SEC. 2. BACKGROUND

.01 Withholding and reporting on payments to foreign persons . Payors of certain types of income, which include dividends, interest, and gross proceeds described in sections 6042, 6049, and 6045, respectively, are generally required to determine whether the payee or beneficial owner is a U.S. or a foreign person for several purposes under the Internal Revenue Code (the ‘‘Code’’). Under sections 1441(a) and 1442(a) of the Code, payments of U.S. source interest and dividends (but not gross proceeds from portfolio investments) are subject to a 30 percent tax withheld at source by the withholding agent if the income is paid to a nonresident alien or a foreign corporation. A foreign beneficial owner may benefit from an exemption or reduced rate under the Code, the regulations, or an income tax treaty. Under section 3406 of the Code, a payor of dividends, interest, and gross proceeds must obtain a Form W–9 from the payee or backup withhold at a 31 percent rate unless an exception applies or the payee furnishes a certificate of foreign status on Form W–8.

.02 Proof of payee’s or beneficial owner’s status . The regulations under section 1441, 6042, 6049, and 6045 prescribe the manner in which a beneficial owner or payee may, with respect to these types of payments, certify to a withholding agent or payor that it is a foreign person and, if applicable, that a reduced rate of withholding at source should apply. For this purpose, a withholding agent may generally rely on a certificate of foreign status (Form W–8) or documentary evidence (see procedures described in §1.1441–1(e)(2)(ii) and §1.6049–5(c)(1) and (2)). Alternative certification procedures may be used in the case of payments made outside the United States with respect to an offshore account.

3. Certification through nominees or agents—intermediary withholding certificate . A QI may provide an intermediary withholding certificate on behalf of its account holders or partners, including intermediaries or other QI’s. See §1.1441–1(e)(5).