SECTION 7. DETERMINATION OF ASSET CATEGORIES AND CLASSES FOR QI’S WITHHOLDING

CERTIFICATE

Sec. 7.01. Statement of Asset Classes. QI shall furnish to the withholding agent a written statement described in this section 7. The statement forms an integral part of the Form W-8IMY. The statement shall separate those assets that generate, or could generate, reportable amounts into the three overall categories described in section 7.02 of this Agreement and into the classes of assets described in section 7.03 of this Agreement. The written statement may be provided in any form and in any manner the QI and withholding agent choose. QI shall use the documentation obtained under section 5 of this Agreement, or the presumption rules under section 5.13 of this Agreement, as the basis for determining categories and classes of assets. QI shall update the statement as often as necessary so that the withholding agent has the information necessary to satisfy its reporting and withholding obligations. All such updates form an integral part of QI’s Form W-8IMY.

Sec. 7.02. Categories of Assets. QI must separate assets into the following three overall categories of assets:

(A) Assets associated with documented foreign account holders;

(B) Assets associated with documented U.S. account holders; and

(C) Assets associated with undocumented account holders.

Sec. 7.03. Class of Assets. A class of assets is a group of assets within a category of assets that produces the same type of income, is subject to the same rate of withholding, and is associated with the same type of account holders as specified in paragraphs (A) through (G) of this section 7.03. A type of income is any item of income subject to the same income code and, unless the income is

1999–5 I.R.B. 41 February 1, 1999

allocable to U.S. account holders, the same exemption code on Form 1042-S. Notwithstanding the preceding two sentences, assets that generate a specific type of income and that are allocable to each U.S. non-exempt recipient are a separate class of assets, unless QI assumes Form 1099 reporting and backup withholding responsibility for reportable payments allocable to U.S. non-exempt recipient account holders. If QI has an account holder that is another intermediary (whether a qualified intermediary, a nonqualified intermediary, or a private arrangement intermediary) or a foreign partnership (whether or not a withholding foreign partnership), QI shall combine the asset information provided by the intermediary or partnership to QI’s own classes of assets. Thus, QI shall identify classes of assets as follows:

(A) Assets that are associated with documented foreign account holders and that generate a specific type of income (as determined by reference to the income and exemption codes on Form 1042-S) subject to a single withholding rate. If QI assumes primary withholding responsibility for assets in an account, the income from those assets is considered subject to a zero rate of withholding;

(B) Assets that are associated with all documented U.S. exempt recipient account holders and that generate a specific type of income (as determined by reference to the income, but not exemption, codes on Form 1042-S);

(C) Assets that are associated with each documented U.S. non-exempt recipient account holder for which QI does not assume Form 1099 reporting and backup withholding responsibility. In addition, for any U.S. non-exempt recipient account holder that receives a reportable amount from a withholding agent, QI shall inform the withholding agent of the assets associated with such U.S. non-exempt recipient account holder that generate, or could generate, reportable payments that are not included in reportable amounts (e.g., broker proceeds, foreign source interest, or foreign source dividends);

(D) Assets that are associated with all documented U.S. non-exempt recipient account holders for which QI does assume Form 1099 reporting and backup withholding responsibility and that generate a specific type of income (as determined by reference to the income, but not exemption, codes on Form 1042-S);

(E) Assets that are associated with each undocumented account holder that QI actually knows is a U.S. non-exempt recipient;

(F) Assets that are associated with undocumented account holders that generate reportable amounts (other than U.S. source bank deposit interest or interest and OID on short-term obligations) that a withholding agent must presume is paid to an undocumented payee that is a foreign person (30 percent withholding applies); and

(G) Assets that are associated with undocumented account holders that generate bank deposit interest or interest and OID on shortterm obligations that a withholding agent must presume are made to a payee that is a U.S. non-exempt recipient (31percent backup withholding applies).