SECTION 3. WITHHOLDING

RESPONSIBILITY

Sec. 3.01. NRA Withholding Re- sponsibility. WT 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 a beneficiary or owner 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. When it is acting as a withholding foreign trust, WT must assume NRA withholding responsibility for amounts subject to NRA withholding that are distributed to, or included in the distributive share of, any direct beneficiary or owner, and WT must withhold the amount required to be withheld under chapter 3 of the Code. WT must provide a Form W–8IMY that certifies to a withholding agent that makes a payment of such amounts that WT is acting as a withholding foreign trust, and WT must identify such amounts on the withholding statement associated with that Form W–8IMY. WT is not required to withhold when it pays such amounts to another withholding foreign trust or withholding foreign partnership that has certified to WT on Form W–8IMY that it is acting as a withholding foreign trust or withholding foreign partnership with respect to such identified amounts. WT is not required to act as a withholding foreign trust for all amounts that it receives from a withholding agent. Except as provided in Section 10 of this Agreement, WT may not act as a withholding foreign trust for amounts distributed to, or included in the

whether the payment subject to withholding is made to an individual or to an entity.

Sec. 2.18. Overwithholding. The term “overwithholding” means the excess of the amount actually withheld over the amount required to be withheld under chapter 3 of the Code.

Sec. 2.19. Payment. A “payment” is considered made to a person if that person realizes income whether or not such income results from an actual transfer of cash or other property. See Treas. Reg. § 1.1441–2(e).

Sec. 2.20. Pooled Reporting (PR) Election. A “pooled reporting (PR) election” is defined in Section 6.03. of this Agreement.

Sec. 2.21. Reduced Rate of With- holding. A “reduced rate of withholding” means a rate of withholding that is less than 30 percent, either as a result of a reduction in withholding under the Code or as a result of a reduction in withholding under an income tax treaty.

Sec. 2.22. Reportable Amount. A “reportable amount” means an amount subject to NRA withholding (as defined in Section 2.02 of this Agreement); U.S. source deposit interest; and U.S. source interest or original issue discount paid on the redemption of short-term obligations. The term does not include payments on deposits with banks and other financial institutions that remain on deposit for two weeks or less. It also does not include amounts of original issue discount arising from a sale and repurchase transaction completed within a period of two weeks or less, or amounts described in Treas. Reg. § 1.6049–5(b)(7), (10), or (11) (relating to certain foreign targeted registered obligations and certain obligations issued in bearer form).

Sec. 2.23. Reporting Pool. A reporting pool is defined in Section 6.03 of this Agreement.

Sec. 2.24. TIN. A “TIN” is a U.S. taxpayer identification number.

Sec. 2.25. Trust, Beneficiary and Owner; Direct, Indirect or Passthrough Beneficiary or Owner. The term “trust” is defined in Treas. Reg. § 301.7701–4. The term “beneficiary” is defined in section 643(c) of the Code and the regulations thereunder. An “owner” is a person treated as a grantor or owner under Subpart C of

Subchapter J of the Code. A direct beneficiary or owner is a beneficiary or owner, other than an intermediary or flow-through entity that is not itself a withholding foreign trust or withholding foreign partnership, for which WT acts as a withholding foreign trust. An indirect beneficiary or owner is a person that owns a trust interest in WT through one or more passthrough beneficiaries or owners. A passthrough beneficiary or owner is a direct or indirect beneficiary or owner in WT that is an intermediary or flow-through entity. As provided in Section 2.07 of this Agreement, a withholding foreign partnership or withholding foreign trust is not a flow-through entity and thus is not a passthrough beneficiary or owner.

Sec. 2.26. Underwithholding. “Underwithholding” means the excess of the amount required to be withheld under chapter 3 of the Code over the amount actually withheld.

Sec. 2.27. U.S. Person. A “United States (or U.S.) person” is a person described in section 7701(a)(30) of the Code, the U.S. government (including an agency or instrumentality thereof), a State of the United States (including an agency or instrumentality thereof), or the District of Columbia (including an agency or instrumentality thereof).

Sec. 2.28. Withholding Agent. A “withholding agent” has the same meaning as set forth in Treas. Reg. § 1.1441–7(a) and includes a payor. As used in this Agreement, the term generally refers to the person making a payment to a withholding foreign trust.

Sec. 2.29. Withholding Foreign Trust (or WT). A “withholding foreign trust” is a person, described in Treas. Reg. § 1.1441–5(e)(v), that has entered into a withholding agreement with the IRS to be treated as a withholding foreign trust and is acting in its capacity as a withholding foreign trust.

Sec. 2.30. Withholding Foreign Trust (or WT) EIN. A “withholding foreign trust EIN” or “WT-EIN” means the employer identification number assigned by the IRS to a withholding foreign trust. WT’s WT-EIN is only to be used when WT is acting as a withholding foreign trust. For example, WT must give a withholding agent its non-WT EIN, if any, rather than its WT-EIN, if it is not acting

2003-32 I.R.B. 325 August 11, 2003

distributive share of, passthrough beneficiaries or owners or indirect beneficiaries or owners. WT must act as a nonwithholding foreign trust for such amounts. When WT is not acting as a withholding foreign trust, WT must: 1) provide to the withholding agent a Form W–8IMY with Part VI completed; 2) identify such amounts on the withholding statement associated with that Form W–8IMY; and 3) provide the documentation and information required by Treas. Reg. § 1.1441–5(e)(5)(iii) and (iv).

Sec. 3.02. Timing of Withholding. WT must withhold on the date it makes a distribution to a direct foreign beneficiary or owner that includes an amount subject to NRA withholding. To the extent a direct foreign beneficiary’s or owner's distributive share of income subject to withholding has not actually been distributed to the direct foreign beneficiary or owner, WT must withhold on the direct beneficiary’s or owner’s distributive share on the earlier of the date the statement required under section 6048 is mailed or otherwise provided to the beneficiary or owner or the due date for furnishing the statement (whether or not WT is required to prepare and furnish the statement).

Sec. 3.03. Withholding on Distribu- tions. WT may determine the amount of withholding on a distribution based on a reasonable estimate of the beneficiary’s or owner’s distributive share of income subject to withholding for the year. WT must correct the estimated withholding to reflect the beneficiary’s or owner’s actual distributive share on the earlier of the date that the statement required under section 6048 is mailed or otherwise provided to the beneficiary or owner or the due date for furnishing the statement (whether or not WT is required to prepare and furnish the statement). If that date is after the due date for the WT’s Forms 1042 and 1042–S (including extensions) for the calendar year, WT may withhold and report any adjustments required by the corrected information in the following calendar year.

Sec. 3.04. Deposit Requirements. WT must deposit amounts withheld under chapter 3 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)).