from withholding for payments made with respect to certain grandfathered obligations. Section 1.1471-3 provides rules for determining the payee of a payment and the documentation requirements to establish a payee's chapter 4 status. Section 1.1471-4 describes the requirements of an FFI agreement under section 1471(b) and the application of sections 1471(b) and (c) to an expanded affiliated group of FFIs. Section 1.1471-5 defines terms relevant to section 1471 and the FFI agreement and defines categories of FFIs that will be deemed to have met the requirements of section 1471(b) pursuant to section 1471(b)(2). Section 1.1471-6 defines classes of beneficial owners of payments that are exempt from withholding under chapter 4. Section 1.1472-1 provides rules for withholding when a withholding agent makes a payment to an NFFE, and defines categories of NFFEs that are not subject to withholding. Section 1.1473-1 provides definitions of the statutory terms in section 1473. Section 1.1474-1 provides rules relating to a withholding agent's liability for withheld tax, filing of income tax and information returns, and depositing of tax withheld. Section 1.1474-2 provides rules relating to adjustments for overwithholding and underwithholding of tax. Section 1.1474-3 provides the circumstances in which a credit is allowed to a beneficial owner for a withheld tax. Section 1.1474-4 provides that a chapter 4 withholding obligation need only be collected once. Section 1.1474-5 contains rules relating to credits and refunds of tax withheld. Section 1.1474-6 provides rules coordinating withholding under sections 1471 and 1472 with withholding provisions under other sections of the Code. Section 1.1474-7 provides the confidentiality requirement for information obtained to comply with the requirements of chapter 4. Any reference in the provisions of sections 1471 through 1474 to an amount that is stated in U.S. dollars includes the foreign currency equivalent of that amount. Except as otherwise provided, the provisions of sections 1471 through 1474 and the regulations thereunder apply only for purposes of chapter 4. See § 301.1474-1 of this chapter for the requirements for reporting on magnetic media that apply to financial institutions making payments or otherwise reporting accounts pursuant to chapter 4.

  (b) Definitions. Except as otherwise provided in this paragraph (b) or under the terms of an applicable Model 2 IGA, the following definitions apply for purposes of sections 1471 through 1474 and the regulations under those sections.

  (1) Account. The term account means a financial account as defined in § 1.1471-5(b).

  (2) Account holder. The term account holder means the person who holds an account, as determined under § 1.1471-5(a)(3).

  (3) Active NFFE. The term active NFFE has the meaning set forth in § 1.1472-1(c)(1)(iv).

  (4) AML due diligence. The term AML due diligence means the customer due diligence procedures of a financial institution pursuant to the anti-money laundering or similar requirements to which the financial institution, or branch thereof, is subject. This includes identifying the customer (including the owners of the customer), understanding the nature and purpose of the account, and ongoing monitoring.

  (5) Annuity contract. The term annuity contract means a contract under which the issuer agrees to make payments for a period of time determined in whole or in part by reference to the life expectancy of one or more individuals. The term also includes a contract that is considered to be an annuity contract in accordance with the law, regulation, or practice of the jurisdiction in which the contract was issued, and under which the issuer agrees to make payments for a term of years. For purposes of the preceding sentence, it is immaterial whether a contract satisfies any of the substantive U.S. tax rules (for example, sections 72(s), 72(u), 817(h), and the investor control prohibition) applicable to the taxation of a contract holder or issuer.

  (6) Assumes primary withholding responsibility. The term assumes primary withholding responsibility refers to when a QI, territory financial institution, or U.S. branch assumes responsibility for withholding on a payment for purposes of chapters 3 and 4 as if it were a U.S. person. A QI may only assume primary withholding responsibility if it does not make an election to be withheld upon with respect to the payment.

  (7) Backup withholding. The term backup withholding means the withholding required under section 3406.

  (8) Beneficial owner. Except as provided in § 1.1472-1(d), § 1.1471-6(d)(4), and § 1.1471-6(f), the term beneficial owner has the meaning set forth in § 1.1441-1(c)(6).

  (9) Blocked account. The term blocked account has the meaning set forth in § 1.1471-4(e)(2)(iii)(B).

  (10) Branch. With respect to a financial institution, the term branch means a unit, business, or office of a financial institution that is treated as a branch under the regulatory regime of a country or that is otherwise regulated under the laws of a country as separate from other offices, units, or branches of the financial institution and also includes an entity that is disregarded as an entity separate from the financial institution (including branches maintained by such disregarded entity). A branch includes a unit, business, or office of a financial institution located in a country in which it is resident, and a unit, business, or office of a financial institution located in the country in which the financial institution is created or organized. All units, businesses, and offices of a participating FFI located in a single country, and all entities disregarded as entities separate from a participating FFI and located in a single country, shall be treated as a single branch and may use the same GIIN. An account will be treated as maintained by a branch or disregarded entity if the rights and obligations of the account holder and the participating FFI with regard to such account (including any assets held in the account) are governed by the laws of the country of the branch or disregarded entity.

  (11) Broker. The term broker means any person, U.S. or foreign, that, in the ordinary course of a trade or business during the calendar year, stands ready to effect sales to be made by others. Examples of a broker include an obligor that regularly issues and retires its own debt obligations, a corporation that regularly redeems its own stock, and a clearing organization that effects sales of securities for its members. A broker does not include an international organization described in § 1.1471-6(c) that redeems or retires an obligation of which it is the issuer, a stock transfer agent that records transfers of stock for a corporation if the nature of the activities of the agent is such that the agent ordinarily would not know the gross proceeds from sales, an escrow agent that effects no sales other than transactions incidental to the purpose of the escrow (such as sales to collect on collateral), or a corporation that issues and retires long-term debt on an irregular basis.

  (12) Cash value. The term cash value has the meaning set forth in § 1.1471-5(b)(3)(vii)(B).

  (13) Cash value insurance contract. The term cash value insurance contract has the meaning set forth in § 1.1471-5(b)(3)(vii).

  (14) Certified deemed-compliant FFI. The term certified deemed-compliant FFI means an FFI described in § 1.1471-5(f)(2).

  (15) Change in circumstances. The term change in circumstances has the meaning set forth in § 1.1471-3(c)(6)(ii)(E) for withholding agents and, in the case of a participating FFI, has the meaning set forth in § 1.1471-4(c)(2)(iii).

  (16) Chapter 3. For purposes of chapter 4, the term chapter 3 means sections 1441 through 1464 and the regulations thereunder, but does not include sections 1445 and 1446 and the regulations thereunder, unless the context indicates otherwise.

  (17) Chapter 4. The term chapter 4 means sections 1471 through 1474 and the regulations thereunder.

  (18) Chapter 4 reportable amount. The term chapter 4 reportable amount has the meaning set forth in § 1.1474-1(d)(2)(i).

  (19) Chapter 4 status. The term chapter 4 status means a person's status as a U.S. person, a specified U.S. person, an individual that is a foreign person, a participating FFI, a deemed-compliant FFI, a restricted distributor, an exempt beneficial owner, a nonparticipating FFI, a territory financial institution, an excepted NFFE, or a passive NFFE.

  (20) Chapter 4 withholding rate pool. The term chapter 4 withholding rate pool means a pool of payees that are nonparticipating FFIs provided on a chapter 4 withholding statement (as described in § 1.1471-3(c)(3)(iii)(B)(3)) to which a withholdable payment is allocated. The term chapter 4 withholding rate pool also means a pool provided on an FFI withholding statement (as described in § 1.1471-3(c)(3)(iii)(B)(2)) to which a withholdable payment is allocated to—

  (i) A pool of payees consisting of each class of recalcitrant account holders described in § 1.1471-4(d)(6) (or with respect to an FFI that is a QI, a single pool of recalcitrant account holders without the need to subdivide into each class of recalcitrant account holders described in § 1.1471-4(d)(6)), including a separate pool of account holders to which the escrow procedures for dormant accounts apply; or

  (ii) A pool of payees that are U.S. persons as described in § 1.1471-3(c)(3)(iii)(B)(2).

  (21) Clearing organization. The term clearing organization means an entity that is in the business of holding securities for its member organizations or clearing trades of securities and transferring, or instructing the transfer of, securities by credit or debit to the account of a member without the necessity of physical delivery of the securities.

  (22) Complex trust. A complex trust is a trust that is not a simple trust or a grantor trust.

  (23) Consolidated obligations. The term consolidated obligations means multiple obligations that a withholding agent (including a withholding agent that is an FFI) has chosen to treat as a single obligation in order to treat the obligations as preexisting obligations pursuant to paragraph (b)(104)(ii) of this section or in order to share documentation between the obligations pursuant to § 1.1471-3(c)(8). A withholding agent that has opted to treat multiple obligations as consolidated obligations pursuant to the previous sentence must also treat the obligations as a single obligation for purposes of satisfying the standards of knowledge requirements set forth in §§ 1.1471-3(e) and 1.1471-4(c)(2)(ii), and for purposes of determining the balance or value of any of the obligations when applying any of the account thresholds applicable to due diligence or reporting as set forth in §§ 1.1471-3(c)(6)(ii), 1.1471-3(d), 1.1471-4(c), 1.1471-5(a)(4), and 1.1471-5(b)(3)(vii). For example, with respect to consolidated obligations, if a withholding agent has reason to know that the chapter 4 status assigned to the account holder or payee of one of the consolidated obligations is inaccurate, then it has reason to know that the chapter 4 status assigned for all other consolidated obligations of the account holder or payee is inaccurate. Similarly, to the extent that an account balance or value is relevant for purposes of applying any account threshold to one or more of the consolidated obligations, the withholding agent must aggregate the balance or value of all such consolidated obligations.

  (24) Custodial account. The term custodial account has the meaning set forth in § 1.1471-5(b)(3)(ii).

  (25) Custodial institution. The term custodial institution has the meaning set forth in § 1.1471-5(e)(1)(ii).

  (26) Customer master file. A customer master file includes the primary files of a withholding agent, participating FFI, or deemed-compliant FFI for maintaining account holder information, such as information used for contacting account holders and for satisfying AML due diligence.

  (27) Deemed-compliant FFI. The term deemed-compliant FFI means an FFI that is treated, pursuant to section 1471(b)(2) and § 1.1471-5(f), as meeting the requirements of section 1471(b). The term deemed-compliant FFI also includes a QI branch of a U.S. financial institution that is a reporting Model 1 FFI.

  (28) Deferred annuity contract. The term deferred annuity contract means an annuity contract other than an immediate annuity contract.

  (29) Depository account. The term depository account has the meaning set forth in § 1.1471-5(b)(3)(i).

  (30) Depository institution. The term depository institution has the meaning set forth in § 1.1471-5(e)(1)(i).

  (31) Direct reporting NFFE. The term direct reporting NFFE has the meaning set forth in § 1.1472-1(c)(3).

  (32) Documentary evidence. The term documentary evidence means documents, other than a withholding certificate or written statement, that a withholding agent is permitted to rely upon to determine the chapter 4 status of a person in accordance with § 1.1471-3(c)(5).

  (33) Documentation. The term documentation means withholding certificates, written statements, documentary evidence, and other documents that may be relevant in determining a person's chapter 4 status, including any document containing a determination of the account holder's citizenship or residency for tax or AML due diligence purposes or an account holder's claim of citizenship or residency for tax or AML due diligence purposes.

  (34) Dormant account. The term dormant account has the meaning set forth in § 1.1471-4(d)(6)(ii).

  (35) Effective date of the FFI agreement. The term effective date of the FFI agreement with respect to an FFI or a branch of an FFI that is a participating FFI means the date on which the IRS issues a GIIN to the FFI or branch. For participating FFIs that receive a GIIN prior to June 30, 2014, the effective date of the FFI agreement is June 30, 2014.

  (36) EIN. The term EIN means an employer identification number (also known as a federal tax identification number) described in § 301.6109-1(a)(1)(i) of this chapter.

  (37) Election to be withheld upon. The term election to be withheld upon has the meaning set forth in § 1.1471-2(a)(2)(iii).

  (38) Electronically searchable information. The term electronically searchable information means information that a withholding agent or FFI maintains in its tax reporting files, customer master files, or similar files, and that is stored in the form of an electronic database against which standard queries in programming languages, such as Structured Query Language, may be used. Information, data, or files are not electronically searchable merely because they are stored in an image retrieval system (such as portable document format (.pdf) or scanned documents).

  (39) Entity. The term entity means any person other than an individual.

  (40) Entity account. The term entity account means an account held by one or more entities.

  (41) Excepted NFFE. The term excepted NFFE means a NFFE that is described in § 1.1472-1(c)(1).

  (42) Exempt beneficial owner. The term exempt beneficial owner means any person described in § 1.1471-6(b) through (g) or that is otherwise treated as an exempt beneficial owner pursuant to a Model 1 IGA or Model 2 IGA.

  (43) Exempt recipient. The term exempt recipient means a person described in § 1.6049-4(c)(1)(ii) (for interest, dividends, and royalties), a person described in § 1.6045-2(b)(2)(i) (for broker proceeds), and a person described in § 1.6041-3(q) (for rents, amounts paid on notional principal contracts, and other fixed or determinable income).

  (44) Expanded affiliated group. The term expanded affiliated group has the meaning set forth in § 1.1471-5(i)(2).

  (45) FATF. The term FATF means the Financial Action Task Force, an inter-governmental body that develops and promotes international policies to combat money laundering and terrorist financing.

  (46) FATF-compliant jurisdiction. The term FATF-compliant jurisdiction means a jurisdiction that—

  (i) Is not subject to a FATF call on its members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing risks emanating from the jurisdiction;

  (ii) Is not a jurisdiction with strategic AML/CFT (anti-money laundering and combating the financing of terrorism) deficiencies that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address the deficiencies; and

  (iii) Is not a jurisdiction with strategic AML/CFT deficiencies that the FATF has identified as not making sufficient progress on its action plan agreed upon with the FATF.

  (47) FFI. The term FFI or foreign financial institution has the meaning set forth in § 1.1471-5(d).

  (48) FFI agreement. The term FFI agreement means an agreement that is described in § 1.1471-4(a). An FFI agreement includes a QI agreement, a WP agreement, and a WT agreement that is entered into by an FFI (other than an FFI that is a registered deemed-compliant FFI, including a reporting Model 1 FFI) and that has an effective date or renewal date on or after June 30, 2014. The term FFI agreement also includes a QI agreement that is entered into by a foreign branch of a U.S. financial institution (other than a branch that is a reporting Model 1 FFI) and that has an effective date or renewal date on or after June 30, 2014.

  (49) Financial account. The term financial account has the meaning set forth in § 1.1471-5(b).

  (50) Financial institution. The term financial institution has the meaning set forth in § 1.1471-5(e) and includes a financial institution as defined in an applicable Model 1 or Model 2 IGA.

  (51) Flow-through entity. The term flow-through entity means a partnership, simple trust, or grantor trust, as determined under U.S. tax principles.

  (52) Flow-through withholding certificate. The term flow-through withholding certificate means a Form W-8IMY submitted by a foreign partnership, foreign simple trust, or foreign grantor trust.

  (53) Foreign entity. The term foreign entity has the meaning set forth in § 1.1473-1(e).

  (54) Foreign passthru payment. The term foreign passthru payment has the meaning set forth in § 1.1471-5(h)(2).

  (55) Foreign payee. The term foreign payee means any payee other than a U.S. payee.

  (56) Foreign person. The term foreign person means any person other than a U.S. person and includes a QI branch of a U.S. financial institution.

  (57) GIIN. The term GIIN or Global Intermediary Identification Number means the identification number that is assigned to a participating FFI or registered deemed-compliant FFI. The term GIIN or Global Intermediary Identification Number also includes the identification number assigned to a reporting Model 1 FFI for purposes of identifying such entity to withholding agents. All GIINs will appear on the IRS FFI list.

  (58) Grandfathered obligation. The term grandfathered obligation has the meaning set forth in § 1.1471-2(b).

  (59) Grantor trust. A grantor trust is a trust with respect to which one or more persons are treated as owners of all or a portion of the trust under sections 671 through 679. If only a portion of the trust is treated as owned by a person, that portion is a grantor trust with respect to that person.

  (60) Gross proceeds. The term gross proceeds has the meaning set forth in § 1.1473-1(a)(3).

  (61) Group annuity contract. The term group annuity contract means an annuity contract under which the obligees are individuals who are affiliated through an employer, trade association, labor union, or other association or group.

  (62) Group insurance contract. The term group insurance contract means an insurance contract that—

  (i) Provides coverage on individuals who are affiliated through an employer, trade association, labor union, or other association or group; and

  (ii) Charges a premium for each member of the group (or member of a class within the group) that is determined without regard to the individual health characteristics other than age, gender, and smoking habits of the member (or class of members) of the group.

  (63) Immediate annuity. The term immediate annuity means an annuity contract that—

  (i) Is purchased with a single premium or annuity consideration; and

  (ii) No later than one year from the purchase date of the contract commences to pay annually or more frequently substantially equal periodic payments.

  (64) Individual account. The term individual account means an account held by one or more individuals.

  (65) Insurance company. The term insurance company means an entity or arrangement—

  (i) That is regulated as an insurance business under the laws, regulations, or practices of any jurisdiction in which the company does business;

  (ii) The gross income of which (for example, gross premiums and gross investment income) arising from insurance, reinsurance, and annuity contracts for the immediately preceding calendar year exceeds 50 percent of total gross income for such year; or

  (iii) The aggregate value of the assets of which associated with insurance, reinsurance, and annuity contracts at any time during the immediately preceding calendar year exceeds 50 percent of total assets at any time during such year.

  (66) Insurance contract. The term insurance contract means a contract (other than an annuity contract) under which the issuer in exchange for consideration agrees to pay an amount upon the occurrence of a specified contingency involving mortality, morbidity, accident, liability, or property risk.

  (67) Intergovernmental agreement (IGA). The term intergovernmental agreement or IGA means any applicable Model 1 or Model 2 IGA.

  (68) Intermediary. The term intermediary has the meaning set forth in § 1.1441-1(c)(13).

  (69) Intermediary withholding certificate. The term intermediary withholding certificate means a Form W-8IMY submitted by an intermediary.

  (70) Investment entity. The term investment entity has the meaning set forth in § 1.1471-5(e)(1)(iii).

  (71) Investment-linked annuity contract. The term investment-linked annuity contract means an annuity contract under which benefits or premiums are adjusted to reflect the investment return or market value of assets associated with the contract.

  (72) Investment-linked insurance contract. The term investment-linked insurance contract means an insurance contract under which benefits, premiums, or the period of coverage are adjusted to reflect the investment return or market value of assets associated with the contract.

  (73) IRS FFI list. The term IRS FFI list means the list published by the IRS that contains the names and GIINs for all participating FFIs, registered deemed-compliant FFIs, and reporting Model 1 FFIs.

  (74) Life annuity contract. The term life annuity contract means an annuity contract that provides for payments over the life or lives of one or more individuals.

  (75) Life insurance contract. The term life insurance contract means an insurance contract under which the issuer, in exchange for consideration, agrees to pay an amount upon the death of one or more individuals. That a contract provides one or more payments (for example, for endowment benefits or disability benefits) in addition to a death benefit will not cause the contract to be other than a life insurance contract. For purposes of the preceding sentence, it is immaterial whether a contract satisfies any of the substantive U.S. tax rules (for example, sections 101(f), 817(h), 7702, or investor control prohibition) applicable to the taxation of the contract holder or issuer.

  (76) Limited branch. The term limited branch has the meaning set forth in § 1.1471-4(e)(2)(iii). With respect to a reporting Model 2 FFI, a limited branch is a branch of the reporting Model 2 FFI that operates in a jurisdiction that prevents such branch from fulfilling the requirements of a participating FFI or deemed-compliant FFI, or that cannot fulfill the requirements of a participating FFI or deemed-compliant FFI due to the expiration of the transitional rule for limited branches under § 1.1471-4(e)(2)(v), and for which the reporting Model 2 FFI meets the terms of the applicable Model 2 IGA with respect to the branch.

  (77) Limited FFI. The term limited FFI has the meaning set forth in § 1.1471-4(e)(3)(ii). With respect to a reporting Model 2 FFI, a limited FFI is a related entity that operates in a jurisdiction that prevents the entity from fulfilling the requirements of a participating FFI or deemed-compliant FFI or that cannot fulfill the requirements of a participating FFI or deemed-compliant FFI due to the expiration of the transitional rule for limited FFIs under § 1.1471-4(e)(3)(iv), and for which the reporting Model 2 FFI meets the requirements of the applicable Model 2 IGA with respect to the entity.

  (78) Model 1 IGA. The term Model 1 IGA means an agreement or arrangement between the United States or the Treasury Department and a foreign government or one or more agencies thereof to implement FATCA through reporting by financial institutions to such foreign government or agency thereof, followed by automatic exchange of the reported information with the IRS. The IRS will publish a list identifying all countries that are treated as having in effect a Model 1 IGA.

  (79) Model 2 IGA. The term Model 2 IGA means an agreement or arrangement between the United States or the Treasury Department and a foreign government or one or more agencies thereof to facilitate the implementation of FATCA through reporting by financial institutions directly to the IRS in accordance with the requirements of an FFI agreement, supplemented by the exchange of information between such foreign government or agency thereof and the IRS. The IRS will publish a list identifying all countries that are treated as having in effect a Model 2 IGA.

  (80) NFFE. The term NFFE or non-financial foreign entity means a foreign entity that is not a financial institution (including a territory NFFE). The term also means a foreign entity treated as an NFFE pursuant to a Model 1 IGA or Model 2 IGA.

  (81) Non-exempt recipient. The term non-exempt recipient means a person that is not an exempt recipient.

  (82) Nonparticipating FFI. The term nonparticipating FFI means an FFI other than a participating FFI, a deemed-compliant FFI, or an exempt beneficial owner.

  (83) Nonreporting IGA FFI. The term nonreporting IGA FFI means an FFI that is a resident of, or located or established in, a Model 1 or Model 2 IGA jurisdiction, as the context requires, and that meets the requirements of one of the following—

  (i) A nonreporting financial institution described in Annex II of the Model 1 IGA;

  (ii) A nonreporting financial institution described in Annex II of the Model 2 IGA;

  (iii) A registered deemed-compliant FFI described in § 1.1471-5(f)(1)(i)(A) through (F);

  (iv) A certified deemed-compliant FFI described in § 1.1471-5(f)(2)(i) through (v); or

  (v) An exempt beneficial owner described in § 1.1471-6.

  (84) Non-U.S. account. The term non-U.S. account means an account that is not a U.S. account and that does not have an account holder that is a nonparticipating FFI or recalcitrant account holder.

  (85) NQI. The term NQI or nonqualified intermediary has the meaning set forth in § 1.1441-1(c)(14).

  (86) NWP. The term NWP or nonwithholding foreign partnership means a foreign partnership that is not a withholding foreign partnership.

  (87) NWT. The term NWT or nonwithholding foreign trust means a foreign trust as defined in section 7701(a)(31)(B) that is a simple trust or grantor trust and is not a withholding foreign trust.

  (88) Offshore obligation. The term offshore obligation means an offshore obligation defined in § 1.6049-5(c)(1) (by substituting the terms withholding agent or financial institution for the term payor).

  (89) Owner. The term owner means a person described in § 1.1473-1(b)(1), without regard to whether such person is a U.S. person and without regard to whether such person owns a ten percent interest in the entity. The term also includes a person that owns a discretionary interest in a trust and receives a distribution during the calendar year.

  (90) Owner-documented FFI. The term owner-documented FFI means an FFI described in § 1.1471-5(f)(3).

  (91) Participating FFI. The term participating FFI means an FFI that has agreed to comply with the requirements of an FFI agreement with respect to all branches of the FFI, other than a branch that is a reporting Model 1 FFI or a U.S. branch. The term participating FFI also includes an FFI described in a Model 2 IGA that has agreed to comply with the requirements of an FFI agreement with respect to a branch (a reporting Model 2 FFI), and a QI branch of a U.S. financial institution, unless such branch is a reporting Model 1 FFI.

  (92) Participating FFI group. The term participating FFI group means an expanded affiliated group that includes one or more participating FFIs and meets the requirements of § 1.1471-4(e)(1). The term participating FFI group also means an expanded affiliated group in which one or more members of the group is a reporting Model 1 FFI and each member of the group that is an FFI is a registered deemed-compliant FFI, nonreporting IGA FFI, limited FFI, or retirement fund described in § 1.1471-6(f).

  (93) Partnership. The term partnership has the meaning set forth in § 301.7701-2(c)(1) of this chapter.

  (94) Passive NFFE. The term passive NFFE means an NFFE other than an excepted NFFE.

  (95) Passthru payment. The term passthru payment has the meaning set forth in § 1.1471-5(h).

  (96) Payee. The term payee has the meaning set forth in § 1.1471-3(a).

  (97) Payment with respect to an offshore obligation. The term payment with respect to an offshore obligation means a payment made outside of the United States, within the meaning of § 1.6049-5(e), with respect to an offshore obligation.

  (98) Payor. The term payor has the meaning set forth in §§ 31.3406(a)-2 and 1.6049-4(a)(2) and generally includes a withholding agent.

  (99) Permanent residence address. The term permanent residence address has the meaning set forth in § 1.1441-1(c)(38).

  (100) Person. The term person has the meaning set forth in section 7701(a)(1) and the regulations thereunder and includes an entity or arrangement that is an insurance company. The term person also includes, with respect to a withholdable payment, a QI branch of a U.S. financial institution.

  (101) Preexisting account. The term preexisting account means a financial account that is a preexisting obligation.

  (102) Preexisting entity account. The term preexisting entity account means a preexisting account held by one or more entities.

  (103) Preexisting individual account. The term preexisting individual account means a preexisting account held by one or more individuals.

  (104) Preexisting obligation—(i) The term preexisting obligation means any account, instrument, contract, debt, or equity interest maintained, executed, or issued by the withholding agent that is outstanding on June 30, 2014. With respect to a participating FFI, the term preexisting obligation means any account, instrument, or contract (including any debt or equity interest) maintained, executed, or issued by the FFI that is outstanding on the effective date of the FFI agreement. With respect to a registered deemed-compliant FFI, a preexisting obligation means any account, instrument, or contract (including any debt or equity interest) that is maintained, executed, or issued by the FFI prior to the later of the date that the FFI registers as a deemed-compliant FFI pursuant to § 1.1471-5(f)(1) and receives a GIIN or the date the FFI is required to implement its account opening procedures under § 1.1471-5(f). Notwithstanding the previous provisions of this paragraph (b)(104)(i), a preexisting obligation includes an obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, by or with a withholding agent or FFI that treats the obligation as a preexisting obligation. See §§ 1.1471-2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-4(c)(3) for the due diligence requirements applicable to preexisting obligations for withholding agents and participating FFIs.

  (ii) The term preexisting obligation also includes any obligation (referring to an account, instrument, contract, debt, or equity interest) of an account holder or payee, regardless of the date such obligation was entered into, if—

  (A) The account holder or payee also holds with the withholding agent (or a member of the withholding agent's expanded affiliated group or sponsored FFI group) an account, instrument, contract, or equity interest that is a preexisting obligation under paragraph (b)(104)(i) of this section;

  (B) The withholding agent (and, as applicable, the member of the withholding agent's expanded affiliated group or sponsored FFI group) treats both of the aforementioned obligations, and any other obligations of the payee or account holder that are treated as preexisting obligations under this paragraph (b)(104)(ii), as consolidated obligations; and

  (C) With respect to an obligation that is subject to AML due diligence, the withholding agent is permitted to satisfy such AML due diligence for the obligation by relying upon the AML due diligence performed for the preexisting obligation described in paragraph (b)(104)(i) of this section.

  (105) Pre-FATCA Form W-8. The term pre-FATCA Form W-8 means a version of a Form W-8 that was issued by the IRS prior to 2013 (including an acceptable substitute form based on such version) and that does not contain chapter 4 statuses but otherwise meets the requirements of § 1.1441-1(e)(1)(ii) applicable to such certificate (or substitute form) and has not expired, or a Form W-8 that was issued prior to 2013 and furnished by an individual to establish such individual's foreign status but otherwise meets the requirements of § 1.1441-1(e)(1)(ii) applicable to such certificate and has not expired.

  (106) Prima facie FFI. The term prima facie FFI means an entity described in § 1.1471-2(a)(4)(ii)(B).

  (107) QI. The term QI or qualified intermediary has the meaning set forth in § 1.1441-1(e)(5)(ii).

  (108) QI agreement. The term QI agreement means the agreement described in § 1.1441-1(e)(5)(iii).

  (109) QI branch of a U.S. financial institution. The term QI branch of a U.S. financial institution means a foreign branch of a U.S. financial institution for which a QI agreement is in effect.

  (110) Recalcitrant account holder. The term recalcitrant account holder has the meaning set forth in § 1.1471-5(g).

  (111) Registered deemed-compliant FFI. The term registered deemed-compliant FFI means an FFI described in § 1.1471-5(f)(1). The term registered deemed-compliant FFI also includes a QI branch of a U.S. financial institution that is a reporting Model 1 FFI.

  (112) Relationship manager. A relationship manager is an officer or other employee of an FFI who is assigned responsibility for specific account holders on an on-going basis (including as an officer or employee that is a member of an FFI's private banking department), advises account holders regarding their banking, investment, trust, fiduciary, estate planning, or philanthropic needs, and recommends, makes referrals to, or arranges for the provision of financial products, services, or other assistance by internal or external providers to meet those needs. Notwithstanding the previous sentence, a person is only a relationship manager with respect to an account that has a balance or value of more than $1,000,000, taking into account the aggregation rules described in § 1.1471-5(b)(4)(iii)(A) and (B).

  (113) Reportable payment. The term reportable payment means a payment of interest or dividends (as defined in section 3406(b)(2)) and other reportable payments (as defined in section 3406(b)(3)).

  (114) Reporting Model 1 FFI. The term reporting Model 1 FFI means an FFI with respect to which a foreign government or agency thereof agrees to obtain and exchange information pursuant to a Model 1 IGA, other than an FFI that is treated as a nonparticipating FFI under the Model 1 IGA.

  (115) Reporting Model 2 FFI. The term reporting Model 2 FFI means a participating FFI that is described in § 1.1471-1(b)(91).

  (116) Responsible officer. The term responsible officer means, with respect to a participating FFI, an officer of any participating FFI or reporting Model 1 FFI in the participating FFI's expanded affiliated group with sufficient authority to fulfill the duties of a responsible officer described in § 1.1471-4, which include the requirement to periodically certify to the IRS regarding the FFI's compliance with its FFI agreement. The term responsible officer means, in the case of a registered deemed-compliant FFI, an officer of any deemed-compliant FFI or participating FFI in the deemed-compliant FFI's expanded affiliated group with sufficient authority to ensure that the FFI meets the applicable requirements of § 1.1471-5(f). The term responsible officer means, with respect to a sponsoring entity, an officer of the sponsoring entity or an officer of an entity that establishes and maintains policies and procedures for, and has general oversight over, the sponsoring entity, provided such officer has sufficient authority to fulfill the duties of a responsible officer described in § 1.1471-5(j) or § 1.1472-1(f) (as applicable). If a participating FFI elects to be part of a consolidated compliance program, the term responsible officer means an officer of the compliance FI (as described in § 1.1471-4(f)) with sufficient authority to fulfill the duties of a responsible officer described in § 1.1471-4(f)(2) and (3) on behalf of each FFI in the compliance group. In the case of an FI or sponsoring entity that is an investment entity, for purposes of this paragraph (b)(116), the responsible officer may be, in lieu of an officer of the investment entity, an individual who is a director, managing member, or general partner of the investment entity or, if the general partner or managing member of the investment entity is itself an entity, an individual who is an officer, director, managing member, or general partner of such other entity.

  (117) Restricted distributor. The term restricted distributor means an entity described in § 1.1471-5(f)(4).

  (118) Simple trust. The term simple trust means a trust that meets the requirements of section 651(a)(1) and (2).

  (119) Specified insurance company. The term specified insurance company has the meaning set forth in § 1.1471-5(e)(1)(iv).

  (120) Specified U.S. person. The term specified U.S. person or specified United States person has the meaning set forth in § 1.1473-1(c).

  (121) Sponsored FFI. The term sponsored FFI means any entity described in § 1.1471-5(f)(1)(i)(F) (describing sponsored investment entities and sponsored controlled foreign corporations) or § 1.1471-5(f)(2)(iii) (describing sponsored, closely held investment vehicles). The term sponsored FFI also means a sponsored investment entity, a sponsored controlled foreign corporation, or a sponsored, closely held investment vehicle treated as deemed-compliant under an applicable Model 2 IGA.

  (122) Sponsored FFI group. The term sponsored FFI group means a group of sponsored FFIs that share the same sponsoring entity.

  (123) Sponsored direct reporting NFFE. The term sponsored direct reporting NFFE has the meaning set forth in § 1.1472-1(c)(5).

  (124) Sponsoring entity. The term sponsoring entity means (i) an entity that registers with the IRS and agrees to perform the due diligence, withholding, and reporting obligations of one or more FFIs pursuant to § 1.1471-5(f)(1)(i)(F) or (f)(2)(iii); or (ii) an entity that registers with the IRS and agrees to perform the due diligence and reporting obligations of one or more direct reporting NFFEs pursuant to § 1.1472-1(c)(5).

  (125) Standardized industry coding system. The term standardized industry coding system means a coding system used by the withholding agent or FFI to classify account holders by business type for purposes other than U.S. tax purposes and that was implemented by the withholding agent by the later of January 1, 2012, or six months after the date the withholding agent was formed or organized.

  (126) Standing instructions to pay amounts. The term standing instructions to pay amounts means current payment instructions provided by the account holder, or an agent of the account holder, that will repeat without further instructions being provided by the account holder. Therefore, for example, a payment instruction to make an isolated payment is not a standing instruction to pay amounts, even if the instructions are given one year in advance. However, an instruction to make payments indefinitely is a standing instruction to pay amounts for the period during which such instructions are in effect, even if such instructions are amended after a single payment.

  (127) Subject to withholding. The term subject to withholding, with respect to an amount, means an amount for which withholding is required under chapter 4 or an amount for which chapter 4 withholding was otherwise applied.

  (128) Substantial U.S. owner. The term substantial U.S. owner or substantial United States owner has the meaning set forth in § 1.1473-1(b). In the case of a reporting Model 2 FFI, in applying this section with respect to a passive NFFE the term substantial U.S. owner means a controlling person as defined in the applicable Model 2 IGA.

  (129) Territory entity. The term territory entity means any entity that is incorporated or organized under the laws of any U.S. territory.

  (130) Territory financial institution. The term territory financial institution means a financial institution that is incorporated or organized under the laws of any U.S. territory, not including a territory entity that is an investment entity but that is not a depository institution, custodial institution, or specified insurance company.

  (131) Territory financial institution treated as a U.S. person. The term territory financial institution treated as a U.S. person means a territory financial institution that is treated as a U.S. person under § 1.1471-3(a)(3)(iv).

  (132) Territory NFFE. The term territory NFFE means a territory entity that is not a financial institution, including a territory entity that is an investment entity but is not a depository institution, custodial institution, or specified insurance company.

  (133) TIN. The term TIN means the tax identifying number assigned to a person under section 6109.

  (134) U.S. account. The term U.S. account or United States account has the meaning set forth in § 1.1471-5(a).

  (135) U.S. branch treated as a U.S. person. The term U.S. branch treated as a U.S. person means a U.S. branch that agrees to be treated as a U.S. person as described in § 1.1441-1(b)(2)(iv)(A). For the due diligence, withholding, and reporting requirements of a U.S. branch of an FFI treated as a U.S. person for purposes of chapter 4, see § 1.1471-4(b)(7), (c)(2)(v), (d)(2)(iii)(B), § 1.1472-1(a), and § 1.1474-1(i)(1) and (2).

  (136) U.S. financial institution. The term U.S. financial institution means a financial institution that is a U.S. person, including a U.S. branch treated as a U.S. person.

  (137) U.S. indicia. The term U.S. indicia has the meaning set forth in § 1.1471-4(c)(5)(iv)(B) when applied to an individual and as set forth in § 1.1471-3(e)(4)(v)(A) when applied to an entity.

  (138) U.S. owned foreign entity. The term U.S. owned foreign entity or United States owned foreign entity has the meaning set forth in § 1.1471-5(c).

  (139) U.S. payee. The term U.S. payee means any payee that is a U.S. person.

  (140) U.S. payor. The term U.S. payor means a U.S. payor or U.S. middleman as defined in § 1.6049-5(c)(5).

  (141) U.S. person—(i) Except as otherwise provided in paragraph (b)(141)(ii) of this section, the term U.S. person or United States person means a person described in section 7701(a)(30), the United States 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). The term U.S. person or United States person also means a foreign insurance company that has made an election under section 953(d), provided that either the foreign insurance company is not a specified insurance company (as described in § 1.1471-5(e)(1)(iv)), or the foreign insurance company is a specified insurance company and is licensed to do business in any State.

  (ii) The term U.S. person or United States person does not include a foreign insurance company that has made an election under section 953(d) if it is a specified insurance company and is not licensed to do business in any State. An individual will not be treated as a U.S. person for a taxable year or any portion of a taxable year that the individual is a dual resident taxpayer (within the meaning of § 301.7701(b)-7(a)(1) of this chapter) who is treated as a nonresident alien pursuant to § 301.7701(b)-7 of this chapter for purposes of computing the individual's U.S. tax liability. A U.S. person does not include an alien individual who has made an election under section 6013(g) or (h) to be treated as a resident of the United States.

  (142) U.S. source FDAP income. The term U.S. source FDAP income has the meaning set forth in § 1.1473-1(a)(2).

  (143) U.S. territory. The term U.S. territory or possession of the United States means American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands.

  (144) U.S. withholding agent. The term U.S. withholding agent means a withholding agent that is either a U.S. person or a U.S. branch of a foreign person.

  (145) Withholdable payment. The term withholdable payment has the meaning set forth in § 1.1473-1(a).

  (146) Withholding. The term withholding means the deduction and withholding of tax at the applicable rate from a payment.

  (147) Withholding agent. The term withholding agent has the meaning set forth in § 1.1473-1(d).

  (148) Withholding certificate. The term withholding certificate means a Form W-8, Form W-9, or any other certificate that under the Code or regulations certifies or establishes the chapter 4 status of a payee or beneficial owner.

  (149) WP. The term WP or withholding foreign partnership means a foreign partnership that has executed the agreement described in § 1.1441-5(c)(2)(ii).

  (150) Written statement. The term written statement has the meaning set forth in § 1.1471-3(c)(4).

  (151) WT. The term WT or withholding foreign trust means a foreign grantor trust or foreign simple trust that has executed the agreement described in § 1.1441-5(e)(5)(v).

  (c) Applicability date. This section generally applies beginning on January 6, 2017, except for paragraphs (b)(116) and (121) of this section, which apply beginning on March 25, 2019. However, taxpayers may apply these provisions as of January 28, 2013. (For the rules that otherwise apply beginning on January 6, 2017, and before March 25, 2019, see this section as in effect and contained in 26 CFR part 1 revised April 1, 2018. For rules that otherwise apply beginning on January 28, 2013, and before January 6, 2017, see this section as in effect and contained in 26 CFR part 1 revised April 1, 2016.)

• Treas. Reg. §1.1471-1(a)Scope of chapter 4 of the Internal Revenue Code. Show full text ▾ Collapse ▴

  Scope of chapter 4 of the Internal Revenue Code. Sections 1.1471-1 through 1.1474-7 provide rules for withholding when a withholding agent makes a payment to an FFI or NFFE and prescribe the requirements for and definitions relevant to FFIs and NFFEs to which withholding will not apply. Section 1.1471-1 provides definitions for terms used in chapter 4 of the Internal Revenue Code (Code) and the regulations thereunder. Section 1.1471-2 provides rules for withholding under section 1471(a) on payments to FFIs, including the exception from withholding for payments made with respect to certain grandfathered obligations. Section 1.1471-3 provides rules for determining the payee of a payment and the documentation requirements to establish a payee's chapter 4 status. Section 1.1471-4 describes the requirements of an FFI agreement under section 1471(b) and the application of sections 1471(b) and (c) to an expanded affiliated group of FFIs. Section 1.1471-5 defines terms relevant to section 1471 and the FFI agreement and defines categories of FFIs that will be deemed to have met the requirements of section 1471(b) pursuant to section 1471(b)(2). Section 1.1471-6 defines classes of beneficial owners of payments that are exempt from withholding under chapter 4. Section 1.1472-1 provides rules for withholding when a withholding agent makes a payment to an NFFE, and defines categories of NFFEs that are not subject to withholding. Section 1.1473-1 provides definitions of the statutory terms in section 1473. Section 1.1474-1 provides rules relating to a withholding agent's liability for withheld tax, filing of income tax and information returns, and depositing of tax withheld. Section 1.1474-2 provides rules relating to adjustments for overwithholding and underwithholding of tax. Section 1.1474-3 provides the circumstances in which a credit is allowed to a beneficial owner for a withheld tax. Section 1.1474-4 provides that a chapter 4 withholding obligation need only be collected once. Section 1.1474-5 contains rules relating to credits and refunds of tax withheld. Section 1.1474-6 provides rules coordinating withholding under sections 1471 and 1472 with withholding provisions under other sections of the Code. Section 1.1474-7 provides the confidentiality requirement for information obtained to comply with the requirements of chapter 4. Any reference in the provisions of sections 1471 through 1474 to an amount that is stated in U.S. dollars includes the foreign currency equivalent of that amount. Except as otherwise provided, the provisions of sections 1471 through 1474 and the regulations thereunder apply only for purposes of chapter 4. See § 301.1474-1 of this chapter for the requirements for reporting on magnetic media that apply to financial institutions making payments or otherwise reporting accounts pursuant to chapter 4.

• Treas. Reg. §1.1471-1(b)Definitions. Show full text ▾ Collapse ▴

  Definitions. Except as otherwise provided in this paragraph (b) or under the terms of an applicable Model 2 IGA, the following definitions apply for purposes of sections 1471 through 1474 and the regulations under those sections.

  (1) Account. The term account means a financial account as defined in § 1.1471-5(b).

  (2) Account holder. The term account holder means the person who holds an account, as determined under § 1.1471-5(a)(3).

  (3) Active NFFE. The term active NFFE has the meaning set forth in § 1.1472-1(c)(1)(iv).

  (4) AML due diligence. The term AML due diligence means the customer due diligence procedures of a financial institution pursuant to the anti-money laundering or similar requirements to which the financial institution, or branch thereof, is subject. This includes identifying the customer (including the owners of the customer), understanding the nature and purpose of the account, and ongoing monitoring.

  (5) Annuity contract. The term annuity contract means a contract under which the issuer agrees to make payments for a period of time determined in whole or in part by reference to the life expectancy of one or more individuals. The term also includes a contract that is considered to be an annuity contract in accordance with the law, regulation, or practice of the jurisdiction in which the contract was issued, and under which the issuer agrees to make payments for a term of years. For purposes of the preceding sentence, it is immaterial whether a contract satisfies any of the substantive U.S. tax rules (for example, sections 72(s), 72(u), 817(h), and the investor control prohibition) applicable to the taxation of a contract holder or issuer.

  (6) Assumes primary withholding responsibility. The term assumes primary withholding responsibility refers to when a QI, territory financial institution, or U.S. branch assumes responsibility for withholding on a payment for purposes of chapters 3 and 4 as if it were a U.S. person. A QI may only assume primary withholding responsibility if it does not make an election to be withheld upon with respect to the payment.

  (7) Backup withholding. The term backup withholding means the withholding required under section 3406.

  (8) Beneficial owner. Except as provided in § 1.1472-1(d), § 1.1471-6(d)(4), and § 1.1471-6(f), the term beneficial owner has the meaning set forth in § 1.1441-1(c)(6).

  (9) Blocked account. The term blocked account has the meaning set forth in § 1.1471-4(e)(2)(iii)(B).

  (10) Branch. With respect to a financial institution, the term branch means a unit, business, or office of a financial institution that is treated as a branch under the regulatory regime of a country or that is otherwise regulated under the laws of a country as separate from other offices, units, or branches of the financial institution and also includes an entity that is disregarded as an entity separate from the financial institution (including branches maintained by such disregarded entity). A branch includes a unit, business, or office of a financial institution located in a country in which it is resident, and a unit, business, or office of a financial institution located in the country in which the financial institution is created or organized. All units, businesses, and offices of a participating FFI located in a single country, and all entities disregarded as entities separate from a participating FFI and located in a single country, shall be treated as a single branch and may use the same GIIN. An account will be treated as maintained by a branch or disregarded entity if the rights and obligations of the account holder and the participating FFI with regard to such account (including any assets held in the account) are governed by the laws of the country of the branch or disregarded entity.

  (11) Broker. The term broker means any person, U.S. or foreign, that, in the ordinary course of a trade or business during the calendar year, stands ready to effect sales to be made by others. Examples of a broker include an obligor that regularly issues and retires its own debt obligations, a corporation that regularly redeems its own stock, and a clearing organization that effects sales of securities for its members. A broker does not include an international organization described in § 1.1471-6(c) that redeems or retires an obligation of which it is the issuer, a stock transfer agent that records transfers of stock for a corporation if the nature of the activities of the agent is such that the agent ordinarily would not know the gross proceeds from sales, an escrow agent that effects no sales other than transactions incidental to the purpose of the escrow (such as sales to collect on collateral), or a corporation that issues and retires long-term debt on an irregular basis.

  (12) Cash value. The term cash value has the meaning set forth in § 1.1471-5(b)(3)(vii)(B).

  (13) Cash value insurance contract. The term cash value insurance contract has the meaning set forth in § 1.1471-5(b)(3)(vii).

  (14) Certified deemed-compliant FFI. The term certified deemed-compliant FFI means an FFI described in § 1.1471-5(f)(2).

  (15) Change in circumstances. The term change in circumstances has the meaning set forth in § 1.1471-3(c)(6)(ii)(E) for withholding agents and, in the case of a participating FFI, has the meaning set forth in § 1.1471-4(c)(2)(iii).

  (16) Chapter 3. For purposes of chapter 4, the term chapter 3 means sections 1441 through 1464 and the regulations thereunder, but does not include sections 1445 and 1446 and the regulations thereunder, unless the context indicates otherwise.

  (17) Chapter 4. The term chapter 4 means sections 1471 through 1474 and the regulations thereunder.

  (18) Chapter 4 reportable amount. The term chapter 4 reportable amount has the meaning set forth in § 1.1474-1(d)(2)(i).

  (19) Chapter 4 status. The term chapter 4 status means a person's status as a U.S. person, a specified U.S. person, an individual that is a foreign person, a participating FFI, a deemed-compliant FFI, a restricted distributor, an exempt beneficial owner, a nonparticipating FFI, a territory financial institution, an excepted NFFE, or a passive NFFE.

  (20) Chapter 4 withholding rate pool. The term chapter 4 withholding rate pool means a pool of payees that are nonparticipating FFIs provided on a chapter 4 withholding statement (as described in § 1.1471-3(c)(3)(iii)(B)(3)) to which a withholdable payment is allocated. The term chapter 4 withholding rate pool also means a pool provided on an FFI withholding statement (as described in § 1.1471-3(c)(3)(iii)(B)(2)) to which a withholdable payment is allocated to—

• Treas. Reg. §1.1471-1(c)Applicability date. Show full text ▾ Collapse ▴

  Applicability date. This section generally applies beginning on January 6, 2017, except for paragraphs (b)(116) and (121) of this section, which apply beginning on March 25, 2019. However, taxpayers may apply these provisions as of January 28, 2013. (For the rules that otherwise apply beginning on January 6, 2017, and before March 25, 2019, see this section as in effect and contained in 26 CFR part 1 revised April 1, 2018. For rules that otherwise apply beginning on January 28, 2013, and before January 6, 2017, see this section as in effect and contained in 26 CFR part 1 revised April 1, 2016.)

• Treas. Reg. §1.1471-1(i)§1.1471-1(i) Show full text ▾ Collapse ▴

  A nonreporting financial institution described in Annex II of the Model 1 IGA;

  (ii) A nonreporting financial institution described in Annex II of the Model 2 IGA;

  (iii) A registered deemed-compliant FFI described in § 1.1471-5(f)(1)(i)(A) through (F);

  (iv) A certified deemed-compliant FFI described in § 1.1471-5(f)(2)(i) through (v); or

• Treas. Reg. §1.1471-1(v)An exempt beneficial owner described in § 1. Show full text ▾ Collapse ▴

  An exempt beneficial owner described in § 1.1471-6.

  (84) Non-U.S. account. The term non-U.S. account means an account that is not a U.S. account and that does not have an account holder that is a nonparticipating FFI or recalcitrant account holder.

  (85) NQI. The term NQI or nonqualified intermediary has the meaning set forth in § 1.1441-1(c)(14).

  (86) NWP. The term NWP or nonwithholding foreign partnership means a foreign partnership that is not a withholding foreign partnership.

  (87) NWT. The term NWT or nonwithholding foreign trust means a foreign trust as defined in section 7701(a)(31)(B) that is a simple trust or grantor trust and is not a withholding foreign trust.

  (88) Offshore obligation. The term offshore obligation means an offshore obligation defined in § 1.6049-5(c)(1) (by substituting the terms withholding agent or financial institution for the term payor).

  (89) Owner. The term owner means a person described in § 1.1473-1(b)(1), without regard to whether such person is a U.S. person and without regard to whether such person owns a ten percent interest in the entity. The term also includes a person that owns a discretionary interest in a trust and receives a distribution during the calendar year.

  (90) Owner-documented FFI. The term owner-documented FFI means an FFI described in § 1.1471-5(f)(3).

  (91) Participating FFI. The term participating FFI means an FFI that has agreed to comply with the requirements of an FFI agreement with respect to all branches of the FFI, other than a branch that is a reporting Model 1 FFI or a U.S. branch. The term participating FFI also includes an FFI described in a Model 2 IGA that has agreed to comply with the requirements of an FFI agreement with respect to a branch (a reporting Model 2 FFI), and a QI branch of a U.S. financial institution, unless such branch is a reporting Model 1 FFI.

  (92) Participating FFI group. The term participating FFI group means an expanded affiliated group that includes one or more participating FFIs and meets the requirements of § 1.1471-4(e)(1). The term participating FFI group also means an expanded affiliated group in which one or more members of the group is a reporting Model 1 FFI and each member of the group that is an FFI is a registered deemed-compliant FFI, nonreporting IGA FFI, limited FFI, or retirement fund described in § 1.1471-6(f).

  (93) Partnership. The term partnership has the meaning set forth in § 301.7701-2(c)(1) of this chapter.

  (94) Passive NFFE. The term passive NFFE means an NFFE other than an excepted NFFE.

  (95) Passthru payment. The term passthru payment has the meaning set forth in § 1.1471-5(h).

  (96) Payee. The term payee has the meaning set forth in § 1.1471-3(a).

  (97) Payment with respect to an offshore obligation. The term payment with respect to an offshore obligation means a payment made outside of the United States, within the meaning of § 1.6049-5(e), with respect to an offshore obligation.

  (98) Payor. The term payor has the meaning set forth in §§ 31.3406(a)-2 and 1.6049-4(a)(2) and generally includes a withholding agent.

  (99) Permanent residence address. The term permanent residence address has the meaning set forth in § 1.1441-1(c)(38).

  (100) Person. The term person has the meaning set forth in section 7701(a)(1) and the regulations thereunder and includes an entity or arrangement that is an insurance company. The term person also includes, with respect to a withholdable payment, a QI branch of a U.S. financial institution.

  (101) Preexisting account. The term preexisting account means a financial account that is a preexisting obligation.

  (102) Preexisting entity account. The term preexisting entity account means a preexisting account held by one or more entities.

  (103) Preexisting individual account. The term preexisting individual account means a preexisting account held by one or more individuals.

  (104) Preexisting obligation—(i) The term preexisting obligation means any account, instrument, contract, debt, or equity interest maintained, executed, or issued by the withholding agent that is outstanding on June 30, 2014. With respect to a participating FFI, the term preexisting obligation means any account, instrument, or contract (including any debt or equity interest) maintained, executed, or issued by the FFI that is outstanding on the effective date of the FFI agreement. With respect to a registered deemed-compliant FFI, a preexisting obligation means any account, instrument, or contract (including any debt or equity interest) that is maintained, executed, or issued by the FFI prior to the later of the date that the FFI registers as a deemed-compliant FFI pursuant to § 1.1471-5(f)(1) and receives a GIIN or the date the FFI is required to implement its account opening procedures under § 1.1471-5(f). Notwithstanding the previous provisions of this paragraph (b)(104)(i), a preexisting obligation includes an obligation held by an entity that is issued, opened, or executed on or after July 1, 2014, and before January 1, 2015, by or with a withholding agent or FFI that treats the obligation as a preexisting obligation. See §§ 1.1471-2(a)(4)(ii), 1.1472-1(b)(2), and 1.1471-4(c)(3) for the due diligence requirements applicable to preexisting obligations for withholding agents and participating FFIs.

  (ii) The term preexisting obligation also includes any obligation (referring to an account, instrument, contract, debt, or equity interest) of an account holder or payee, regardless of the date such obligation was entered into, if—

  (A) The account holder or payee also holds with the withholding agent (or a member of the withholding agent's expanded affiliated group or sponsored FFI group) an account, instrument, contract, or equity interest that is a preexisting obligation under paragraph (b)(104)(i) of this section;

  (B) The withholding agent (and, as applicable, the member of the withholding agent's expanded affiliated group or sponsored FFI group) treats both of the aforementioned obligations, and any other obligations of the payee or account holder that are treated as preexisting obligations under this paragraph (b)(104)(ii), as consolidated obligations; and

  (C) With respect to an obligation that is subject to AML due diligence, the withholding agent is permitted to satisfy such AML due diligence for the obligation by relying upon the AML due diligence performed for the preexisting obligation described in paragraph (b)(104)(i) of this section.

  (105) Pre-FATCA Form W-8. The term pre-FATCA Form W-8 means a version of a Form W-8 that was issued by the IRS prior to 2013 (including an acceptable substitute form based on such version) and that does not contain chapter 4 statuses but otherwise meets the requirements of § 1.1441-1(e)(1)(ii) applicable to such certificate (or substitute form) and has not expired, or a Form W-8 that was issued prior to 2013 and furnished by an individual to establish such individual's foreign status but otherwise meets the requirements of § 1.1441-1(e)(1)(ii) applicable to such certificate and has not expired.

  (106) Prima facie FFI. The term prima facie FFI means an entity described in § 1.1471-2(a)(4)(ii)(B).

  (107) QI. The term QI or qualified intermediary has the meaning set forth in § 1.1441-1(e)(5)(ii).

  (108) QI agreement. The term QI agreement means the agreement described in § 1.1441-1(e)(5)(iii).

  (109) QI branch of a U.S. financial institution. The term QI branch of a U.S. financial institution means a foreign branch of a U.S. financial institution for which a QI agreement is in effect.

  (110) Recalcitrant account holder. The term recalcitrant account holder has the meaning set forth in § 1.1471-5(g).

  (111) Registered deemed-compliant FFI. The term registered deemed-compliant FFI means an FFI described in § 1.1471-5(f)(1). The term registered deemed-compliant FFI also includes a QI branch of a U.S. financial institution that is a reporting Model 1 FFI.

  (112) Relationship manager. A relationship manager is an officer or other employee of an FFI who is assigned responsibility for specific account holders on an on-going basis (including as an officer or employee that is a member of an FFI's private banking department), advises account holders regarding their banking, investment, trust, fiduciary, estate planning, or philanthropic needs, and recommends, makes referrals to, or arranges for the provision of financial products, services, or other assistance by internal or external providers to meet those needs. Notwithstanding the previous sentence, a person is only a relationship manager with respect to an account that has a balance or value of more than $1,000,000, taking into account the aggregation rules described in § 1.1471-5(b)(4)(iii)(A) and (B).

  (113) Reportable payment. The term reportable payment means a payment of interest or dividends (as defined in section 3406(b)(2)) and other reportable payments (as defined in section 3406(b)(3)).

  (114) Reporting Model 1 FFI. The term reporting Model 1 FFI means an FFI with respect to which a foreign government or agency thereof agrees to obtain and exchange information pursuant to a Model 1 IGA, other than an FFI that is treated as a nonparticipating FFI under the Model 1 IGA.

  (115) Reporting Model 2 FFI. The term reporting Model 2 FFI means a participating FFI that is described in § 1.1471-1(b)(91).

  (116) Responsible officer. The term responsible officer means, with respect to a participating FFI, an officer of any participating FFI or reporting Model 1 FFI in the participating FFI's expanded affiliated group with sufficient authority to fulfill the duties of a responsible officer described in § 1.1471-4, which include the requirement to periodically certify to the IRS regarding the FFI's compliance with its FFI agreement. The term responsible officer means, in the case of a registered deemed-compliant FFI, an officer of any deemed-compliant FFI or participating FFI in the deemed-compliant FFI's expanded affiliated group with sufficient authority to ensure that the FFI meets the applicable requirements of § 1.1471-5(f). The term responsible officer means, with respect to a sponsoring entity, an officer of the sponsoring entity or an officer of an entity that establishes and maintains policies and procedures for, and has general oversight over, the sponsoring entity, provided such officer has sufficient authority to fulfill the duties of a responsible officer described in § 1.1471-5(j) or § 1.1472-1(f) (as applicable). If a participating FFI elects to be part of a consolidated compliance program, the term responsible officer means an officer of the compliance FI (as described in § 1.1471-4(f)) with sufficient authority to fulfill the duties of a responsible officer described in § 1.1471-4(f)(2) and (3) on behalf of each FFI in the compliance group. In the case of an FI or sponsoring entity that is an investment entity, for purposes of this paragraph (b)(116), the responsible officer may be, in lieu of an officer of the investment entity, an individual who is a director, managing member, or general partner of the investment entity or, if the general partner or managing member of the investment entity is itself an entity, an individual who is an officer, director, managing member, or general partner of such other entity.

  (117) Restricted distributor. The term restricted distributor means an entity described in § 1.1471-5(f)(4).

  (118) Simple trust. The term simple trust means a trust that meets the requirements of section 651(a)(1) and (2).

  (119) Specified insurance company. The term specified insurance company has the meaning set forth in § 1.1471-5(e)(1)(iv).

  (120) Specified U.S. person. The term specified U.S. person or specified United States person has the meaning set forth in § 1.1473-1(c).

  (121) Sponsored FFI. The term sponsored FFI means any entity described in § 1.1471-5(f)(1)(i)(F) (describing sponsored investment entities and sponsored controlled foreign corporations) or § 1.1471-5(f)(2)(iii) (describing sponsored, closely held investment vehicles). The term sponsored FFI also means a sponsored investment entity, a sponsored controlled foreign corporation, or a sponsored, closely held investment vehicle treated as deemed-compliant under an applicable Model 2 IGA.

  (122) Sponsored FFI group. The term sponsored FFI group means a group of sponsored FFIs that share the same sponsoring entity.

  (123) Sponsored direct reporting NFFE. The term sponsored direct reporting NFFE has the meaning set forth in § 1.1472-1(c)(5).

  (124) Sponsoring entity. The term sponsoring entity means (i) an entity that registers with the IRS and agrees to perform the due diligence, withholding, and reporting obligations of one or more FFIs pursuant to § 1.1471-5(f)(1)(i)(F) or (f)(2)(iii); or (ii) an entity that registers with the IRS and agrees to perform the due diligence and reporting obligations of one or more direct reporting NFFEs pursuant to § 1.1472-1(c)(5).

  (125) Standardized industry coding system. The term standardized industry coding system means a coding system used by the withholding agent or FFI to classify account holders by business type for purposes other than U.S. tax purposes and that was implemented by the withholding agent by the later of January 1, 2012, or six months after the date the withholding agent was formed or organized.

  (126) Standing instructions to pay amounts. The term standing instructions to pay amounts means current payment instructions provided by the account holder, or an agent of the account holder, that will repeat without further instructions being provided by the account holder. Therefore, for example, a payment instruction to make an isolated payment is not a standing instruction to pay amounts, even if the instructions are given one year in advance. However, an instruction to make payments indefinitely is a standing instruction to pay amounts for the period during which such instructions are in effect, even if such instructions are amended after a single payment.

  (127) Subject to withholding. The term subject to withholding, with respect to an amount, means an amount for which withholding is required under chapter 4 or an amount for which chapter 4 withholding was otherwise applied.

  (128) Substantial U.S. owner. The term substantial U.S. owner or substantial United States owner has the meaning set forth in § 1.1473-1(b). In the case of a reporting Model 2 FFI, in applying this section with respect to a passive NFFE the term substantial U.S. owner means a controlling person as defined in the applicable Model 2 IGA.

  (129) Territory entity. The term territory entity means any entity that is incorporated or organized under the laws of any U.S. territory.

  (130) Territory financial institution. The term territory financial institution means a financial institution that is incorporated or organized under the laws of any U.S. territory, not including a territory entity that is an investment entity but that is not a depository institution, custodial institution, or specified insurance company.

  (131) Territory financial institution treated as a U.S. person. The term territory financial institution treated as a U.S. person means a territory financial institution that is treated as a U.S. person under § 1.1471-3(a)(3)(iv).

  (132) Territory NFFE. The term territory NFFE means a territory entity that is not a financial institution, including a territory entity that is an investment entity but is not a depository institution, custodial institution, or specified insurance company.

  (133) TIN. The term TIN means the tax identifying number assigned to a person under section 6109.

  (134) U.S. account. The term U.S. account or United States account has the meaning set forth in § 1.1471-5(a).

  (135) U.S. branch treated as a U.S. person. The term U.S. branch treated as a U.S. person means a U.S. branch that agrees to be treated as a U.S. person as described in § 1.1441-1(b)(2)(iv)(A). For the due diligence, withholding, and reporting requirements of a U.S. branch of an FFI treated as a U.S. person for purposes of chapter 4, see § 1.1471-4(b)(7), (c)(2)(v), (d)(2)(iii)(B), § 1.1472-1(a), and § 1.1474-1(i)(1) and (2).

  (136) U.S. financial institution. The term U.S. financial institution means a financial institution that is a U.S. person, including a U.S. branch treated as a U.S. person.

  (137) U.S. indicia. The term U.S. indicia has the meaning set forth in § 1.1471-4(c)(5)(iv)(B) when applied to an individual and as set forth in § 1.1471-3(e)(4)(v)(A) when applied to an entity.

  (138) U.S. owned foreign entity. The term U.S. owned foreign entity or United States owned foreign entity has the meaning set forth in § 1.1471-5(c).

  (139) U.S. payee. The term U.S. payee means any payee that is a U.S. person.

  (140) U.S. payor. The term U.S. payor means a U.S. payor or U.S. middleman as defined in § 1.6049-5(c)(5).

  (141) U.S. person—(i) Except as otherwise provided in paragraph (b)(141)(ii) of this section, the term U.S. person or United States person means a person described in section 7701(a)(30), the United States 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). The term U.S. person or United States person also means a foreign insurance company that has made an election under section 953(d), provided that either the foreign insurance company is not a specified insurance company (as described in § 1.1471-5(e)(1)(iv)), or the foreign insurance company is a specified insurance company and is licensed to do business in any State.

  (ii) The term U.S. person or United States person does not include a foreign insurance company that has made an election under section 953(d) if it is a specified insurance company and is not licensed to do business in any State. An individual will not be treated as a U.S. person for a taxable year or any portion of a taxable year that the individual is a dual resident taxpayer (within the meaning of § 301.7701(b)-7(a)(1) of this chapter) who is treated as a nonresident alien pursuant to § 301.7701(b)-7 of this chapter for purposes of computing the individual's U.S. tax liability. A U.S. person does not include an alien individual who has made an election under section 6013(g) or (h) to be treated as a resident of the United States.

  (142) U.S. source FDAP income. The term U.S. source FDAP income has the meaning set forth in § 1.1473-1(a)(2).

  (143) U.S. territory. The term U.S. territory or possession of the United States means American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands.

  (144) U.S. withholding agent. The term U.S. withholding agent means a withholding agent that is either a U.S. person or a U.S. branch of a foreign person.

  (145) Withholdable payment. The term withholdable payment has the meaning set forth in § 1.1473-1(a).

  (146) Withholding. The term withholding means the deduction and withholding of tax at the applicable rate from a payment.

  (147) Withholding agent. The term withholding agent has the meaning set forth in § 1.1473-1(d).

  (148) Withholding certificate. The term withholding certificate means a Form W-8, Form W-9, or any other certificate that under the Code or regulations certifies or establishes the chapter 4 status of a payee or beneficial owner.

  (149) WP. The term WP or withholding foreign partnership means a foreign partnership that has executed the agreement described in § 1.1441-5(c)(2)(ii).

  (150) Written statement. The term written statement has the meaning set forth in § 1.1471-3(c)(4).

  (151) WT. The term WT or withholding foreign trust means a foreign grantor trust or foreign simple trust that has executed the agreement described in § 1.1441-5(e)(5)(v).

• Treas. Reg. §1.1471-2Requirement to deduct and withhold tax on withholdable payments to certain FFIs Show full text ▾ Collapse ▴

  (a) Requirement to withhold on payments to FFIs—(1) General rule of withholding. Under section 1471(a), notwithstanding any exemption from withholding under any other provision of the Code or regulations, a withholding agent must withhold 30 percent of any withholdable payment made after June 30, 2014, to a payee that is an FFI unless either the withholding agent can reliably associate the payment with documentation upon which it is permitted to rely to treat the payment as exempt from withholding under paragraph (a)(4) of this section or the payment is made under a grandfathered obligation that is described in paragraph (b) of this section or constitutes gross proceeds from the disposition of such an obligation. A withholding agent that is making a payment must determine who the payee is under § 1.1471-3(a) with respect to that payment and the chapter 4 status of such payee. See § 1.1471-3 for requirements for determining the chapter 4 status of a payee, including additional documentation requirements that apply when a payment is made to an intermediary or flow-through entity that is not the payee. Withholding under this section applies without regard to whether the payee receives a withholdable payment as a beneficial owner or as an intermediary. See paragraph (a)(2)(iv) of this section for a description of the withholding requirements imposed on territory financial institutions as withholding agents under chapter 4. In the case of a withholdable payment to a NFFE, a withholding agent is required to determine whether withholding applies under section 1472 and § 1.1472-1. Except as otherwise provided in the regulations under chapter 4, a withholding obligation arises on the date a payment is made, as determined under § 1.1473-1(a).

  (2) Special withholding rules—(i) Requirement to withhold on payments of U.S. source FDAP income to participating FFIs and deemed-compliant FFIs that are NQIs, NWPs, or NWTs, and U.S. branches acting as intermediaries. A withholding agent that, after June 30, 2014, makes a payment of U.S. source FDAP income to a participating FFI or deemed-compliant FFI that is an NQI receiving the payment as an intermediary, or a NWP or NWT, must withhold 30 percent of the payment unless the withholding is reduced under this paragraph (a)(2)(i). A withholding agent is not required to withhold on a payment, or portion of a payment, that it can reliably associate, in the manner described in § 1.1471-3(c)(2), with a valid intermediary or flow-through withholding certificate that meets the requirements of § 1.1471-3(d)(4) and a withholding statement that meets the requirements of § 1.1471-3(c)(3)(iii)(B) and that allocates the payment or portion of the payment to payees for which no withholding is required under chapter 4. Further, a withholding agent is not required to withhold on a payment that it can reliably associate with documentation indicating that the payee is a U.S. branch treated as a U.S. person (as defined in § 1.1471-1(b)(135)) or is a U.S. branch of an FFI that is not treated as a U.S. person but that applies the rules described in § 1.1471-4(d)(2)(iii)(C). See also § 1.1471-3(c)(3)(iii)(H) for the rules for valid documentation of a U.S. branch.

  (ii) Residual withholding responsibility of intermediaries and flow-through entities. An intermediary or flow-through entity that receives a withholdable payment after June 30, 2014, is required to withhold on such payment to the extent required under chapter 4. Notwithstanding the previous sentence, an intermediary or flow-through entity is not required to withhold if another withholding agent has withheld the full amount required. Further, an NQI, NWP, or NWT is not required to withhold with respect to a withholdable payment under chapter 4 if it has provided a valid intermediary withholding certificate or flow-through withholding certificate and all of the information required by § 1.1471-3(c)(3)(iii), and it does not know, and has no reason to know, that another withholding agent failed to withhold the correct amount. A QI's, WP's, or WT's obligation to withhold and report is determined in accordance with its QI agreement, WP agreement, or WT agreement.

  (iii) Requirement to withhold if a participating FFI or registered deemed-compliant FFI makes an election to be withheld upon. A person that otherwise would be a payee with respect to a payment but that makes an election to be withheld upon does not agree to accept primary withholding responsibility for the payment under chapter 3 or 4. Accordingly, such person cannot be treated as the payee and the withholding agent must determine whether it must withhold based on the chapter 4 status of the payee on whose behalf the person is receiving the payment. The election to be withheld upon is only available to the extent provided in paragraph (a)(2)(iii)(A) and (B) of this section. The election is not available to an entity that is required to accept primary withholding responsibility for the payment, such as a WP or WT receiving a payment of U.S. source FDAP income, or an entity that already must be withheld upon because it may not accept primary withholding responsibility for the payment and, as such, already must pass up documentation with respect to the payee to the withholding agent, such as a participating FFI that is an NQI receiving a payment of U.S. source FDAP income.

  (A) Election to be withheld upon for U.S. source FDAP income. A withholding agent is required to withhold with respect to a payment, or portion of a payment, that is U.S. source FDAP income subject to withholding that is made after June 30, 2014, to a QI that has elected in accordance with this paragraph to be withheld upon, unless such withholding agent also makes an election to be withheld upon under this paragraph (a)(2)(iii)(A) or is an FFI that may not accept primary withholding responsibility for the payment. In such case, the withholding agent must withhold 30 percent of the portion of the payment that is allocable, pursuant to a withholding statement described in § 1.1471-3(c)(3)(iii)(B) provided by the QI, to recalcitrant account holders and nonparticipating FFIs. If no such allocation information is provided, the withholding agent must apply the presumption rules of § 1.1471-3(f) to determine the chapter 4 status of the payee. A QI that is an FFI and that makes the election to be withheld upon with respect to a payment of U.S. source FDAP income may not assume primary withholding responsibility under chapter 3 for that payment. Conversely, a QI that is an FFI and that does not make the election to be withheld upon with respect to a payment of U.S. source FDAP income is required to assume primary withholding responsibility under chapter 3 for that payment. The election to be withheld upon is only available with respect to a payment of U.S. source FDAP income if—

  (1) The withholding agent is a participating FFI, reporting Model 1 FFI, QI, or a U.S. withholding agent;

  (2) The person who receives the payment is a participating FFI or registered deemed-compliant FFI that acts as a QI with respect to the payment;

  (3) The person who receives the payment provides the withholding agent, at or before the time of the payment, with a valid intermediary withholding certificate with respect to the payment that notifies the withholding agent that it has elected to be withheld upon, certifies that it is not assuming primary withholding responsibility under chapter 3, and designates whether such election is made for all accounts held with the withholding agent or for the specific accounts identified on the withholding certificate; and

  (4) The intermediary withholding certificate is accompanied by a withholding statement described in § 1.1471-3(c)(3)(iii)(B).

  (B) Election to be withheld upon for gross proceeds. [Reserved]

  (iv) Withholding obligation of a territory financial institution. A territory financial institution that is a flow-through entity or that acts as an intermediary with respect to a withholdable payment has an obligation to withhold (to the extent required under this section and § 1.1472-1(b)) if it agrees to be treated as a U.S. person with respect to the payment for purposes of both chapter 4 and § 1.1441-1(b)(2)(iv)(A). A territory financial institution that is a flow-through entity or that acts as an intermediary with respect to a withholdable payment is not required to withhold under paragraph (a)(1) of this section or § 1.1472-1(b), however, if it has provided the withholding agent that is a U.S. withholding agent, participating FFI, reporting Model 1 FFI, or QI with all of the documentation described in § 1.1471-3(c)(3)(iii) (in which it has not agreed to be treated as a U.S. person with respect to the payment), and it does not know, or have reason to know, that another withholding agent failed to withhold the correct amount or failed to report the payment correctly under § 1.1474-1(d).

  (v) Withholding obligation of a foreign branch of a U.S. financial institution. A foreign branch of a U.S. financial institution is a U.S. withholding agent and a payee that is a U.S. person, and is generally not an FFI. However, a foreign branch of a U.S. financial institution that is also a reporting Model 1 FFI is both a withholding agent and a registered deemed-compliant FFI. Additionally, a QI branch of a U.S. financial institution is both a withholding agent and either a participating FFI or a registered deemed-compliant FFI. Therefore, a foreign branch of a U.S. financial institution is not subject to withholding under chapter 4 but has an obligation to withhold under this section and § 1.1472-1 and may be liable for the tax if it fails to do so. See § 1.1471-2(a) (requirement to withhold on payments to FFIs) and § 1.1471-3(a)(3)(iii) (U.S. intermediary or agent of a foreign person). A foreign branch that is a reporting Model 1 FFI or a reporting Model 2 FFI may apply the procedures under Annex I of an applicable IGA to document the chapter 4 status of a payee of a withholdable payment that is a holder of an account maintained by the branch in the Model 1 or Model 2 IGA jurisdiction. A QI branch of a U.S. financial institution must withhold in accordance with this chapter as provided in the QI agreement in addition to meeting its obligations under either § 1.1471-4(b) and its FFI agreement or § 1.1471-5(f).

  (vi) Payments of gross proceeds. [Reserved]

  (3) Coordination of withholding under sections 1471(a) and (b). The following entities are deemed to satisfy their withholding obligations under section 1471(a) and this section: participating FFIs that comply with the withholding requirements of § 1.1471-4(b); exempt beneficial owners; section 501(c) entities described in § 1.1471-5(e)(5)(v); and nonprofit organizations described in § 1.1471-5(e)(5)(vi). See § 1.1471-5(f) for when a deemed-compliant FFI is deemed to satisfy its withholding obligations under section 1471(a) and this section.

  (4) Payments for which no withholding is required. A withholding agent that has determined, in accordance with the documentation requirements and other rules provided in § 1.1471-3, that the payee of a withholdable payment is a foreign entity must determine whether the payment is exempt from withholding. Paragraphs (a)(4)(i) through (viii) of this section describe the circumstances in which a withholdable payment is not subject to withholding under section 1471(a) and this section.

  (i) Exception to withholding if the withholding agent lacks control, custody, or knowledge—(A) In general. A withholding agent that is not related to the payee or beneficial owner has an obligation to withhold under chapter 4 only to the extent that, at any time between the date that the obligation to withhold would arise (but for the provisions of this paragraph (a)(4)(i)) and the due date for filing the return on Form 1042 (including extensions) for the year in which the payment occurs, it has control over or custody of money or property owned by the payee or beneficial owner from which to withhold an amount and has knowledge of the facts that give rise to the payment. The exemption from the obligation to withhold under this paragraph (a)(4)(i) does not apply, however, to payments with respect to stock or other securities or if the lack of control or custody of money or property from which to withhold is part of a pre-arranged plan known to the withholding agent to avoid withholding under section 1471 or 1472. A withholding agent does not lack control over money or property for purposes of this paragraph (a)(4)(i) if the withholding agent directs another party to make the payment. Thus, for example, a principal does not cease to have control over a payment when it contracts with a paying agent to make the payments to its account holders in lieu of paying the account holders directly. Further, a withholding agent does not lack knowledge of the facts that give rise to a payment merely because the withholding agent does not know the character or source of the payment for U.S. tax purposes. See paragraph (a)(5) of this section for rules addressing a withholding agent's obligations when the withholding agent has knowledge of the facts that give rise to the payment, but the character or source of the payment is not known. For purposes of this paragraph (a)(4)(i), a withholding agent is related to the payee or beneficial owner if it is related within the meaning of section 482. Any exemption from withholding pursuant to this paragraph (a)(4)(i) applies without a requirement that documentation be furnished to the withholding agent. The special rules set forth in § 1.1441-2(d)(2) through (4), regarding the obligation of a withholding agent with respect to cancellation of debt, the satisfaction of a tax liability following underwithholding by a withholding agent, and amounts described in § 1.860G-3(b)(1) (regarding certain partnership allocations of REMIC net income with respect to a REMIC residual interest) also apply for purposes of chapter 4.

  (B) Example. A, an individual, owns stock in DC, a domestic corporation, through a custodian, Bank 1, that is a participating FFI. A also has a money market account at Bank 2, which is also a participating FFI. DC pays a dividend of $1,000 that is deposited in A's custodial account at Bank 1. A then directs Bank 1 to transfer $1,000 to A's money market account at Bank 2. With respect to the payment of the dividend into A's custodial account with Bank 1, both DC and Bank 1 are withholding agents making a withholdable payment for which they have custody, control, and knowledge. See § 1.1473-1(a)(2)(vii)(B) and (d). Therefore, both DC and Bank 1 have an obligation to withhold on the payment unless they can reliably associate the payment with documentation sufficient to treat the respective payees as not subject to withholding under chapter 4. With respect to the wire transfer of $1,000 from A's account at Bank 1 to A's account at Bank 2, neither Bank 1 nor Bank 2 is required to withhold with respect to the transfer because neither bank has knowledge of the facts that gave rise to the payment. Even though Bank 1 is a custodian with respect to A's interest in DC and has knowledge regarding the $1,000 dividend paid to A, once Bank 1 credits the $1,000 dividend to A's account, the $1,000 becomes A's property. When A transfers the $1,000 to its account at Bank 2, this constitutes a separate payment about which Bank 1 has no knowledge regarding the type of payment made. Further, Bank 2 only has knowledge that it receives $1,000 to be credited to A's account but has no knowledge regarding the type of payment made. Accordingly, Bank 1 and Bank 2 have no withholding obligation with respect to the transfer from A's custodial account at Bank 1 to A's money market account at Bank 2.

  (ii) Exception to withholding for certain payments made prior to July 1, 2016 (transitional)—(A) In general. For any withholdable payment made prior to July 1, 2016, with respect to a preexisting obligation for which a withholding agent does not have documentation indicating the payee's status as a nonparticipating FFI, the withholding agent is not required to withhold under this section and section 1471(a) unless the payee is a prima facie FFI.

  (B) Prima facie FFIs. If the payee is a prima facie FFI, the withholding agent must treat the payee as a nonparticipating FFI beginning on January 1, 2015, until the date the withholding agent obtains documentation sufficient to establish a different chapter 4 status of the payee. A prima facie FFI means any payee if—

  (1) The withholding agent has available as part of its electronically searchable information a designation for the payee as a QI or NQI; or

  (2) For an account maintained in the United States, the payee is presumed to be a foreign entity under § 1.1471-3(f) or is documented as a foreign entity for purposes of chapter 3 or 61, and the withholding agent has recorded as part of its electronically searchable information one of the following North American Industry Classification System or Standard Industrial Classification codes indicating that the payee is a financial institution:

  (i) Commercial Banking (NAICS 522110).

  (ii) Savings Institutions (NAICS 522120).

  (iii) Credit Unions (NAICS 522130).

  (iv) Other Depositary Credit Intermediation (NAICS 522190).

  (v) Investment Banking and Securities Dealing (NAICS 523110).

  (vi) Securities Brokerage (NAICS 523120).

  (vii) Commodity Contracts Dealing (NAICS 523130).

  (viii) Commodity Contracts Brokerage (NAICS 523140).

  (ix) Miscellaneous Financial Investment Activities (NAICS 523999).

  (x) Open-End Investment Funds (NAICS 525910).

  (xi) Commercial Banks, NEC (SIC 6029).

  (xii) Branches and Agencies of Foreign Banks (branches) (SIC 6081).

  (xiii) Foreign Trade and International Banking Institutions (SIC 6082).

  (xiv) Asset-Backed Securities (SIC 6189).

  (xv) Security & Commodity Brokers, Dealers, Exchanges & Services (SIC 6200).

  (xvi) Security Brokers, Dealers & Flotation Companies (SIC 6211).

  (xvii) Commodity Contracts Brokers & Dealers (SIC 6221).

  (xviii) Unit Investment Trusts, Face-Amount Certificate Offices, and Closed-End Management Investment Offices (SIC 6726).

  (iii) Payments to a participating FFI. Except to the extent provided in paragraph (a)(2)(i) of this section, a withholding agent is not required to withhold under section 1471(a) and this section on a withholdable payment made to a payee that the withholding agent can treat as a participating FFI in accordance with § 1.1471-3(d)(4). For this purpose, a limited branch of a participating FFI is treated as a nonparticipating FFI.

  (iv) Payments to a deemed-compliant FFI. Except to the extent provided in paragraph (a)(2)(i) or (iii) of this section, a withholding agent is not required to withhold under section 1471(a) and this section on a withholdable payment made to a payee that the withholding agent can treat as a deemed-compliant FFI in accordance with § 1.1471-3(d)(4) through (7). For this purpose, a limited branch of a deemed-compliant FFI is treated as a nonparticipating FFI.

  (v) Payments to an exempt beneficial owner. A withholding agent is not required to withhold under section 1471(a) and this section on a withholdable payment to the extent that the withholding agent can reliably associate the payment with documentation to determine the portion of the payment that is allocable to an exempt beneficial owner in accordance with § 1.1471-3(d)(8). For example, a withholding agent is not required to withhold under this section on a withholdable payment made to a payee that is an exempt beneficial owner with respect to the payment, to a nonparticipating FFI to the extent that the nonparticipating FFI receives the payment as an intermediary on behalf of one or more of its account holders that are exempt beneficial owners, or to a flow-through entity to the extent that the flow-through entity receives the payment with respect to one or more of its partners, beneficiaries, or owners (as applicable) that are exempt beneficial owners. See § 1.1471-3(d)(8)(ii) for special rules for a withholding agent to determine the portion of a withholdable payment that is beneficially owned by an exempt beneficial owner in the case of a payment made to a nonparticipating FFI.

  (vi) Payments to a territory financial institution. A withholding agent is not required to withhold under section 1471(a) and this section on a withholdable payment made to a payee that the withholding agent can treat as a territory financial institution that beneficially owns the payment in accordance with § 1.1471-3(d)(10)(i). A withholding agent also is not required to withhold under this section on a withholdable payment that the withholding agent can treat, in accordance with § 1.1471-3(d)(10)(ii), as made to a territory financial institution that is a flow-through entity or that acts as an intermediary with respect to the payment and that has agreed to be treated as a U.S. person for purposes of chapters 3 and 4 with respect to the payment. A territory financial institution's agreement to be treated as a U.S. person for purposes of this section must be evidenced by a withholding certificate described in § 1.1471-3(c)(3)(iii)(F) furnished by the territory financial institution to the withholding agent.

  (vii) Payments to an account held with a clearing organization with FATCA-compliant membership. [Reserved]

  (viii) Payments to certain excepted accounts. A withholding agent is not required to withhold under chapter 4 on a withholdable payment made to an account described in § 1.1471-5(b)(2).

  (5) Withholding requirements if source or character of payment is unknown—(i) General rule. If a withholding agent has knowledge of the facts that give rise to a payment but is unable to determine at the time of payment the character of the payment sufficiently to determine whether it is a withholdable payment, such payment must be treated as a withholdable payment. If a withholding agent has knowledge of the facts that give rise to a payment but is unable to determine at the time of payment the source of the payment, such payment must be treated as U.S. source income. For example, if a withholding agent does not know at the time of payment the amount of the payment that is a withholdable payment, because that calculation depends on facts that are not known at the time of payment (for example, because the withholding agent does not know whether services were performed in the United States or whether the payment constitutes income to the recipient) the withholding agent must withhold an amount necessary to ensure that the amount withheld is not less than 30 percent of the amount that could be a withholdable payment, subject to the limitation that the withheld amount must not exceed 30 percent of the amount paid. Notwithstanding this paragraph (a)(5), a withholding agent may presume a payment to be effectively connected with the conduct of a trade or business in the United States, and thus, not a withholdable payment, if it can do so under § 1.1471-3(f)(6) (regarding payments to certain U.S. branches).

  (ii) Optional escrow procedure. With respect to a payment described in paragraph (a)(5) of this section, the withholding agent may elect to retain 30 percent of the payment to hold in escrow until the earlier of the date that the amount of the withholdable payment can be determined or one year from the date the amount is placed in escrow, at which time either the withholding becomes due under this section or, to the extent that it is determined that the payment is of a type for which no withholding is required, the escrowed amount must be paid to the payee.

  (b) Grandfathered obligations—(1) Grandfathered treatment of outstanding obligations. Notwithstanding § 1.1473-1(a), a withholdable payment does not include any payment made under a grandfathered obligation described in paragraph (b)(2)(i)(A) of this section, or any gross proceeds from the disposition of such an obligation. Notwithstanding § 1.1471-5(h), a foreign passthru payment does not include any payment made under a grandfathered obligation described in paragraph (b)(2)(i)(A) or (B) of this section, or any gross proceeds from the disposition of such an obligation. A premium paid with regard to an insurance contract or annuity contract that is a grandfathered obligation is treated as a payment made under a grandfathered obligation.

  (2) Definitions. The following definitions apply solely for purposes of this paragraph (b).

  (i) Grandfathered obligation—(A) The term grandfathered obligation means—

  (1) Any obligation outstanding on July 1, 2014;

  (2) Any obligation that gives rise to a withholdable payment solely because the obligation is treated as giving rise to a dividend equivalent pursuant to section 871(m) and the regulations thereunder, provided that the obligation is executed on or before the date that is six months after the date on which obligations of its type are first treated as giving rise to dividend equivalents;

  (3) Any agreement requiring a secured party to make a payment with respect to, or to repay, collateral posted to secure a grandfathered obligation. If collateral (or a pool of collateral) secures both grandfathered obligations and obligations that are not grandfathered, the collateral posted to secure the grandfathered obligations may be determined by allocating (pro rata by value) the collateral (or each item comprising the pool of collateral) to all outstanding obligations secured by the collateral (or pool of collateral) or, if the collateral cannot be allocated pro rata to all obligations, by allocating all collateral to obligations that are not grandfathered and withholding to the extent required under chapter 4; and

  (4) Any obligation that gives rise to substitute interest (as defined in § 1.861-2(a)(7)) that arises from the payee posting a grandfathered obligation described in paragraph (b)(2)(i)(A)(1) of this section as collateral.

  (B) Solely for purposes of a foreign passthru payment, the term grandfathered obligation also includes any obligation that is executed on or before the date that is six months after the date on which final regulations defining the term foreign passthru payment are filed with the Federal Register.

  (ii) Obligation—(A) Except as otherwise provided in paragraph (b)(2)(ii)(B) of this section, the term obligation means any legally binding agreement or instrument. An obligation for purposes of this paragraph (b)(2)(i) includes, for example—

  (1) A debt instrument (for example, a bond, guaranteed investment certificate, or term deposit);

  (2) An agreement to extend credit for a fixed term (for example, a line of credit or a revolving credit facility), provided that the agreement as of its issue date fixes the material terms (including a stated maturity date) under which the credit will be provided;

  (3) A derivatives transaction entered into between counterparties under an ISDA Master Agreement that is evidenced by a confirmation;

  (4) A life insurance contract under which the entire contract value is payable no later than upon the death of the individual(s) insured under the contract but, in the case of a life insurance contract that contains a provision that permits the substitution of a new individual as the insured under the contract, only until a substitution occurs; and

  (5) An immediate annuity contract payable for a period certain or for the life of the annuitant.

  (B) An obligation for purposes of this paragraph (b)(2)(ii) does not include any legal agreement or instrument that—

  (1) Is treated as equity for U.S. tax purposes;

  (2) Lacks a stated expiration or term (for example, a savings deposit or demand deposit, a deferred annuity contract, or an annuity contract that permits a substitution of a new individual as the annuitant under the contract);

  (3) Is a brokerage agreement, custodial agreement, investment linked insurance contract, investment linked annuity contract, or similar agreement to hold financial assets for the account of others and to make and receive payments of income and other amounts with respect to such assets; or

  (4) Is a master agreement that merely sets forth standard terms and conditions that are intended to apply to a series of transactions between parties but that does not set forth all of the specific terms necessary to conclude a particular transaction.

  (iii) Date outstanding. Except as provided in the following sentence, an obligation that constitutes indebtedness for U.S. tax purposes is outstanding on the date provided in paragraph (b)(2)(i) if it has an issue date before such date. In all other cases, including an agreement described in paragraph (b)(2)(ii)(A)(2) of this section, an obligation is outstanding on the date provided in paragraph (b)(2)(i) if a legally binding agreement establishing the obligation was executed between the parties to the agreement before such date. Any material modification of an outstanding obligation will result in the obligation being treated as newly issued or executed as of the effective date of such modification.

  (iv) Material modification. In the case of an obligation that constitutes indebtedness for U.S. tax purposes, a material modification is any significant modification of the debt instrument as defined in § 1.1001-3(e). For life insurance contracts, a material modification includes any substitution of the insured under the contract. In all other cases, whether a modification of an obligation is material is determined based on the facts and circumstances.

  (3) Application to flow-through entities—(i) Partnerships. A payment made under a grandfathered obligation includes a payment made to a partnership with respect to such obligation and a payment made with respect to a partnership's disposition of such obligation. A payment made under a grandfathered obligation also includes the income from such obligation that is includible in the gross income of a partner with respect to a capital or profits interest in the partnership and the gross proceeds allocated to a partner from the disposition of such obligation as determined under § 1.1473-1(a)(5)(vii).

  (ii) Simple trusts. A payment made under a grandfathered obligation includes a payment made to a simple trust with respect to such obligation, including a payment made with respect to a simple trust's disposition of such obligation. A payment made under a grandfathered obligation also includes income from such obligation that is includible in the income of a beneficiary and further includes a beneficiary's share of the gross proceeds from a disposition of such obligation as determined under § 1.1473-1(a)(5)(vii).

  (iii) Grantor trusts. A payment made under a grandfathered obligation includes a payment made to a grantor trust with respect to such obligation, including a payment made with respect to the trust's disposition of such obligation. A payment made under a grandfathered obligation also includes income from such obligation that is includible in the gross income of a person that is treated as an owner of the trust and the gross proceeds from the disposition of such obligation to the extent such owner is treated as owning the portion of the trust that consists of the obligation.

  (4) Determination by withholding agent of grandfathered treatment—(i) In general. A withholding agent other than the issuer of the obligation (or agent of the issuer) may, absent actual knowledge, rely on a written statement by the issuer of the obligation to determine if such obligation meets the requirements for grandfathered treatment provided under this paragraph (b).

  (ii) Determination of material modification. For purposes of paragraph (b)(2)(iv) of this section (defining material modification), a withholding agent, other than the issuer of the obligation (or an agent of the issuer), is required to treat a modification of the obligation as material only if the withholding agent has actual knowledge thereof, such as in the event the withholding agent receives a disclosure indicating that there has been or will be a material modification to such obligation. The issuer of the obligation (or an agent of the issuer) that is a withholding agent is required to treat a modification of the obligation as material if the withholding agent knows or has reason to know that a material modification has occurred with respect to the obligation.

  (iii) Record retention. A withholding agent that relies on a document provided by the issuer of an obligation as described in paragraph (b)(4)(i) or (ii) of this section must retain such document in its records for the applicable period of limitations on assessment and collection with respect to amounts paid under the obligation or from disposition of the obligation.

  (c) Effective/applicability date. This section applies on January 6, 2017. However, taxpayers may apply these provisions as of January 28, 2013. (For the rules that apply beginning on January 28, 2013, and before January 6, 2017, see this section as in effect and contained in 26 CFR part 1 revised April 1, 2016.)

• Treas. Reg. §1.1471-2(a)Requirement to withhold on payments to FFIs—(1) General rule of withholding. Show full text ▾ Collapse ▴

  Requirement to withhold on payments to FFIs—(1) General rule of withholding. Under section 1471(a), notwithstanding any exemption from withholding under any other provision of the Code or regulations, a withholding agent must withhold 30 percent of any withholdable payment made after June 30, 2014, to a payee that is an FFI unless either the withholding agent can reliably associate the payment with documentation upon which it is permitted to rely to treat the payment as exempt from withholding under paragraph (a)(4) of this section or the payment is made under a grandfathered obligation that is described in paragraph (b) of this section or constitutes gross proceeds from the disposition of such an obligation. A withholding agent that is making a payment must determine who the payee is under § 1.1471-3(a) with respect to that payment and the chapter 4 status of such payee. See § 1.1471-3 for requirements for determining the chapter 4 status of a payee, including additional documentation requirements that apply when a payment is made to an intermediary or flow-through entity that is not the payee. Withholding under this section applies without regard to whether the payee receives a withholdable payment as a beneficial owner or as an intermediary. See paragraph (a)(2)(iv) of this section for a description of the withholding requirements imposed on territory financial institutions as withholding agents under chapter 4. In the case of a withholdable payment to a NFFE, a withholding agent is required to determine whether withholding applies under section 1472 and § 1.1472-1. Except as otherwise provided in the regulations under chapter 4, a withholding obligation arises on the date a payment is made, as determined under § 1.1473-1(a).

  (2) Special withholding rules—(i) Requirement to withhold on payments of U.S. source FDAP income to participating FFIs and deemed-compliant FFIs that are NQIs, NWPs, or NWTs, and U.S. branches acting as intermediaries. A withholding agent that, after June 30, 2014, makes a payment of U.S. source FDAP income to a participating FFI or deemed-compliant FFI that is an NQI receiving the payment as an intermediary, or a NWP or NWT, must withhold 30 percent of the payment unless the withholding is reduced under this paragraph (a)(2)(i). A withholding agent is not required to withhold on a payment, or portion of a payment, that it can reliably associate, in the manner described in § 1.1471-3(c)(2), with a valid intermediary or flow-through withholding certificate that meets the requirements of § 1.1471-3(d)(4) and a withholding statement that meets the requirements of § 1.1471-3(c)(3)(iii)(B) and that allocates the payment or portion of the payment to payees for which no withholding is required under chapter 4. Further, a withholding agent is not required to withhold on a payment that it can reliably associate with documentation indicating that the payee is a U.S. branch treated as a U.S. person (as defined in § 1.1471-1(b)(135)) or is a U.S. branch of an FFI that is not treated as a U.S. person but that applies the rules described in § 1.1471-4(d)(2)(iii)(C). See also § 1.1471-3(c)(3)(iii)(H) for the rules for valid documentation of a U.S. branch.

  (ii) Residual withholding responsibility of intermediaries and flow-through entities. An intermediary or flow-through entity that receives a withholdable payment after June 30, 2014, is required to withhold on such payment to the extent required under chapter 4. Notwithstanding the previous sentence, an intermediary or flow-through entity is not required to withhold if another withholding agent has withheld the full amount required. Further, an NQI, NWP, or NWT is not required to withhold with respect to a withholdable payment under chapter 4 if it has provided a valid intermediary withholding certificate or flow-through withholding certificate and all of the information required by § 1.1471-3(c)(3)(iii), and it does not know, and has no reason to know, that another withholding agent failed to withhold the correct amount. A QI's, WP's, or WT's obligation to withhold and report is determined in accordance with its QI agreement, WP agreement, or WT agreement.

  (iii) Requirement to withhold if a participating FFI or registered deemed-compliant FFI makes an election to be withheld upon. A person that otherwise would be a payee with respect to a payment but that makes an election to be withheld upon does not agree to accept primary withholding responsibility for the payment under chapter 3 or 4. Accordingly, such person cannot be treated as the payee and the withholding agent must determine whether it must withhold based on the chapter 4 status of the payee on whose behalf the person is receiving the payment. The election to be withheld upon is only available to the extent provided in paragraph (a)(2)(iii)(A) and (B) of this section. The election is not available to an entity that is required to accept primary withholding responsibility for the payment, such as a WP or WT receiving a payment of U.S. source FDAP income, or an entity that already must be withheld upon because it may not accept primary withholding responsibility for the payment and, as such, already must pass up documentation with respect to the payee to the withholding agent, such as a participating FFI that is an NQI receiving a payment of U.S. source FDAP income.

  (A) Election to be withheld upon for U.S. source FDAP income. A withholding agent is required to withhold with respect to a payment, or portion of a payment, that is U.S. source FDAP income subject to withholding that is made after June 30, 2014, to a QI that has elected in accordance with this paragraph to be withheld upon, unless such withholding agent also makes an election to be withheld upon under this paragraph (a)(2)(iii)(A) or is an FFI that may not accept primary withholding responsibility for the payment. In such case, the withholding agent must withhold 30 percent of the portion of the payment that is allocable, pursuant to a withholding statement described in § 1.1471-3(c)(3)(iii)(B) provided by the QI, to recalcitrant account holders and nonparticipating FFIs. If no such allocation information is provided, the withholding agent must apply the presumption rules of § 1.1471-3(f) to determine the chapter 4 status of the payee. A QI that is an FFI and that makes the election to be withheld upon with respect to a payment of U.S. source FDAP income may not assume primary withholding responsibility under chapter 3 for that payment. Conversely, a QI that is an FFI and that does not make the election to be withheld upon with respect to a payment of U.S. source FDAP income is required to assume primary withholding responsibility under chapter 3 for that payment. The election to be withheld upon is only available with respect to a payment of U.S. source FDAP income if—

  (1) The withholding agent is a participating FFI, reporting Model 1 FFI, QI, or a U.S. withholding agent;

  (2) The person who receives the payment is a participating FFI or registered deemed-compliant FFI that acts as a QI with respect to the payment;

  (3) The person who receives the payment provides the withholding agent, at or before the time of the payment, with a valid intermediary withholding certificate with respect to the payment that notifies the withholding agent that it has elected to be withheld upon, certifies that it is not assuming primary withholding responsibility under chapter 3, and designates whether such election is made for all accounts held with the withholding agent or for the specific accounts identified on the withholding certificate; and

  (4) The intermediary withholding certificate is accompanied by a withholding statement described in § 1.1471-3(c)(3)(iii)(B).

  (B) Election to be withheld upon for gross proceeds. [Reserved]

  (iv) Withholding obligation of a territory financial institution. A territory financial institution that is a flow-through entity or that acts as an intermediary with respect to a withholdable payment has an obligation to withhold (to the extent required under this section and § 1.1472-1(b)) if it agrees to be treated as a U.S. person with respect to the payment for purposes of both chapter 4 and § 1.1441-1(b)(2)(iv)(A). A territory financial institution that is a flow-through entity or that acts as an intermediary with respect to a withholdable payment is not required to withhold under paragraph (a)(1) of this section or § 1.1472-1(b), however, if it has provided the withholding agent that is a U.S. withholding agent, participating FFI, reporting Model 1 FFI, or QI with all of the documentation described in § 1.1471-3(c)(3)(iii) (in which it has not agreed to be treated as a U.S. person with respect to the payment), and it does not know, or have reason to know, that another withholding agent failed to withhold the correct amount or failed to report the payment correctly under § 1.1474-1(d).

• Treas. Reg. §1.1471-2(b)Grandfathered obligations—(1) Grandfathered treatment of outstanding obligations. Show full text ▾ Collapse ▴

  Grandfathered obligations—(1) Grandfathered treatment of outstanding obligations. Notwithstanding § 1.1473-1(a), a withholdable payment does not include any payment made under a grandfathered obligation described in paragraph (b)(2)(i)(A) of this section, or any gross proceeds from the disposition of such an obligation. Notwithstanding § 1.1471-5(h), a foreign passthru payment does not include any payment made under a grandfathered obligation described in paragraph (b)(2)(i)(A) or (B) of this section, or any gross proceeds from the disposition of such an obligation. A premium paid with regard to an insurance contract or annuity contract that is a grandfathered obligation is treated as a payment made under a grandfathered obligation.

  (2) Definitions. The following definitions apply solely for purposes of this paragraph (b).