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Foreign Intermediaries

An intermediary is a custodian, broker, nominee, or any other person that acts as an agent for another person. A foreign intermediary is either a qualified intermediary or a nonqualified intermediary. Generally, you determine whether an entity is a qualified intermediary or a nonqualified intermediary based on the representations the intermediary makes on Form W-8IMY.

You must determine whether the customers or account holders of a foreign intermediary are U.S. or foreign persons, and, if the account holder or customer is foreign, whether a reduced rate of NRA withholding applies. You make these determinations based on the foreign intermediary's Form W-8IMY and associated information and documentation. If you do not have all of the information or documentation that is required to reliably associate a payment with a payee, you must apply the presumption rules. Refer to Beneficial Owners and Documentation and Presumption Rules.

Generally, the payees of payments made to a foreign intermediary are the persons for whom the foreign intermediary collects the payment, such as account holders or customers, not the intermediary itself. This rule applies for purposes of NRA withholding and for Form 1099 reporting and backup withholding.

You may, however, treat a qualified intermediary that has assumed primary withholding responsibility for a payment as the payee, and you are not required to withhold.

A nonqualified intermediary (NQI) is any intermediary that is a foreign person and that is not a qualified intermediary. The payees of a payment made to an NQI are the customers or account holders on whose behalf the NQI is acting.

For a detailed discussion of intermediaries, for both Chapter 3 and Chapter 4 withholding purposes, see “Foreign Intermediaries” under the Identifying the Payee section of Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.

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