Section 3. WITHHOLDING

RESPONSIBILITY

Sec. 3.01. Chapters 3 and 4 Withhold- ing—In General. (A) Chapter 4 Withholding. WP (unless WP is a retirement fund) is a withholding agent for purposes of chapter 4 and is subject to the withholding and reporting provisions applicable to withholding agents under sections 1471 and 1472 with respect to its partners. WP is required to withhold 30 percent of any withholdable payment made after June 30, 2014, that is distributed to, or included in the distributive share of, a partner that is an FFI unless WP can reliably associate the payment (or portion of the payment) with documentation upon which it is permitted to rely to treat the payment as exempt from withholding under § 1.1471– 2(a)(4), or the payment is made under a grandfathered obligation described in § 1.1471–2(b). See § 1.1473–1(a) for the definition of a withholdable payment and the applicable exceptions to this definition. WP is also required to withhold 30 percent of any withholdable payment made after June 30, 2014, that is distributed to, or included in the distributive share of, a partner that is an NFFE unless WP can reliably associate the payment (or portion of the payment) with a certification described in § 1.1472–1(b)(1)(ii), or an exception to withholding under § 1.1472–1 applies. If WP is a retirement fund, WP is not required to withhold under section 1471 or 1472. If WP is a participating FFI or registered deemed-compliant FFI (other than a reporting Model 1 FFI), WP will satisfy its requirement to withhold under sections 1471(a) and 1472(a) with respect to direct partners that are entities by withholding on withholdable payments made to nonparticipating FFIs and recalcitrant account holders to the extent required under its FATCA requirements as a participating FFI or registered deemed

compliant FFI. See the FFI agreement, § 1.1471–5(f), or the applicable Model 2 IGA for the withholding requirements that apply to withholdable payments made to direct partners that are individuals and are treated as recalcitrant account holders. If WP is a reporting Model 1 FFI or a registered deemedcompliant Model 1 IGA FFI, WP will satisfy its requirement to withhold under section 1471(a) with respect to direct partners by withholding on withholdable payments made to nonparticipating FFIs to the extent required under its FATCA requirements as a registered deemedcompliant FFI or registered deemedcompliant Model 1 IGA FFI. WP must withhold at the time and in the manner described in sections 3.02 through 3.04 of this Agreement, which modifies other provisions describing the time and manner in which WP would otherwise be required to withhold for chapter 4 purposes. (B) Chapter 3 Withholding. WP is a withholding agent for purposes of chapter 3 and is subject to the withholding and reporting provisions applicable to withholding agents under chapter 3. WP must withhold 30 percent of any payment of an amount subject to chapter 3 withholding that is distributed to, or included in the distributive share of, a partner that is a foreign person unless WP 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 4 of this Agreement regarding documentation requirements applicable to WP for determining whether chapter 3 withholding applies. With respect to an amount subject to chapter 4 withholding that is also an amount subject to chapter 3 withholding, WP may credit any tax withheld under chapter 4 against its liability for any tax due under chapter 3 with respect to the payment so that no additional withholding is required on the payment for purposes of chapter 3. Nothing in chapter 4 or the regulations thereunder (including the FFI agreement) or any applicable IGA relieves WP of its requirements to withhold on an amount subject to chapter 3 withholding

to the extent required under sections 3.02 through 3.04 of this Agreement or modifies the documentation upon which WP may rely under section 4 of this Agreement for determining whether withholding under chapter 3 applies. Sec. 3.02. Primary Chapters 3 and 4 Withholding Responsibility. WP must assume primary chapters 3 and 4 withholding responsibility for all withholdable payments and amounts subject to chapter 3 withholding that are distributed to, or included in the distributive share of, any direct partner and any indirect partner for which it acts as a WP to the extent permissible under section 9 of this Agreement. If WP acts as a nonwithholding foreign partnership (NWP) with respect to an indirect partner, it cannot assume primary chapters 3 and 4 withholding responsibility for payments made to that indirect partner. WP is not required to withhold on amounts it pays to a QI that assumes primary withholding responsibility with respect to the payment, or to a WT, or another WP. If WP is a participating FFI or a registered deemed-compliant FFI, it may not elect with respect to its direct partners to satisfy its obligation to withhold under chapter 4 (or the FFI agreement) on a withholdable payment made to a recalcitrant account holder that is a U.S. non-exempt recipient by backup withholding under section 3406 as provided in § 1.1471–4(b)(3)(iii) and section 4 of the FFI agreement. See section 6 of this Agreement regarding WP’s responsibility to report amounts subject to withholding on Form 1042–S. Sec. 3.03. Timing of Withholding. WP must withhold on the date it makes a distribution to a foreign partner that includes a withholdable payment or an amount subject to chapter 3 withholding as determined under section 3.04 of this Agreement. To the extent a partner’s distributive share of income subject to withholding has not actually been distributed to the partner, WP must withhold on the partner’s distributive share on the earlier of the date that the statement required under section 6031(b) (i.e., Schedule K–1) is mailed or otherwise provided to the partner or the due date for furnishing the statement (whether or not WP is required to prepare and furnish the statement). If that date is after the due date (including

February 6, 2017 802 Bulletin No. 2017–6

extensions) for filing WP’s Forms 1042–S for the calendar year to which the distributive share relates, WP must withhold and report the withholding on the distributive share that relates to the prior calendar year as if it arises in the subsequent calendar year. See section 6.01 of this Agreement for the requirement to report the withheld tax. Sec. 3.04. Withholding on Distributions. WP may determine the amount of withholding on a distribution based on a reasonable estimate of the partner’s distributive share of income subject to withholding for the year. WP must correct the estimated withholding to reflect the partner’s actual distributive share on the earlier of the date that the statement required under section 6031(b) (i.e., Schedule K–1) is mailed or otherwise provided to the partner or the due date for furnishing the statement (whether or not WP is required to prepare and furnish the statement). If that date is after the earlier of the due date (including extensions) for filing WP’s Forms 1042–S or the date WP actually issues Forms 1042–S for the calendar year, WP must withhold and report any adjustments required by correcting the information for the following calendar year. Sec. 3.05. Deposit Requirements. WP must deposit amounts withheld under chapters 3 and 4 at the time and in the manner provided under section 6302 (see § 1.6302–2(a) or § 31.6302–1(h)).