SECTION 3. WITHHOLDING

RESPONSIBILITY

Sec. 3.01. NRA Withholding Responsi- bility. QI is subject to the withholding and reporting provisions applicable to withholding agents under chapter 3 of the Code. Under chapter 3, a withholding agent must withhold 30 percent of any payment of an amount subject to NRA withholding made to an account holder that is a foreign person unless the withholding agent can reliably associate the payment with documentation upon which it can rely to treat the payment as made to a payee that is a U.S. person or as made to a beneficial owner that is a foreign person entitled to a reduced rate of withholding. See section 5 of this Agreement regarding documentation requirements. Sec. 3.02. Primary NRA Withholding Responsibility Not Assumed. Notwithstanding sections 1.01 and 3.01 of this Agreement, QI shall not be required to withhold under chapter 3 of the Code if it does not accept primary NRA withholding responsibility under section 3.03 of this Agreement and it has provided a valid withholding certificate and correct withholding statements to a withholding agent from which it receives an amount subject to NRA withholding in accordance with section 6 of this Agreement. Notwithstanding its election not to assume primary NRA withholding responsibility, QI shall, however, withhold the difference between the amount of NRA withholding required under chapter 3 of the Code and the amount actually withheld by another withholding agent if QI–

(A) Actually knows that the appropriate amount has not been withheld by another withholding agent; or (B) Made an error which results in the withholding agent’s failure to withhold the correct amount due (e.g., QI fails to provide an accurate withholding statement with respect to the payment) and QI has not corrected the underwithholding under the reimbursement and setoff procedures of section 9.05 of this Agreement. QI is not required to withhold under chapter 3 of the Code on an amount subject to NRA withholding that it pays to another qualified intermediary that has assumed primary NRA withholding responsibility with respect to the payment or to a withholding foreign partnership. See section 8 of this Agreement regarding QI’s responsibility to report amounts subject to withholding on Form 1042–S. Sec. 3.03. Assumption of Primary NRA Withholding Responsibility. QI, upon notification to a withholding agent, may assume primary NRA withholding responsibility for an amount subject to NRA withholding by providing a valid withholding certificate described in section 6 of this Agreement to a withholding agent that makes a payment of an amount subject to NRA withholding and by designating on the withholding statement associated with such certificate the account for which QI assumes primary NRA withholding responsibility. QI may assume primary NRA withholding responsibility without informing the IRS. QI is not required to assume primary NRA withholding responsibility for all accounts it has with the withholding agent. However, if QI assumes primary NRA withholding responsibility for any account, it must assume that responsibility for all payments of amounts subject to NRA withholding made by the withholding agent to that account. To the extent that QI assumes primary NRA withholding responsibility, QI shall withhold from amounts subject to NRA withholding the amount required to be withheld under chapter 3 of the Code. QI is not required, however, to withhold on amounts it pays to another qualified intermediary that has certified to QI on Form W-8IMY that it has assumed primary withholding responsibility with respect to the payment or to a withholding foreign partnership. See section 8 of this Agreement regarding QI’s responsibility to report amounts subject to

withholding on Form 1042-S. Sec. 3.04. Backup Withholding Re- sponsibility. QI is a payor under section 3406 of the Code with respect to reportable payments. Under section 3406, a payor is required to deduct and withhold 31 percent from the payment of a reportable payment to a U.S. non-exempt recipient if the U.S. non-exempt recipient has not provided its TIN in the manner required under that section; the IRS notifies the payor that the TIN furnished by the payee is incorrect; there has been a notified payee under-reporting described in section 3406(c); or there has been a payee certification failure described in section 3406(d). QI represents that there are no legal restrictions that prohibit it from complying with the Form 1099 reporting requirements of this Agreement or imposing backup withholding and depositing the amounts withheld in accordance with section 3.08 of this Agreement. Sec. 3.05. Primary Form 1099 Report- ing and Backup Withholding Responsi- bility For Reportable Payments Other Than Reportable Amounts. Under section 6.01 of this Agreement, QI is only required to provide a withholding agent with information regarding reportable amounts. Therefore, QI is primarily responsible for reporting on Form 1099 and, if required, backup withholding on the payments described in section 3.05(A) and (B) of this Agreement whether or not QI assumes primary Form 1099 reporting and backup withholding responsibility with respect to reportable amounts under section 3.07 of this Agreement. No provision of this Agreement which requires QI to provide another withholding agent with information regarding reportable amounts shall be construed as relieving QI of its Form 1099 reporting and backup withholding obligations with respect to reportable payments that are not reportable amounts. (A) U.S. Payor. Except as provided in section 3.05(C) of this Agreement, if QI is a U.S. payor, QI has primary Form 1099 reporting and backup withholding responsibility for reportable payments as defined in section 3406(b) of the Code other than reportable amounts. For example, if QI is a U.S. payor, it has primary Form 1099 reporting and backup withholding responsibility for payments of foreign source income as well as all broker proceeds paid

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to account holders that are, or are presumed to be, U.S. non-exempt recipients, unless an exception to reporting or backup withholding applies. QI also has primary Form 1099 reporting and backup withholding responsibility for broker proceeds from the sale of assets beneficially owned by a U.S. non-exempt recipient account holder that produce or could produce, reportable payments if the identity and account information of that account holder is prohibited by law from disclosure as described in section 6.04 of this Agreement. See section 2.44(A) of this Agreement for the instances in which certain reporting and withholding exceptions do not apply. (B) Non-U.S. Payor. Except as provided in section 3.05(C) of this Agreement, if QI is a non-U.S. payor, QI has primary Form 1099 reporting and backup withholding responsibility for broker proceeds described in section 2.44(B)(2) and (3) of this Agreement and foreign source income paid in the United States or to an account maintained in the United States as described in section 2.44(B)(4) of this Agreement, if such payments are made, or presumed made under section 5.13(C)(4) of this Agreement, to U.S. non-exempt recipients. (C) Designated Broker Proceeds Proce- dure. Whether QI is a U.S. payor or nonU.S. payor, QI may request another payor to report on Form 1099 and, if required, backup withhold on designated broker proceeds (as defined in section 2.11 of this Agreement), provided the other payor actually receives the broker proceeds. QI will not be primarily responsible for Form 1099 reporting and for backup withholding if the other payor agrees to do the reporting and backup withholding and QI provides all of the information necessary for the other payor to properly report, and backup withhold on the designated broker proceeds. QI, however, remains primarily responsible for Form 1099 reporting and backup withholding if the other payor does not agree to report and backup withhold, or QI knows that the other payor failed to do so. Sec. 3.06. Primary Form 1099 Report- ing and Backup Withholding Responsi- bility For Reportable Amounts Not As- sumed. Notwithstanding sections 1.01 and 3.04 of this Agreement, QI shall not be required to backup withhold on a re

portable amount if QI does not assume primary Form 1099 reporting and backup withholding responsibility and it provides a payor from which it receives a reportable amount the Forms W-9 of its U.S. non- exempt recipient account holders (or, if a U.S. non-exempt recipient fails to provide a Form W-9, information regarding the account holder’s name, address, and TIN, if a TIN is available) together with the withholding rate pools (as defined in section 6.03 of this Agreement) attributable to U.S. non-exempt recipient account holders. Notwithstanding its election not to assume primary Form 1099 reporting and backup withholding responsibility, QI shall backup withhold and report a reportable amount if– (A) QI actually knows a reportable amount is subject to backup withholding and another payor failed to apply backup or NRA withholding; (B) Another payor has not applied backup or NRA withholding to a reportable amount because of an error made by QI (e.g., QI failed to provide the other payor with information regarding the name, address, TIN, if available, and withholding rate pool for a U.S. non-exempt recipient account holder subject to backup withholding); (C) QI pays a reportable amount to a U.S. non-exempt recipient whose identity and other account information are prohibited by law from disclosure (see section 6.04 of this Agreement) and another payor of the reportable amount has not backup withheld. QI is not required to backup withhold, however, on a reportable amount it makes to a withholding foreign partnership or to another qualified intermediary if the other qualified intermediary has assumed primary Form 1099 reporting and backup withholding responsibility with respect to the payment. See section 3.05 of this Agreement for backup withholding responsibility for reportable payments other than reportable amounts. See section 8.04 of this Agreement regarding QI’s responsibility to report reportable payments on Form 1099.

[NOTE: A qualified intermediary that is not a U.S. payor must obtain IRS approval to assume primary Form 1099 reporting and backup withholding responsibility with respect to reportable amounts. The IRS will evidence its approval of a non-U.S.

payor’s assumption of primary Form 1099 reporting and backup withholding respon- sibility by the signature of the Commis- sioner, or his delegate, in the margin of section 3.07 of this Agreement. ] Sec. 3.07. Assumption of Primary Form 1099 Reporting and Backup Withholding Responsibility. QI may assume primary Form 1099 reporting responsibility under chapter 61 of the Code and primary backup withholding responsibility under section 3406 of the Code with respect to reportable amounts. See sections 3.05 and 8.04 of this Agreement for QI’s obligations regarding reportable payments other than reportable amounts. A qualified intermediary that assumes such responsibility is subject to all of the obligations imposed by chapter 61 and section 3406 of the Code and shall be subject to any applicable penalties for failure to meet those obligations. The exception from backup withholding under Treas. Reg. §31.3406(g)–1(e) shall not apply, however, to payments of deposit interest, or interest or original issue discount on redemptions of short-term obligations, to the extent QI must presume that an account holder is a U.S. non-exempt recipient under section 5.13(C)(2) of this Agreement. QI shall inform a withholding agent from which it receives a reportable amount that it has assumed primary Form 1099 reporting and backup withholding responsibility by providing the withholding agent with a valid withholding certificate described in section 6 of this Agreement and by designating on the withholding statement associated with such certificate the account for which QI assumes primary Form 1099 reporting and backup withholding responsibility. QI may assume primary Form 1099 reporting and backup withholding responsibility without informing the IRS, unless QI is a non-U.S. payor. QI is not required to assume primary Form 1099 reporting and backup withholding responsibility for all accounts it has with a withholding agent. However, if QI assumes primary Form 1099 reporting and backup withholding responsibility for any account, it must assume that responsibility for all reportable amounts made by a payor to that account. QI shall not be required to backup withhold on a reportable amount it makes to another qualified intermediary that has assumed primary Form 1099 re

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porting and backup withholding responsibility with respect to the reportable amount. See section 8 of this Agreement regarding QI’s responsibility to report reportable payments on Form 1099. Sec. 3.08. Deposit Requirements. If QI is a U.S. payor or a non-U.S. payor that assumes primary NRA withholding responsibility or primary Form 1099 and backup withholding responsibility, it must deposit amounts withheld under chapter 3 or section 3406 of the Code with a Federal Reserve bank or authorized financial institution at the time and in the manner provided under section 6302 of the Code (see Treas. Reg. §1.6302–2(a) or §31.6302–1(h)). If QI is a non-U.S. payor that does not assume primary NRA withholding responsibility or primary Form 1099 and backup withholding responsibility, QI must deposit amounts withheld by the 15th day following the month in which the NRA or backup withholding occurred.