Responsibilities of a Withholding Agent To Obtain Form W-8

Chapter 3 Responsibilities Generally, an amount is subject to withholding for purposes of chapter 3 if it is an amount from sources within the United States that is fixed or determinable annual or periodical (FDAP) income. FDAP income is in general all income included in gross income, including

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interest (and original issue discount (OID)), dividends (including dividend equivalents), rents, royalties, and compensation. FDAP income does not include most gains from the sale of property (including market discount and option premiums) or items of income excluded from gross income without regard to the U.S. or foreign status of the owner of the income, such as interest under section 103(a). Amounts subject to chapter 3 withholding do not include amounts that are not FDAP income as well as other specific items of income described in Regulations section 1.1441-2 (such as interest on bank deposits and short-term OID).

For purposes of sections 1441 and 1442, if you are a withholding agent, you must withhold 30% of any payment of an amount subject to chapter 3 withholding made to a payee that is a foreign person unless you can reliably associate the payment with documentation (for example, Form W-8 or Form W-9, Request for Taxpayer Identification Number and Certification) upon which you can rely to treat the payment as made to (a) a payee that is a U.S. person, or (b) a beneficial owner that is a foreign person entitled to a reduced rate of, or exemption from, withholding. In certain circumstances, however, you may be allowed to associate a payment with documentary evidence rather than a Form W-8 for a payment made outside the United States with respect to an offshore obligation under Regulations section 1.6049-5(c)(1). A withholding agent must also withhold under section 1443 on certain payments to foreign tax-exempt organizations that are unrelated business taxable income or subject to the 4% excise tax imposed by section 4948.

However, a withholding agent making a payment to a foreign person need not withhold under chapter 3 if the foreign person assumes responsibility for withholding on the payment as a QI (other than a QI that is acting as a QDD, in which case withholding is not required only for a payment with respect to a section 871(m) transaction that is not an underlying security or a dividend equivalent), or if the foreign person is a withholding foreign partnership (WP), or a withholding foreign trust (WT) that has provided a valid Form W-8IMY certifying to such status. A withholding agent is not required to withhold on dividends paid in 2022 to a QI acting as a QDD in its equity derivatives dealer capacity. The QDD's withholding statement should contain the information necessary for determining the dividends subject to withholding. See the Instructions for Form W-8IMY for the requirements for a QDD withholding statement. Withholding under chapter 3 is also not required if the payment is made to a U.S. branch of a foreign insurance company or foreign bank or a territory financial institution that agrees to be treated as a U.S. person under the requirements of Regulations section 1.1441-1(b)(2)(iv)(A) and provides a valid Form W-8IMY certifying to such status.

Chapter 4 Responsibilities For purposes of chapter 4, if you are a withholding agent, you must withhold 30% of any payment that is a withholdable payment (as defined in Regulations section 1.1473-1(a)) made to a nonparticipating FFI that is not an exempt beneficial owner or to a non-financial foreign entity (NFFE) that is not an excepted NFFE and does not disclose its substantial U.S. owners (or certify that it has

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no substantial U.S. owners). In addition, if you are a withholding agent and also a participating FFI, you must withhold to the extent required under Regulations section 1.1471-4(b) and the FFI agreement, which, in addition to the requirements described in the previous sentence, require withholding on withholdable payments made to recalcitrant account holders.

You must determine if a payment is a withholdable payment without regard to any exceptions from withholding applicable under chapter 3. For each such withholdable payment, you must obtain a Form W-8 (or other documentation permitted under Regulations section 1.1471-3(d)) upon which you are permitted to rely under chapter 4 to determine the chapter 4 status of a payee that is a foreign person for purposes of whether withholding applies under chapter 4. Thus, a determination of whether a Form W-8 is valid for purposes of providing an exemption from chapter 4 withholding is a separate determination from whether the Form W-8 may be relied upon to provide an exemption from (or reduction in) withholding under chapter 3. For purposes of determining whether withholding under chapter 4 applies to a payment to a QI, WP, or WT, the exceptions in chapter 3 for QIs, WPs, and WTs will apply, provided the entity includes its chapter 4 status on Form W-8IMY. See also Notes for Validating Form W-8IMY under Form W-8IMY , later, for the requirements for withholdable payments made to certain U.S. branches that act as intermediaries.

Section 1446(a) and (f) Responsibilities Section 1446(a) requires a partnership conducting a trade or business in the United States to withhold tax on a foreign partner's allocable share of the partnership's ECTI at the highest tax rate applicable to that person for the type of income allocated (for example, ordinary income or capital gains) in accordance with the provisions of Regulations sections 1.1446-1 through 1.1446-6. For a partnership that is not a PTP, the partnership must withhold in the year the ECTI is allocable to the foreign partner, whether or not there is a distribution. In contrast, if the partnership is a PTP, the partnership withholds in the year in the ECTI is distributed to the foreign partner, not in the year the ECTI is allocable to the foreign partner.

Section 1446(f) generally requires a transferee of a partnership interest (or a broker in the case of a transfer of a PTP interest) to withhold on the amount realized from the transfer by a foreign person when any portion of the gain from the transfer would be treated as effectively connected gain under section 864(c)(8).

To avoid being subject to the default withholding rules under section 1446(a) or (f), a partner must provide a certification to the partnership or transferee, respectively. A U.S. person that submits a valid Form W-9 generally will not be subject to withholding under section 1446(a) or (f). Generally, a foreign person that is a partner in a partnership that submits a Form W-8 for purposes of section 1441 or 1442 will satisfy the documentation requirements under section 1446(a) or (f) as well. However, in some cases the documentation requirements of sections 1441 and 1442 do not match the documentation requirements of section 1446(a) or (f). See

Regulations sections 1.1446-1 through 1.1446-6 (for documentation requirements under section 1446(a)) and Regulations sections 1.1446(f)-2 and 1.1446(f)-4 (for documentation requirements under section 1446(f)). For example, a Form W-8 provided by a partner (including a partner that is a partnership or trust) for section 1446(a) or (f) purposes must include the partner's U.S. TIN to be a valid form to qualify for a preferential rate of withholding (to the extent applicable), which you may also rely upon when included on a separate statement associated with an otherwise valid Form W-8. This statement may be provided by a partner that obtains a partnership interest after providing to you an otherwise valid Form W-8. A separate statement for providing a U.S. TIN must indicate that it relates to the applicable Form W-8. See, however, Regulation section 1.1441-1(e)(4)(vii) for when a U.S. TIN is required on a Form W-8 to be a valid form for chapter 3 purposes. See also Regulations section 1.1446(f)-4(a)(5) for when you may rely on a Form W-8 or Form W-9 furnished by a U.S. clearing organization for a member of the clearing organization for purposes of your requirement (as a broker) to withhold on the transfer of a PTP interest. A requirement to withhold under section 1446(f) will not apply if you are a broker paying an amount realized on the sale of a PTP interest regardless of whether you obtain a valid Form W-8 when the PTP publishes a qualified notice representing that the “10%” exception to withholding under section 1446(f) applies (when applicable to the period in which the sale is made). See Regulations section 1.1446(f)-4(b)(3).

Other Uses of Form W-8

Chapter 61 and section 3406. The Form W-8 you collect may also be used to establish a person's status for purposes of domestic information reporting under chapter 61 and backup withholding under section 3406, including for a payment settlement entity to determine whether a participating payee is a foreign person for purposes of section 6050W and whether a reportable policy sale recipient or reportable death benefits recipient is a foreign person for purposes of the reporting required under section 6050Y. In general, if you receive a Form W-8 that you can reliably associate with the payment and are permitted to rely upon (generally under the standards for foreign status claims for chapter 3 purposes), you are exempt from reporting the payment on a Form 1099 and withholding under section 3406.

FFI documenting account holders. If you are an FFI maintaining a financial account, you may be required to perform due diligence procedures to identify and document the account holder under the chapter 4 regulations or an applicable intergovernmental agreement (IGA) even if you are not making a payment to the account holder that is subject to withholding. You may use Form W-8 to document the chapter 4 status of an account holder and to validate a claim of foreign status made by the account holder, such as when the account has certain U.S. indicia. For example, a participating FFI may treat an individual account holder claiming foreign status that has U.S. indicia (as described in Regulations section 1.1471-4(c)(5)(iv)(B)) as a foreign person for purposes of the FFI’s U.S. account reporting requirements (that is,

Form 8966) when the individual provides a Form W-8BEN and certain documentary evidence establishing foreign status.

If you are an FFI documenting an account holder of an account that you determine is excepted as a financial account under Regulations section 1.1471-5(b)(2), a Form W-8 (or other permitted documentation for chapter 4 purposes) is not required unless the form is associated with amounts subject to withholding under chapter 3. In such a case, a valid chapter 4 status (including that the account is not a financial account) is not required to be provided on the form.

Requesting Form W-8 Generally, if you are making a payment of an amount subject to chapter 3 withholding or a withholdable payment, you must withhold as required at the 30% rate under chapter 3 or 4 unless you can reliably associate the payment with a Form W-8 or other permitted documentation to permit withholding at a reduced rate or an exemption from withholding. You can reliably associate a payment with a Form W-8 if you hold a valid form that contains the information required for purposes of chapter 3 or 4 (as applicable), you can reliably determine how much of the payment relates to the form, and you may rely upon the form under the due diligence requirements. See Due Diligence Requirements in General , later.

You should request a Form W-8 from any person to whom you are making a payment that you believe to be a foreign person. You should request the form before making a payment so that you have the form when you make the payment. See, however, Regulations sections 1.1441-1(b)(7)(ii) and 1.1471-3(c)(7)(ii) for when you may be able to rely on a Form W-8 obtained after the date of a payment to support reduced withholding for chapter 3 or 4 purposes.

A withholding agent or payor that fails to obtain a valid Form W-8 or Form W-9 and fails to withhold as required under the presumption rules may be assessed tax at the 30% rate under chapter 3 or 4 or the 24% backup withholding rate under section 3406 (as of the revision date of these instructions), as well as interest and penalties for lack of compliance. If you are a partnership that fails to withhold on ECTI allocable to a foreign partner as required under section 1446(a) or are a broker or transferee that fails to withhold as required under section 1446(f), you will be liable for the tax required to be withheld. A nominee for a PTP distribution may also be liable for failing to withhold to the extent required on the distribution under Regulations section 1.1446-4. In addition under applicable regulations to section 1446(a) or (f), you may in certain cases be liable for interest, penalties, and additions to the tax even if there is no underlying tax liability due from a foreign partner on its allocable share of the partnership’s ECTI or from the transferor on the transfer of a partnership interest.

If you are a withholding agent making a payment of an amount subject to chapter 3 withholding or a withholdable payment and you make the payment to an intermediary, you must obtain documentation from such intermediary (including the intermediary’s chapter 4 status if the

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payment is a withholdable payment), as well as any required documentation for the beneficial owner(s) of the payment to the extent required under the chapter 3 or 4 regulations.

Do not send Forms W-8 to the IRS. Instead, keep the forms in your records for as long as they may be relevant to the determination of your liability under section 1461 (for amounts subject to chapter 3 withholding), section 1474 (for withholdable payments), or Regulations section 1.1471-4(c)(2)(iv) (for an FFI documenting account holders). See, however, section 1.1446(f)-2(b)(7) for the requirement to furnish a certification for claiming treaty benefits to the IRS on the transfer of an interest in a partnership (other than a PTP) subject to section 1446(f).

Form W-8 provided or signed electronically. You may rely on a valid Form W-8 received by facsimile or scanned and furnished to you by email unless you know that the person transmitting the Form W-8 is not authorized to do so.

You may also rely on an otherwise valid Form W-8 received electronically from a third-party repository if the form was uploaded or provided to the third-party repository and there are processes in place to ensure that the withholding certificate can be reliably associated with a specific request from you and a specific authorization from the person providing the form (or an agent of the person providing the form) for you to receive the withholding certificate. Notwithstanding the preceding sentence, you do not need a specific authorization for each payment to be associated with the withholding certificate when you are permitted to rely on the withholding certificate on an obligation-by-obligation basis or as otherwise permitted under Regulations section 1.1441-1(e)(4)(ix). You may also rely on a withholding statement received from a third-party repository if the intermediary provides a Form W-8IMY and withholding statement through the repository, provides an updated withholding statement to you in the event of any change in the information previously provided, and ensures there are processes in place to update you when there is a new withholding statement (and Forms W-8, as necessary) in the event of any change that would affect the validity of the prior forms or withholding statement. For purposes of this paragraph, a third-party repository is an entity that maintains withholding certificates but is not an agent of the applicable withholding agent or the person providing the certificate. See Regulations section 1.1441-1(e)(4)(iv) (E) for the complete requirements for relying on a withholding certificate from a third-party repository.

If you are a withholding agent that maintains a system for furnishing Forms W-8 electronically, you must satisfy the requirements of Regulations section 1.1441-1(e)(4)(iv) (B). You may otherwise accept a Form W-8 with an electronic signature, provided the electronic signature meets the requirements of Regulations section 1.1441-1(e)(4)(iv)(B)(3)(ii). The withholding certificate must reasonably demonstrate that the form has been electronically signed by the recipient identified on the form (or a person authorized to sign for the recipient). For example, a withholding agent may treat as signed for purposes of the requirements of a valid withholding certificate, a withholding certificate that has in the

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signature block the name of the person authorized to sign, a time and date stamp, and a statement that the certificate has been electronically signed. You may not treat a Form W-8 with a typed name in the signature line as validly signed without further information supporting that the signature is an electronic signature. You may also rely on an electronically signed withholding certificate based on additional information or documentation that you have no actual knowledge to be incorrect. See Regulations section 1.1441-1(e)(4)(i)(B).

Requesting Prior Versions of Form W-8

If the IRS issues an updated version of a Form W-8, you may accept the prior version of the form until the later of 6 full months after the revision date shown on the form or the end of the calendar year the updated form is issued (based on the revision date shown on the form), unless the IRS has issued guidance that affects the period for acceptance of the prior version (for example, if a new payee status is required under revised regulations that is not in the prior version and is relevant to the payee’s claim).