Partnership withholding on effectively connected income (ECI). New rules apply to the process used by a partnership to reduce or eliminate the partnership's obligation to pay withholding tax under section 1446 on ECI of a foreign partner. Any certificate (including any updated certificates and status reports) submitted, or required to be submitted, after July 28, 2008, must comply with the new rules. See Amount of Withholding Tax under Partnership Withholding on Effectively Connected Income.

U.S. real property interest. For dispositions of U.S. real property interests after July 30, 2008, transferors can give a nonforeign certification to a qualified substitute. See Exceptions under U.S. Real Property Interest. Generally, the treatment of a regulated investment company (RIC) as a qualified investment entity (QIE) was scheduled to expire at the end of 2007. The provision has been extended through 2009. The special rules that apply to distributions from a QIE attributable to the gain from the sale or exchange of a U.S. real property interest will continue to apply to any distribution from a RIC. See Qualified investment entities under U.S. Real Property Interest.

New treaties and protocol. The United States has exchanged instruments of ratification for new income tax treaties with Bulgaria and Iceland and a new protocol to the income tax treaty with Canada. The effective dates are as follows: Bulgaria. The provisions for withholding tax at source are effective for amounts paid or credited on or after January 1, 2009. For other taxes, the treaty is effective for tax periods beginning on or after January 1, 2009. Canada. The provisions for withholding tax at source are generally effective for amounts paid or credited on or after February 1, 2009. For other taxes, the protocol is effective for tax periods beginning on or after January 1, 2009. Certain provisions, none of which are discussed in this publication, have different effective dates. Iceland. The provisions for withholding tax at source are effective for amounts derived on or after January 1, 2009. For other taxes, the new treaty is effective for tax years beginning on or after January 1, 2009. An individual who was otherwise entitled to benefits under Article 21 (Teachers) of the former treaty can continue to apply those provisions. A person entitled to benefits under the former treaty can elect to have that treaty apply in its entirety for a twelve-month period following the date the new treaty would otherwise apply.

Interest-related dividends and short-term capital gain dividends received from mutual funds. The exemption from withholding on certain interest-related dividends and short-term capital gain dividends paid by a mutual fund or other regulated investment company was scheduled to expire at the end of 2007. These provisions have been extended through 2009.

Note. This publication serves as the Small Entity Compliance Guide required by section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, P.L. 104-121.

Form W-8.  There are multiple Forms W-8. The form to use depends on the type of certification being made. As used in this publication, the term “Form W-8” refers to the appropriate document. For more information, see Documentation, later.

Electronic deposit rules. You must use the Electronic Federal Tax Payment System (EFTPS) to make electronic deposits of all depository tax liabilities you incur after 2008, if you meet either of the following conditions.

If you do not meet these conditions, electronic deposits are voluntary.For more information about depositing electronically, see Publication 966, The Secure Way to Pay Your Federal Taxes.

Filing electronically. If you file Form 1042-S electronically, you will use the Filing Information Returns Electronically (FIRE) system. You get to the system through the Internet at fire.irs.gov.For files submitted on the FIRE system, it is the responsibility of the filer to verify the results of the transmission within 5 business days. The IRS will not mail error reports for files that are bad.

IRS taxpayer identification numbers for aliens. The IRS will issue an individual taxpayer identification number (ITIN) to an alien who does not have and is not eligible to get a social security number (SSN).An ITIN is for tax use only. It does not entitle an alien to social security benefits or change his or her employment or immigration status under U.S. law.For more information on ITINs, see U.S. Taxpayer Identification Numbers, later.

Real estate mortgage investment conduits (REMIC). Excess inclusion income is treated as income from sources in the United States. The date an excess inclusion allocated to a foreign person by certain pass-through entities is subject to withholding is, generally, the close of the entity's tax year. An excess inclusion is not eligible for any reduction in withholding tax (by treaty or otherwise). See REMIC excess inclusions.

Partnership withholding on effectively connected income (ECI). A partnership must withhold tax on ECI allocated to a foreign partner. However, a publicly traded partnership (PTP) cannot elect to withhold tax based on ECI allocable to its foreign partners. The PTP must withhold on the distribution of that income to its foreign partners.For more information, see Publicly Traded Partnerships under Partnership Withholding on Effectively Connected Income.

Qualified intermediaries. A branch of a financial institution may not act as a qualified intermediary in a country that does not have approved know-your-customer rules. See Qualified intermediary under Foreign Intermediaries.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication is for withholding agents who pay income to foreign persons, including nonresident aliens, foreign corporations, foreign partnerships, foreign trusts, foreign estates, foreign governments, and international organizations. Specifically, it describes the persons responsible for withholding (withholding agents), the types of income subject to withholding, and the information return and tax return filing obligations of withholding agents. In addition to discussing the rules that apply generally to payments of U.S. source income to foreign persons, it also contains sections on the withholding that applies to the disposition of U.S. real property interests and the withholding by partnerships on income effectively connected with the active conduct of a U.S. trade or business.