Purpose of Form

Under chapter 3, foreign persons are generally subject to U.S. tax at a 30% rate on income they receive from U.S. sources that consists of interest (including certain original issue discount (OID)), dividends, rents, premiums, annuities, compensation for, or in expectation of, services performed, or other fixed or determinable annual or periodical (FDAP) gains, profits, or income. This tax is imposed on the gross amount paid and is generally collected by withholding under section 1441 or 1442 on that amount. A payment is considered to have been made whether it is made directly to the beneficial owner or to another person, such as an

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intermediary, agent, trustee, executor, or partnership, for the benefit of the beneficial owner.

Under chapter 4, withholding agents must withhold at a 30% rate under sections 1471 and 1472 on withholdable payments made to nonparticipating foreign financial institutions (FFIs) (including when the nonparticipating FFI is a flow-through entity or is acting as an intermediary), certain other foreign entities, and certain account holders of FFIs. For example, if a U.S. withholding agent makes a payment of portfolio interest described in section 871(h) to an account maintained by a nonparticipating FFI, the payment will be subject to a 30% withholding tax under section 1471 even if the nonparticipating FFI is an intermediary or flow-through entity and the beneficial owner for whom the intermediary or flow-through is acting is a foreign individual who provides a valid Form W-8BEN.

Foreign persons are also subject to tax at graduated rates on income they earn that is considered effectively connected with a U.S. trade or business. If a foreign person invests in a partnership that conducts a U.S. trade or business, the foreign person is considered to be engaged in a U.S. trade or business. The partnership is required to withhold tax under section 1446(a) on the foreign person’s distributive share of the partnership’s effectively connected taxable income or, in the case of a PTP, on the amount of a distribution attributable to effectively connected taxable income of the PTP as provided in Regulations section 1.1446-4 (excluding when a nominee rather than the PTP is required to withhold). For purposes of section 1446(a), the partnership may generally accept any beneficial owner withholding certificate submitted for purposes of section 1441 or 1442, with few exceptions, to establish the foreign status of the partner, including a withholding certificate that is associated with a Form W-8IMY submitted by an upper-tier foreign partnership, a foreign grantor trust, or a foreign intermediary. See Regulations sections 1.1446-1 through 1.1446-6 to determine whether a withholding certificate submitted for purposes of section 1441 or 1442 will be accepted for purposes of section 1446(a).

Withholding may also be required under the section 1446(f) regulations by a transferee paying the amount realized from a transfer of a partnership interest to a transferor of the interest or, for a transfer of an interest in a PTP, by a broker effecting the transfer. This withholding is generally required when any portion of the gain from the transfer would be treated as effectively connected gain under section 864(c)(8). The withholding required of a broker on an amount realized on the transfer of a PTP interest is subject to certain exceptions such as when an amount realized is paid to a qualified intermediary assuming withholding responsibility under section 1446(f) or to a U.S. branch acting as a U.S. person for the amount realized. See Regulations section 1.1446(f)-4. For certain withholding exceptions, an applicable withholding certificate is required for a transfer of a PTP interest, such as for an entity to represent its status as an entity described in the preceding sentence (made on this Form W-8IMY) or for a transferor to claim an exemption from withholding based on an income tax treaty. A withholding certificate may also be required to establish the status of a broker or partner withheld upon under section 1446(f). Separate withholding exceptions apply to transfers of interests in partnerships other than PTPs, certain of which require the collection of a withholding certificate or other applicable certification. See Regulations section 1.1446(f)-2.

Additional information. For additional information and instructions for the withholding agent, see the Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY.