Intermediary

An intermediary is a person who acts as a custodian, broker, nominee, or otherwise as an agent for another person, regardless of whether that other person is the beneficial owner of the amount paid, a flow-through entity, or another intermediary.

QI. A QI is a foreign intermediary (or a QDD) that is a party to a QI agreement with the IRS described in Regulations section 1.1441-1(e)(5)(iii) or (e)(6). For information on the QI agreement, go to IRS.gov/QISystem .

WP or WT. A WP or WT is a foreign partnership or trust that has entered into a withholding agreement with the IRS described in Regulations sections 1.1441-5(c)(2) and (e)(5) in which it agrees to assume primary withholding responsibility under chapters 3 and 4 for all payments that are made to it for its direct partners, beneficiaries, or owners.

Nonqualified intermediary (NQI). An NQI is any intermediary that is not a U.S. person and that is not a QI.

Nonwithholding foreign partnership (NWP). An NWP is a foreign partnership that is not a WP.

Nonwithholding foreign trust (NWT). An NWT is a foreign trust that is a simple trust or grantor trust and is not a WT.

QDD. A QDD is a QI that is an eligible entity that agrees to assume the requirements of a QDD and the other requirements in the QI agreement. Any applicable home office or branch that seeks to be a QDD must qualify and be approved for QDD status. A QDD must document itself to a withholding agent with a Form W-8 IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting , indicating that it is acting as a QDD for payments with respect to potential section 871(m) transactions and underlying securities that it receives in a principal capacity, separately identify the home office or branch as the recipient on a withholding statement (if necessary), and indicate on the form that it will assume primary chapters 3 and 4 withholding responsibilities and primary Form 1099 reporting and backup withholding responsibilities for certain payments it makes and receives as a QDD, as well as including any other information required by the QI agreement. See Regulations section 1.1441-1(e)(6) and the QI agreement in Rev. Proc. 2022-43 for more information. See also Notice 2022-37 and Notice 2024-44 , described in Section 871(m) transition , earlier.

Schedule Q (Form 1042). If the taxpayer, or any branch of the taxpayer, is a QDD, the taxpayer must attach to Form 1042 at least one Schedule Q (Form 1042), Tax Liability of Qualified Derivatives Dealer (QDD) , for each QDD. See the Schedule Q (Form 1042) for additional information.

Qualified securities lender (QSL). A QSL is an FFI that is a bank, custodian, broker-dealer, or clearing organization subject to regulatory supervision in its home jurisdiction and that is:

1. Regularly engaged in the business of borrowing securities of U.S. corporations and lending such securities to unrelated customers; and

2. Subject to audit by the IRS under section 7602 or, in the case of a QI, an external auditor.

For further information about requirements for QSL status and the withholding requirements for substitute dividend payments, see Notice 2010-46, 2010-24 I.R.B. 757, available at IRS.gov/irb/2010-24_IRB#NOT-2010-46 . While Notice 2010-46 is obsoleted, an entity may claim QSL status and be treated as a recipient for substitute dividend payments made before January 1, 2027. See Notice 2022-37 and Notice 2024-44 .

FFI. An FFI is a foreign entity described in Regulations section 1.1471-5(d).

RDCFFI. An RDCFFI (as defined in Regulations section 1.1471-5(f)(1)) is an FFI that is deemed to satisfy the requirements of section 1471(b). This includes a reporting Model 1 FFI or branch of an FFI that is a reporting Model 1 FFI (see Regulations section 1.1471-1(b)(114) for the definition of a reporting Model 1 FFI).

PFFI. A PFFI is an FFI that has agreed to satisfy the obligations of an FFI agreement under chapter 4 with respect to all of its branches of the FFI, other than a branch that is a reporting Model 1 FFI or a U.S. branch. This includes a reporting Model 2 FFI (that has entered

Instructions for Form 1042 (2025) 3

into an FFI agreement with respect to a branch) and a QI branch of a U.S. financial institution unless such branch is a reporting Model 1 FFI.

Nonparticipating FFI. A nonparticipating FFI is an FFI that is not a PFFI, deemed-compliant FFI, or exempt beneficial owner.

Recalcitrant account holder. Generally, a recalcitrant account holder is an account holder of a participating or deemed-compliant FFI that failed to provide the documentation required under chapter 4 to determine the account holder’s status or to enable the FFI to report the account as a U.S. account. See Regulations section 1.1471-5(g).

Passive nonfinancial foreign entity (NFFE). A passive NFFE is a nonfinancial foreign entity other than an excepted NFFE, including a WP, WT, QI, or direct reporting NFFE. See Regulations sections 1.1471-1(b) (80) and 1.1472-1(b).

Caution: For chapter 4 purposes, an intermediary must provide its chapter 4 status to a withholding agent to determine whether withholding applies to the payment. Thus, a chapter 4 status must be provided for a withholdable payment made to a foreign entity.