SECTION 1. PURPOSE AND SCOPE

Sec. 1.01. General Obligations. When the IRS enters into a QI Agreement with a foreign person or a foreign branch of a

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vided it separately qualifies as an eligible entity. If QI acts as a QDD with respect to the home office or branch, the home office or branch, as applicable, must act as a QDD for all payments made as a principal with respect to potential section 871(m) transactions and all payments received as a principal with respect to potential section 871(m) transactions and underlying securities, excluding any payments made or received by the QDD to the extent the payment is treated as effectively connected with the conduct of a trade or business within the United States within the meaning of section 864. For purposes of this Agreement, any securities lending or sale-repurchase transaction (as defined in §1.871–15(a)(13)) QI enters into that is a section 871(m) transaction is treated as entered into by QI as a principal unless QI determines that it is acting as an intermediary with respect to that transaction. A QI may not act as a QDD when it receives or makes payments as an intermediary and must act as either a QI or NQI for the payment. A QI acting as a QDD must assume primary chapter 3 and chapter 4 withholding responsibility and primary Form 1099 reporting and backup withholding responsibility under section 3406 for payments made as a QDD with respect to any potential section 871(m) transaction provided the amount paid is an amount subject to chapter 3 or 4 withholding or a reportable payment under chapter 61. A QI acting as a QDD (other than a QDD that is a foreign branch of a U.S. financial institution) also must satisfy its QDD tax liability as determined under section 3.09 of this Agreement. The QDD (other than a QDD that is a foreign branch of a U.S. financial institution) must report its withholding tax liability under chapters 3 and 4 on Form 1042 and must report its QDD tax liability on the appropriate U.S. tax return (as prescribed by the IRS). A U.S. financial institution with a foreign branch that acts as a QDD must file the appropriate U.S. income tax return ( e.g., Form 1120, U.S. Corporation Income Tax Return ) for the tax year covered by this Agreement to report and pay its tax liability under chapter 1 and would not have a separate QDD tax liability.

A dividend or dividend equivalent is treated as received by a QDD acting in its non-equity derivatives dealer capacity if

U.S. person, that foreign person (or foreign branch) becomes a QI. QI is a withholding agent under chapters 3 and 4, and a payor under chapter 61 and section 3406, for amounts that it pays to its account holders.

If QI is an FFI, the requirements QI has agreed to as a participating FFI, registered deemed-compliant FFI, or registered deemed-compliant Model 1 IGA FFI apply in addition to the requirements under this Agreement. If QI acts as a QI with respect to an account, this Agreement will reference QI’s chapter 4 obligations when necessary to facilitate coordination with the QI’s obligations under chapters 3, 4, and 61 and section 3406 with respect to such account holders. A participating FFI’s (including a reporting Model 2 FFI) obligations are provided in the FFI agreement, a registered deemed-compliant FFI’s (other than a reporting Model 1 FFI) obligations are provided in §1.1471– 5(f)(1) or the applicable Model 2 IGA, and the obligations of a reporting Model 1 FFI or a registered deemed-compliant Model 1 IGA FFI are provided in the applicable Model 1 IGA. For purposes of chapter 4, QI must comply with its FATCA requirements as a participating FFI, registered deemed-compliant FFI, or registered deemed-compliant Model 1 IGA FFI (as applicable) in order to maintain its required chapter 4 status, as well as the requirements of a withholding agent for any payee that is a nonparticipating FFI or NFFE that is not an account holder. If QI is an FFI, QI must also, pursuant to this Agreement, assume primary reporting responsibility for purposes of section 1472, for certain indirect account holders for which it acts as a QI. If QI is an NFFE acting on behalf of persons other than its shareholders, QI must assume primary reporting responsibility for purposes of section 1472 for any person for which it acts as a QI.

If QI acts as a sponsoring entity on behalf of a sponsored FFI (as defined in §1.1471–1(b)(121)) or sponsored direct reporting NFFE (as defined in §1.1471– 1(b)(123)), it must comply with the due diligence, withholding, reporting, and compliance requirements of a sponsoring entity in addition to its requirements under this Agreement.

For purposes of chapters 3 and 61 and section 3406, QI must act in its capacity as a QI pursuant to this Agreement for those accounts that QI holds with a withholding agent and that QI has identified as accounts for which it acts as a QI. QI is not required to act as a QI for all accounts that it holds with a withholding agent. However, QI must, as part of its QI Agreement, materially comply with the requirements of a withholding agent or payor, as applicable to a nonqualified intermediary (NQI) under chapters 3 and 61 and section 3406, for any account for which it does not (or cannot) act as a QI and for any payee that is not an account holder. If QI identifies an account as one for which it will act as a QI, it must act as a QI for all payments made to that account and obtain the documentation required under section 5 of this Agreement for such account. When QI acts as a QI for an account and assumes primary chapter 3 withholding responsibility for payments to the account, QI must also assume primary withholding responsibility for withholdable payments made to such account for chapter 4 purposes.

If QI acts as a QI with respect to payments of substitute interest, as described in section 3.03(A) of this Agreement, it must act as a QI and assume primary withholding responsibility for all such payments of substitute interest.

If QI acts as a qualified securities lender (QSL) with respect to substitute dividend payments (as defined in §1.861– 3(a)(6)), QI is required to act as a QSL and assume primary withholding responsibility for all substitute dividends received and paid by QI when acting as an intermediary or dealer with respect to securities lending and similar transactions. A QI that acts as a QDD may not act as a QSL, except with respect to a payment on a securities lending or sale-repurchase transaction for which the QI has determined that it is acting as an intermediary for the payment.

The home office (as defined in section 2.43 of this Agreement) and each branch of a foreign person that intends to act as a QDD must each separately qualify and be approved for QDD status, as provided in section 1.02 of this Agreement. A foreign branch of a U.S. financial institution may also apply for QI and QDD status pro

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the dividend or dividend equivalent is received by a QDD acting as a proprietary trader. Transactions properly reflected in a QDD’s equity derivatives dealer book are presumed to be held by a dealer in its equity derivatives dealer capacity for purposes of determining the QDD tax liability. In addition, for purposes of determining whether a dealer is acting in its equity derivatives dealer capacity, only the dealer’s activities as an equity derivatives dealer are taken into account.

Sec. 1.02. Parties to the Agreement. This Agreement applies to: (A) QI; and (B) The Internal Revenue Service.

If QI is an FFI, QI can only act as a QI for an account if the branch of QI that holds the account operates in a KYC jurisdiction identified on the IRS’s Approved KYC List. QI may add any jurisdiction in which it operates a branch that is not initially included in its QI application without prior IRS approval if the jurisdiction is identified on the IRS’s Approved KYC List and QI updates its information on the QI/WP/WT Application and Accounts Management System with respect to such branch prior to treating such branch as a QI. Notwithstanding the preceding sentence, a QI may not add a branch that will act as a QDD through the QI/WP/WT Application and Accounts Management System. Instead, the branch must separately qualify and be approved for QDD status in accordance with the procedures to be prescribed by the IRS. A branch of a QI that is not subject to the provisions of this Agreement remains subject to the rules of chapters 3, 4, and 61 and section 3406, as provided in section 1.01 of this Agreement.