Notice 2016-42: Proposed qualified intermediary agreement (text)

IRS Notice 2016-42

The IRS today released an advance version of Notice 2016-42 that provides a proposed qualified intermediary (QI) withholding agreement (QI agreement) entered into under Reg. section 1.1441-1(e)(5). The QI agreement allows foreign persons to enter into an agreement with the IRS to simplify their obligations as a withholding agent under chapters 3 and 4 and as a payor under chapter 61 and section 3406 for amounts paid to their account holders.

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Notice 2016-42 [PDF 552 KB] provides in 155 pages:

  • The QI agreement currently in effect, pursuant to Rev. Proc. 2014-39—the 2014 QI agreement—expires December 31, 2016.
  • The proposed changes to the QI agreement (subject to any modifications included in a revenue procedure containing the final QI agreement, to be issued later in 2016) will apply to QI agreements that are in effect on or after January 1, 2017.
  • The proposed changes to the 2014 QI agreement and provides a general description of corresponding changes that will be made to the withholding foreign partnership agreement (WP agreement) and withholding foreign trust agreement (WT agreement) as previously published in Rev. Proc. 2014-47.
  • The application procedures for becoming a QI and renewing a QI agreement. The language of the proposed QI agreement.
  • The requirements and obligations applicable to qualified derivatives dealers (QDDs).
  • QI internal compliance and review procedures.

Read commentary and observations about the proposed QI agreement in TaxNewsFlash-United States.

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