SECTION 1. PURPOSE AND SCOPE

.01 Purpose. This revenue procedure provides guidance for entering into a qualified intermediary (QI) withholding agreement with the Internal Revenue Service (IRS) under § 1.1441–1(e)(5) ¹ . Section 2 of this revenue procedure provides background on the withholding and reporting requirements of chapters 3, 4, and 61 and section 3406, and provides a highlight of changes to the existing QI agreement (included in Revenue Procedure 2000–12, 2000–1 C.B. 387 (as amended)). Section 3 of this revenue procedure provides the application procedures for becoming a QI and renewing a QI agreement. Section 4 of this revenue procedure provides the final qualified intermediary withholding agreement (QI agreement), and provides that such agreement is not intended to be modified by a rider. The objective of the QI agreement is to allow a foreign intermediary to assume the withholding and reporting obligations for payments of income (including interest, dividends, royalties, and gross proceeds) made to its account holders or payees through one or more foreign intermediaries or flowthrough entities.

.02 Entities Eligible to Execute a QI Agreement. A QI agreement may be entered into by persons described in § 1.1441–1(e)(5)(ii) (foreign financial institutions (FFIs), foreign clearing organizations, and foreign branches of U.S. financial institutions or U.S. clearing organizations). With respect to an FFI, as defined in § 1.1471–5(d), the FFI may apply to enter into a QI agreement if the FFI is able to and agrees to satisfy the

requirements and obligations of (1) a participating FFI (including a reporting Model 2 FFI), (2) a registered deemedcompliant FFI (including a reporting Model 1 FFI and a nonreporting Model 2 FFI treated as registered deemedcompliant), (3) a registered deemedcompliant Model 1 IGA FFI (as defined in section 2.17(C) of the QI agreement), or (4) for a transitional period, a limited FFI. See § 1.1471–1(b)(91), (111), and (77). An FFI that is a certified deemedcompliant FFI (including a nonreporting IGA FFI (as defined in § 1.1471–1(b)(83)) may enter into a QI agreement if the FFI meets and agrees to assume the obligations of, and to be treated as, a participating FFI (including a reporting Model 2 FFI), a registered deemed-compliant FFI (including a reporting Model 1 FFI or a nonreporting Model 2 FFI treated as registered deemed-compliant), or a registered deemed-compliant Model 1 IGA FFI with respect to all accounts that it maintains (even if the FFI does not intend to designate an account as one for which it will act as a QI). A central bank of issue may enter into a QI agreement provided that it meets and agrees to assume the obligations of, and to be treated as, a participating FFI (including a reporting Model 2 FFI) or a registered deemed-compliant FFI (including a reporting Model 1 FFI) with respect to any account that it maintains and that is held in connection with a commercial financial activity described in § 1.1471– 6(h) and for which it receives a withholdable payment (as defined in § 1.1471– 1(b)(145)). A foreign branch of a U.S. financial institution may also apply to enter into a QI agreement provided that either it is a reporting Model 1 FFI, or it agrees to assume the requirements and obligations of a participating FFI (including a reporting Model 2 FFI). See § 1.1441–1(e)(5)(ii).

An entity that is a territory financial institution (territory FI) (as defined in § 1.1471–1(b)(130)) or a nonparticipating FFI (as defined in § 1.1471–1(b)(82)) may not apply for a QI agreement.

The QI agreement described in section 4 of this revenue procedure may apply to a foreign corporation that is a nonfinancial foreign entity (NFFE, as defined

in § 1.1471–1(b)(80)) described in § 1.1441–1(e)(5)(ii)(C) seeking to become a QI to, for example, present claims of benefits under an income tax treaty on behalf of its shareholders or other persons (other than an FFI) for which the foreign corporation acts as an intermediary and that the IRS accepts as a qualified intermediary pursuant to § 1.1441– 1(e)(5)(ii)(D). An NFFE that enters into a QI agreement to act on behalf of its shareholders must meet and agree to assume the obligations of, and to be treated as, a direct reporting NFFE under § 1.1472– 1(c)(3). An NFFE that enters into a QI agreement to act on behalf of persons other than its shareholders will be required to satisfy the withholding and reporting requirements of §§ 1.1472–1(a) and 1.1474–1(i) with respect to any NFFE that is a beneficial owner for whom the QI is acting with respect to a withholdable payment. The QI agreement does not apply to a foreign partnership or foreign trust. A foreign partnership or foreign trust may seek to qualify as a withholding foreign partnership or withholding foreign trust. See §§ 1.1441–5(c)(2)(ii) and 1.1441–5(e)(5)(v). .03 Effective Date of QI Agreement. The QI agreement provided in section 4 of this revenue procedure applies to a QI agreement with an effective date on or after June 30, 2014. An FFI, an NFFE acting as a QI on behalf of its shareholders, or an NFFE that is a sponsoring entity that applies for QI status before June 30, 2014 and is issued a GIIN before such date will have a QI agreement with an effective date of June 30, 2014. An FFI, an NFFE acting as a QI on behalf of its shareholders, or an NFFE that is a sponsoring entity that applies for QI status on or after June 30, 2014 will have a QI agreement with an effective date on the date it is issued a GIIN.

A QI that is an NFFE that is not acting on behalf of its shareholders and is not a sponsoring entity and that renews its QI agreement on or before June 30, 2014 will have a QI agreement with an effective date of June 30, 2014, and, if it renews after June 30, 2014, the effective date of the QI agreement will be the date of renewal provided in the IRS approval no

1Unless otherwise provided, all citations in this revenue procedure and the QI agreement are to the Internal Revenue Code of 1986 and to the Income Tax Regulations thereunder.

July 14, 2014 150 Bulletin No. 2014–29

tice. An NFFE that is not acting on behalf of its shareholders, that is not a sponsoring entity, and that is applying to obtain QI status will have a QI agreement with an effective date on the date it is issued a QI-EIN.

A QI that has submitted an application for QI status to the IRS before July 31, 2014 and is approved during calendar year 2014 may act as a qualified intermediary in accordance with Revenue Procedure 2000–12 (as amended) until June 30, 2014, as if the QI agreement of such QI were effective on January 1, 2014 and expires on June 30, 2014.

.04 Effect on Other Documents. Revenue Procedure 2000–12, 2000–1 C.B. 387, is superseded with respect to the requirements of a QI that apply on or after June 30, 2014. A QI agreement (which includes any riders to such agreement) in effect before June 30, 2014 expires on June 30, 2014. Revenue Procedure 2002– 55, 2002–2 C.B. 435, is revoked.