# Future Developments > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3Af59d2d457dc8eafc ## Record - **Collection:** Agency decision - **Document type:** Agency decision ## Text Future Developments Publication 515 Withholding of Tax on Nonresident Aliens and Foreign Entities For use in 2026 For the latest information about developments related to Pub. 515, such as legislation enacted after it was published, go to IRS.gov/Pub515. What’s New Information Returns Intake System (IRIS). The IRS has developed IRIS, an online portal e-filing information returns that will replace the Filing Information Returns Electronically (FIRE) system once it is retired. FIRE is set to retire for tax year 2026 and will not be available for submissions for filing season 2027 (forms due in 2027). IRIS will be available beginning January 1, 2026, and must be used to e-file 2026 Forms 1042-S (due March 15, 2027). Either IRIS or FIRE may be used to e-file 2025 Forms 1042-S (due March 15, 2026). For more information about IRIS, see Pub. 5717, IRIS Taxpayer Portal User Guide, or go to IRS.gov/IRIS. Forms 1042-S for prior tax years, as well as submissions by foreign filers, must continue to be electronically filed using the FIRE system until it is retired. IRIS will be the only intake system for information returns currently received through FIRE. For more information on e-filing with IRIS, go to IRS.gov/InfoReturns. Direct deposit and electronic payments. If you have access to U.S. banking services or electronic payment systems, you are now able to request your tax refund electronically deposited for free into your financial account. Also, the IRS added another option for withholding agents to make federal tax deposits and make balance due payments using IRS Direct Pay. Go to IRS.gov/Payments to see all your payment options. Reminders Get forms and other information faster and easier at: • IRS.gov (English) • IRS.gov/Korean (한국어) • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt) Mar 10, 2026 Partial suspension of income tax convention with USSR as it relates to Belarus. On December 17, 2024, the United States provided formal notice to the Republic of Belarus of the partial suspension of its tax treaty with the USSR as it relates to Belarus. The United States has suspended the operation of paragraph 1, subparagraph (g), of Article 3 of the Convention. The rest of the treaty articles will remain in place. The suspension went into effect December 17, 2024, and will continue until December 31, 2026, or earlier if mutually determined by the two governments. Withholding agents may not accept treaty claims for tax withholding on interest payments on credits, loans, and other forms of indebtedness connected with the financing of trade made to residents of Belarus on or after December 17, 2024. Partial suspension of income tax convention with Russia. On June 17, 2024, the United States provided formal notice to the Russian Federation of the partial suspension of its treaty with Russia. The United States Publication 515 (2026) Catalog Number 15019L Department of the Treasury Internal Revenue Service www.irs.gov has suspended the operation of paragraph 4 of Article 1, Articles 5 through 21, and Article 23 of the Convention, as well as the Protocol. The suspension went into effect both for taxes withheld at source and in respect of other taxes on August 16, 2024, and will continue until otherwise decided by the two governments. Beginning on or after August 16, 2024, withholding agents are required to withhold at the statutory 30% withholding tax rate on payments of U.S. source income made to recipients who may have previously qualified for treaty benefits under the U.S.–Russia income tax treaty. Termination of 1979 tax convention with Hungary. On July 15, 2022, the U.S. Treasury Department announced that Hungary was notified on July 8, 2022, that the United States would terminate its tax treaty with Hungary. In accordance with the treaty’s provisions on termination, termination of the treaty is effective on January 8, 2023. With respect to taxes withheld at source, the treaty ceases to have effect on January 1, 2024. Therefore, as of January 1, 2024, withholding agents are required to withhold at the statutory 30% withholding rate on payments of U.S. source income made to recipients who may have previously qualified for treaty benefits under the U.S.–Hungary income tax treaty. In respect of other taxes, the treaty ceases to have effect with respect to tax periods beginning on or after January 1, 2024. E-filing returns. The Taxpayer First Act of 2019 authorized the Department of the Treasury and the IRS to issue regulations that reduce the 250-return e-file threshold. T.D. 9972, published February 23, 2023, lowered the e-file threshold to 10 (calculated by aggregating all information returns), effective for information returns required to be filed on or after January 1, 2024. Go to IRS.gov/InfoReturn for e-file options. These final regulations also include requirements for withholding agents to e-file Form 1042, Annual Withholding Tax Returns for U.S. Source Income of Foreign Persons, effective for Form 1042 returns required to be filed on or after January 1, 2024. For more information, see the Instructions for Form 1042. Photographs of missing children. The IRS is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). 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. 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 (USRPIs) and the withholding by partnerships on income effectively connected with the active conduct of a U.S. trade or business. Comments and suggestions. We welcome your comments about this publication and suggestions for future editions. You can send us comments through IRS.gov/ FormComments. Or, you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Although we can’t respond individually to each comment received, we do appreciate your feedback and will consider your comments and suggestions as we revise our tax forms, instructions, and publications. Don’t send tax questions, tax returns, or payments to the above address. Getting answers to your tax questions. If you have a tax question not answered by this publication or the How To Get Tax Help section at the end of this publication, go to the IRS Interactive Tax Assistant page at IRS.gov/ Help/ITA where you can find topics by using the search feature or viewing the categories listed. Getting tax forms, instructions, and publications. Go to IRS.gov/Forms to download current and prior-year forms, instructions, and publications. Ordering tax forms, instructions, and publications. Go to IRS.gov/OrderForms to order current forms, instructions, and publications; call 800-829-3676 to order prior-year forms and instructions. The IRS will process your order for forms and publications as soon as possible. Don’t resubmit requests you’ve already sent us. You can get forms and publications faster online. Useful Items You may want to see: Publication 15 15 (Circular E), Employer’s Tax Guide 15-A Employer’s Supplemental Tax Guide 15-A 15-B Employer’s Tax Guide to Fringe Benefits 15-B 15-T Federal Income Tax Withholding Methods 15-T 505 Tax Withholding and Estimated Tax 505 Introduction 519 U.S. Tax Guide for Aliens 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 1179 General Rules and Specifications For Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns 2 519 901 U.S. Tax Treaties 901 1179 5124 FATCA XML User Guide 5124 Form (and Instructions) SS-4 Application for Employer Identification Number SS-4 Publication 515 (2026) W-2 Wage and Tax Statement W-2 W-4 Employee’s Withholding Certificate W-4 W-4P Withholding Certificate for Periodic Pension or Annuity Payments 8966 FATCA Report 8966 See How To Get Tax Help later in this publication for information about getting publications and forms. W-4P W-7 Application for IRS Individual Taxpayer Identification Number Withholding of Tax W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals) In most cases, a foreign person is subject to U.S. tax on its U.S. source income. Most types of U.S. source income received by a foreign person are subject to U.S. tax of 30%. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign person’s country of residence and the United States. The tax is generally withheld (chapter 3 withholding) from the payment made to the foreign person. W-7 W-8BEN W-8BEN-E Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities) W-8BEN-E W-8ECI Certificate of Foreign Person’s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States W-8ECI W-8EXP Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting W-8EXP W-8IMY Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting W-8IMY W-8 Inst. Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY W-8 Inst. W-9 Request for Taxpayer Identification Number and Certification W-9 W-9 Inst. Instructions for the Requester of Form W-9 W-9 Inst. 941 Employer’s QUARTERLY Federal Tax Return 941 945 Annual Return of Withheld Federal Income Tax 945 1042 Annual Withholding Tax Return for U.S. Source Income of Foreign Persons 1042 1042-S Foreign Person’s U.S. Source Income Subject to Withholding 1042-S 1042-T Annual Summary and Transmittal of Forms 1042-S 1042-T 13930 Central Withholding Agreement Application 13930 8233 Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual The term “chapter 3 withholding” is used in this publication descriptively to refer to withholding required under sections 1441, 1442, and 1443. In most cases, chapter 3 withholding describes the withholding regime that requires withholding on a payment of U.S. source income. Payments to foreign persons, including nonresident alien individuals, foreign entities, and governments, may be subject to chapter 3 withholding. Withholding may also be required on a payment to the extent required under chapter 4. “Chapter 4” refers to chapter 4 of Subtitle A (sections 1471 through 1474). See Chapter 4 Withholding Requirements, later. Caution: Chapter 3 withholding, when referenced in (and not provided otherwise) in this publication, does not include withholding under section 1445 (see U.S. Real Property Interest, later) or under section 1446 (see Partnership Withholding on Effectively Connected Taxable Income (ECTI) and Section 1446(f) Withholding, later). A withholding agent (defined next) is the person responsible for withholding on payments made to a foreign person. However, a withholding agent that can reliably associate the payment with valid documentation (discussed later) from a U.S. person is not required to withhold. In addition, a withholding agent may apply a reduced rate of withholding (including an exemption from withholding) if it can reliably associate the payment with documentation from a beneficial owner that is a foreign person entitled to a reduced rate of withholding. 8233 8288 U.S. Withholding Tax Return for Certain Dispositions by Foreign Persons If an amount subject to chapter 3 withholding is also a withholdable payment and chapter 4 withholding is applied to the payment, no withholding is required under chapter 3. See Chapter 4 Withholding Requirements, later. 8288-A Statement of Withholding on Certain Dispositions by Foreign Persons Withholding Agent 8288-B Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests Chapter 3 Withholding Requirements 8288 8288-A 8288-B 8288-C Statement of Withholding Under Section 1446(f)(4) on Disposition by Foreign Persons of Partnership Interests 8288-C Publication 515 (2026) You are a withholding agent if you are a U.S. or foreign person, in whatever capacity acting, that has control, receipt, custody, disposal, or payment of an amount subject to chapter 3 withholding. A withholding agent may be an 3 individual, corporation, partnership, trust, association, nominee (under section 1446), or any other entity, including any foreign intermediary, foreign partnership, or U.S. branch of certain foreign banks and insurance companies. You may be a withholding agent even if there is no requirement to withhold from a payment or even if another person has withheld the required amount from the payment. Although several persons may be withholding agents for a single payment, the full tax is required to be withheld only once. In most cases, the U.S. person who pays an amount subject to chapter 3 withholding is the person responsible for withholding. However, other persons may be required to withhold. For example, a payment made by a flow-through entity or nonqualified intermediary (NQI) that knows, or has reason to know, that the full amount of chapter 3 withholding was not done by the person from which it receives a payment is required to do the appropriate withholding since it also falls within the definition of a withholding agent. In addition, withholding must be done by any qualified intermediary (QI), withholding foreign partnership (WP), or withholding foreign trust (WT) in accordance with the terms of its withholding agreement, discussed later. person’s debt to the creditor is considered made to the person. A payment is also considered made to a person if it is made to that person’s agent. A U.S. partnership should withhold when any distributions that include amounts subject to withholding are made. However, if a foreign partner’s distributive share of income subject to withholding is not actually distributed, the U.S. partnership must withhold on the foreign partner’s distributive share of the income on the earlier of the date that a Schedule K-1 (Form 1065) is furnished or mailed to the partner or the due date for furnishing that schedule. Note: If the foreign distributive share of income includes effectively connected income (ECI), see Partnership Withholding on ECTI, later. A U.S. trust is required to withhold on the amount includible in the gross income of a foreign beneficiary to the extent the trust’s distributable net income consists of an amount subject to withholding. To the extent a U.S. trust is required to distribute an amount subject to withholding but does not actually distribute the amount, it must withhold on the foreign beneficiary’s allocable share at the time the income is required to be reported on Form 1042-S. Liability for tax. As a withholding agent, you are personally liable for any tax required to be withheld. This liability is independent of the tax liability of the foreign person to whom the payment is made. If you fail to withhold and the foreign payee fails to satisfy its U.S. tax liability, then both you and the foreign person are liable for tax, as well as interest and any applicable penalties. The applicable tax will be collected only once. If the foreign person satisfies its U.S. tax liability, you are not liable for the tax but remain liable for any interest and penalties for failure to withhold. Note: Proposed regulations issued on December 18, 2018 (83 FR 64757) would allow partnerships or trusts that are permitted to withhold in a subsequent year, with respect to a foreign partner’s or beneficiary’s share of income for the prior year, to designate the deposit of the withholding as attributable to the preceding year. In such a case, the partnership or trust will be required to report the associated amount and tax withheld on Forms 1042 and 1042-S for the preceding year. See the Instructions for Form 1042 and the Instructions for Form 1042-S for additional information. Determination of amount to withhold. You must withhold on the gross amount subject to chapter 3 withholding. You cannot reduce the gross amount by any deductions. If the determination of the source of the income or the amount subject to tax depends on facts that are not known at the time of payment, you must withhold an amount sufficient to ensure that at least 30% of the amount subsequently determined to be subject to withholding is withheld. In no case, however, should you withhold more than 30% of the total amount paid. You may elect to hold 30% of the payment in escrow until the earlier of the date that the amount of income from U.S. sources or the taxable amount can be determined or 1 year from the date the amount is placed in escrow, at which time the withholding becomes due, or, to the extent that withholding is not required, the escrowed amount must be paid to the payee. Chapter 4 Withholding Requirements When to withhold. Withholding is required at the time you make a payment of an amount subject to withholding. A payment is made to a person if that person realizes income, whether or not there is an actual transfer of cash or other property. A payment is considered made to a person if it is paid for that person’s benefit. For example, a payment made to a creditor of a person in satisfaction of that 4 You are a withholding agent for purposes of chapter 4 if you are a U.S. or foreign person, in whatever capacity you are acting, that has control, receipt, custody, disposal, or payment of a withholdable payment. Similar rules for determining who is a withholding agent as those described in Chapter 3 Withholding Requirements, earlier, also apply for chapter 4. For purposes of chapter 4, a withholding agent includes a participating foreign financial institution (FFI) (including a reporting Model 2 FFI) or registered deemed-compliant FFI to the extent such FFI makes a withholdable payment. Under chapter 4, a withholding agent that makes a withholdable payment to a payee that is an FFI must withhold 30% on the payment unless the withholding agent is able to treat the FFI as a participating FFI, deemed-compliant FFI, or exempt beneficial owner. A withholding agent must also withhold 30% on a withholdable payment made to a payee that is a foreign entity other than an FFI (that is, a nonfinancial foreign entity, or NFFE) that fails to identify its substantial U.S. owners (or certify that it does not have any substantial U.S. owners) unless the payment is excepted from withholding under the regulations to Publication 515 (2026) section 1472. A participating FFI is a withholding agent under chapter 4 and is required to withhold on a withholdable payment to the extent required under the FFI agreement, including on a payment made to an account holder that the FFI is required to treat as a recalcitrant account holder. A reporting Model 1 FFI is required to withhold under chapter 4 to the extent required in the applicable intergovernmental agreement (IGA). A registered deemed-compliant FFI (other than a reporting Model 1 FFI) is required to withhold under chapter 4 to the extent required under the conditions applicable to its registered deemed-compliant FFI status. See Regulations section 1.1471-5(f)(1) for a description of the types of registered deemed-compliant FFIs that may have withholding requirements. Generally, a withholdable payment is a payment of U.S. source fixed or determinable annual or periodical (FDAP) income. Specific exceptions to withholdable payments apply instead of the exemptions from withholding or taxation provided under chapter 3. See Income Subject to Withholding, later, for more information on payments of U.S. source FDAP income that are excepted from the definition of withholdable payment. If a withholding agent makes a payment subject to both chapter 4 withholding and chapter 3 withholding, the withholding agent must apply the withholding provisions of chapter 4, and need not withhold on the payment under chapter 3 to the extent that it has withheld under chapter 4. Similar rules for withholding agent liability for tax, determination of amount to withhold, and when to withhold as those described in chapter 3 withholding requirements, earlier, also apply for chapter 4. Forms 1042 and 1042-S Reporting Obligations You are required to report payments subject to chapter 3 withholding on Form 1042-S and to file a tax return on Form 1042. (See Returns Required, later.) You are also required to report withholdable payments to which chapter 4 withholding was (or should have been) applied on Form 1042-S and to file a tax return on Form 1042 to report the payments. An exception from reporting may apply for chapter 3 purposes to individuals who are not required to withhold from a payment and who do not make the payment in the course of their trade or business. A similar exception from reporting for chapter 4 purposes may apply to an individual making a withholdable payment outside the course of the individual’s trade or business (including as an agent with respect to making or receiving such payment). Withholding and Reporting Obligations (Other Than Forms 1042 and 1042-S Reporting for Chapter 3 or 4 Purposes) Form 1099 reporting and backup withholding. You may also be responsible as a payer for reporting payments to a U.S. person, generally on Form 1099. You must withhold 24% (backup withholding rate) from certain reportable payments made to a U.S. person that is subject to Form 1099 reporting if any of the following apply. • The U.S. person has not provided its taxpayer identification number (TIN) in the manner required. • The IRS notifies you that the TIN furnished by the payee is incorrect. • There has been a notified payee underreporting. • There has been a payee certification failure. In most cases, a TIN must be provided by a U.S. nonexempt recipient (a U.S. person subject to Form 1099 reporting) on Form W-9. A payer files a tax return on Form 945 to report backup withholding. You may be required to file Form 1099 and, if appropriate, backup withhold, even if you do not make the payments directly to that U.S. person. For example, you are required to report income paid to a foreign intermediary or flow-through entity that collects for a U.S. person subject to Form 1099 reporting. However, you may not be required to report on Form 1099 if you make a payment to a participating FFI or registered deemed-compliant FFI that provides a withholding statement allocating the payment to a chapter 4 withholding rate pool of U.S. payees. See Identifying the Payee, later, for more information. Also, see Section S. Special Rules for Reporting Payments Made Through Foreign Intermediaries and Foreign Flow-Through Entities on Form 1099 in Pub. 1099, General Instructions for Certain Information Returns. Tip: Foreign persons who provide a valid Form W-8 (or applicable documentary evidence when permitted in lieu of a Form W-8) are exempt from backup withholding and Form 1099 reporting. Form 8966 reporting. For chapter 4 purposes, you may be required to report on Form 8966 if you make a withholdable payment to an entity you agree to treat as an owner-documented FFI or to a passive NFFE. See Returns Required, later. Wages paid to employees. If you are the employer of a nonresident alien, you must generally withhold taxes at graduated rates. See Pay for Personal Services Performed, later. Effectively connected income by partnerships. A withholding agent that is a partnership (whether U.S. or foreign) is also responsible for withholding on its income effectively connected with a U.S. trade or business that is allocable to foreign partners. In the case of a publicly Publication 515 (2026) 5 traded partnership (PTP), however, either the partnership or a nominee may be responsible for this withholding, as applied to distributions by the partnership (PTP distributions). See Partnership Withholding on ECTI, later, for more information. Transfers of interests in partnerships engaged in the conduct of a U.S. trade or business. A withholding agent is also responsible for withholding on the amount realized on the transfer by a foreign partner of an interest in a partnership (domestic or foreign) engaged in the conduct of a U.S. trade or business. See Section 1446(f) Withholding, later, for more information, including withholding requirements applicable to brokers effecting transfers of PTP interests. USRPI. A withholding agent may also be responsible for withholding if a foreign person transfers a USRPI to the agent, or if it is a corporation, partnership, trust, or estate that distributes a USRPI to a shareholder, partner, or beneficiary that is a foreign person. See U.S. Real Property Interest, later. Persons Subject to Chapter 3 or Chapter 4 Withholding Chapter 3 withholding applies only to payments made to a payee that is a foreign person. It does not apply to payments made to U.S. persons. Usually, you determine the payee’s status as a U.S. or foreign person or, if you are making a withholdable payment to an entity (or are an FFI making a payment to an account holder), the payee’s chapter 4 status, based on the documentation that person provides. See Documentation, discussed later. However, if you have received no documentation or you cannot reliably associate all or a part of a payment with documentation upon which you can rely, then you must apply certain presumption rules, discussed later. Chapter 4 withholding applies to withholdable payments made to an entity payee that is an FFI unless the withholding agent is able to treat the FFI as a participating FFI, deemed-compliant FFI, or exempt beneficial owner. Chapter 4 withholding also applies to withholdable payments made to a passive NFFE that fails to identify its substantial U.S. owners (or certify that it does not have any substantial U.S. owners). You must establish the payee’s chapter 4 status to determine if withholding applies by applying the documentation requirements of chapter 4, generally by obtaining a Form W-8 (or, under an applicable IGA, a similar agreed form) associated with the payment, or other documentation for payments made outside of the United States on offshore obligations. See Regulations section 1.1471-3(d) for details on these documentation requirements. Withholding under chapter 4 also applies to account holders of a participating FFI or registered deemed-compliant FFI that the FFI is required to treat as recalcitrant account holders. 6 This section applies to both chapters 3 and 4 except where otherwise indicated and except where the text clearly applies to one or the other (for example, reduced rates and exemptions under income tax treaties). Identifying the Payee In most cases, the payee is the person to whom you make the payment, regardless of whether that person is the beneficial owner of the income. However, there are situations in which the payee is a person other than the one to whom you actually make a payment. U.S. agent of foreign person. For purposes of chapter 3, if you make a payment to a U.S. person and you have actual knowledge that the U.S. person is receiving the payment as an agent of a foreign person, you must treat the payment as made to the foreign person. However, if the U.S. person is a financial institution (FI), defined later, you may treat the institution as the payee provided you have no reason to believe that the institution will not comply with its own obligation to withhold under chapter 3. For chapter 4 purposes, if you make a withholdable payment to a U.S. person and you have actual knowledge that the U.S. person is receiving the payment as an intermediary or agent of a foreign person, you must treat the foreign person as the payee. However, if you make a withholdable payment to a U.S. FI or a U.S. insurance broker (to the extent the withholdable payment is a payment of an insurance premium) that is receiving the payment as an intermediary or agent, you may treat the FI or insurance broker as the payee if you do not have reason to know that the FI or insurance broker will not comply with its obligations to withhold under chapter 4. If the payment is not subject to chapter 3 withholding and is not a withholdable payment, you must treat the payment as made to a U.S. person and not as a payment to a foreign person. You may be required to report the payment on Form 1099 and, if applicable, backup withhold. Disregarded entities. In general, a business entity that is not a corporation and that has a single owner may be disregarded as an entity separate from its owner (a disregarded entity) for federal tax purposes. The payee of a payment made to a disregarded entity is the owner of the entity. If the owner of the entity is a foreign person, you must apply chapter 3 withholding unless you can treat the foreign owner as a beneficial owner entitled to a reduced rate of withholding. If the owner is a U.S. person, you do not apply chapter 3 withholding. However, you may be required to report the payment on Form 1099 and, if applicable, backup withhold. You may assume that a foreign entity is not a disregarded entity unless you can reliably associate the payment with documentation provided by the owner or you have actual knowledge or reason to know that the foreign entity is a disregarded entity. Special chapter 4 rules. If you make a withholdable payment to a disregarded entity owned by an FFI, for Publication 515 (2026) chapter 4 purposes you must determine whether you must treat the payment as made to a payee that is a nonparticipating FFI (to which chapter 4 withholding applies) or a payee that is an FFI with another chapter 4 status (such as a participating FFI). If you make a withholdable payment to a disregarded entity that is treated as a disregarded entity that is a branch of an FFI that cannot comply with the requirements of an applicable IGA or the regulations under chapter 4, you must treat the payment as made to a nonparticipating FFI and withhold 30% of the payment. See the Instructions for Form W-8BEN-E for more information on payments to disregarded entities. Flow-Through Entities Chapter 3 payees. The payees of payments (other than income effectively connected with a U.S. trade or business and dispositions of interests in partnerships engaged in a trade or business within the United States) made to a foreign flow-through entity are the owners or beneficiaries of the flow-through entity. This rule applies for purposes of chapter 3 withholding and for Form 1099 reporting and backup withholding. Income that is, or is deemed to be, effectively connected with the conduct of a U.S. trade or business of a flow-through entity is treated as paid to the entity. The following are flow-through entities. • A foreign partnership (other than a WP). • A foreign simple or foreign grantor trust (other than a WT). If the chapter 3 payee is a disregarded entity or flow-through entity for U.S. tax purposes, but the payee is claiming treaty benefits, see Fiscally transparent entities claiming treaty benefits, later. Chapter 4 payees. For purposes of chapter 4, however, a foreign entity that is a flow-through entity is a payee with respect to a payment (other than income effectively connected with the conduct of a U.S. trade or business) if the flow-through entity is: • An FFI that is not a participating FFI or deemed-com- pliant FFI, or restricted distributor (an entity that operates as a distributor that holds debt or equity interests in a restricted fund as a nominee and meets the requirements described in Regulations section 1.1471-5(f)(4)) receiving the payment on behalf of its owners (in such a case, the entity is a nonparticipating FFI subject to withholding under chapter 4); or • An excepted NFFE that is not acting as an agent or intermediary with respect to the payment. If you make a withholdable payment to a flow-through entity that is not one of the types described above, you must treat the partner, beneficiary, or owner (as applicable) of the flow-through entity as the payee for chapter 4 purposes (similar to the determination of the payee for chapter 3 purposes) (looking through partners, beneficiaries, and owners that are themselves flow-through entities that are not one of the types described above). Publication 515 (2026) In most cases, you treat a payee as a flow-through entity if it provides you with a Form W-8IMY (see Documentation, later) on which it claims such status. You may also be required to treat the entity as a flow-through entity under the presumption rules, discussed later. For purposes of chapter 3, you must determine whether the owners or beneficiaries of a flow-through entity are U.S. or foreign persons, how much of the payment relates to each owner or beneficiary, and, if the owner or beneficiary is foreign, whether a reduced rate of chapter 3 withholding applies. For purposes of chapter 4, you must determine the chapter 4 status of the owners or beneficiaries of a flow-through entity (subject to the exceptions described above), how much of the payment relates to each owner or beneficiary, and whether withholding under chapter 4 applies. You make these determinations based on the documentation and other information (contained in a withholding statement) that is associated with the flow-through entity’s Form W-8IMY. If you do not have all of the information that is required to reliably associate a payment with a specific payee, you must apply the presumption rules. See Documentation and Presumption Rules, later. WPs and WTs are not flow-through entities. Foreign partnerships. A foreign partnership is any partnership (including an entity classified as a partnership) that is not organized under the laws of any state of the United States or the District of Columbia or any partnership that is treated as foreign under the income tax regulations. If a foreign partnership is not a WP, the payees of income are the partners of the partnership, provided the partners are not themselves flow-through entities or foreign intermediaries. However, the payee is the partnership itself if the partnership is claiming treaty benefits on the basis that it is not treated as fiscally transparent in the treaty jurisdiction and that it meets all the other requirements for claiming treaty benefits. If a partner is a foreign flow-through entity or a foreign intermediary, you apply the payee determination rules to that partner to determine the payees. For purposes of chapter 4, a foreign partnership is a payee of a withholdable payment if the partnership is a WP that is not acting as an agent or intermediary with respect to the payment. If the partnership is not a WP, the payees are the partners (looking through any partners that are flow-through entities that are not treated as payees under the chapter 4 regulations). Example 1. A nonwithholding foreign partnership has three partners: a nonresident alien individual, a foreign corporation, and a U.S. citizen. You make a payment of U.S. source interest to the partnership. Assume that the payment is subject to chapter 3 withholding but is not a withholdable payment. The partnership gives you a Form W-8IMY with which it associates Form W-8BEN from the nonresident alien, Form W-8BEN-E from the foreign corporation, and Form W-9 from the U.S. citizen. The partnership also gives you a complete withholding statement that enables you to associate a part of the interest payment to each partner. 7 You must treat all three partners as the payees of their part of the interest payment as if the payment were made directly to them. Report the payments to the nonresident alien and the foreign corporation on Forms 1042-S. Report the payment to the U.S. citizen on Form 1099-INT. You do not need to determine the chapter 4 status of the partnership because the payment is not a withholdable payment. Example 2. A nonwithholding foreign partnership has two partners: a foreign corporation and a nonwithholding foreign partnership. The second partnership has two partners, both nonresident alien individuals. You make a payment of U.S. source interest to the first partnership. Assume that the payment is subject to chapter 3 withholding but is not a withholdable payment. The partnership gives you a valid Form W-8IMY with which it associates a Form W-8BEN-E from the foreign corporation and a Form W-8IMY from the second partnership. In addition, Forms W-8BEN from the partners are associated with the Form W-8IMY from the second partnership. The Forms W-8IMY from the partnerships have complete withholding statements associated with them. Because you can reliably associate a part of the interest payment with the Form W-8BEN-E provided by the foreign corporation and the Forms W-8BEN provided by the nonresident alien individual partners as a result of the withholding statements, you must treat them as the payees of the interest. You do not need to determine the chapter 4 status of the partnership because the payment is not a withholdable payment. Example 3. You make a payment of U.S. source dividends to a WP. Assume that the payment is subject to chapter 3 withholding and is not a withholdable payment. The partnership has two partners, both foreign corporations. You can reliably associate the payment with a valid Form W-8IMY from the partnership on which it represents that it is a WP. You must treat the partnership as the payee of the dividends for purposes of both chapter 3 and chapter 4, and you must determine the chapter 4 status of the partnership. Foreign simple and grantor trust. A trust is foreign unless it meets both of the following tests. • A court within the United States is able to exercise primary supervision over the administration of the trust. • One or more U.S. persons have the authority to control all substantial decisions of the trust. In most cases, a foreign simple trust is a foreign trust that is required to distribute all of its income annually. A foreign grantor trust is a foreign trust that is treated as a grantor trust under sections 671 through 679. The payees of a payment made to a foreign simple trust are the beneficiaries of the trust. The payees of a payment made to a foreign grantor trust are the owners of the trust. However, the payee is the foreign simple or grantor trust itself if the trust is claiming treaty benefits on the basis that it is not fiscally transparent and that it meets all the other requirements for claiming treaty benefits. If the beneficiaries or owners are themselves flow-through entities or foreign intermediaries, you apply the payee determination rules to that beneficiary or owner to determine the payees. 8 Example. A foreign simple trust has three beneficiaries: two nonresident alien individuals and a U.S. citizen. You make a payment of U.S. source interest to the foreign trust. Assume that the payment is subject to chapter 3 withholding but is not a withholdable payment. The foreign trust gives you a Form W-8IMY with which it associates Forms W-8BEN from the nonresident aliens and a Form W-9 from the U.S. citizen. The trust also gives you a complete withholding statement that enables you to associate the interest payment with the forms provided by each beneficiary. You must treat all three beneficiaries as the payees of their part of the interest payment as if the payment were made directly to them. Report the payment to the nonresident aliens on Forms 1042-S. Report the payment to the U.S. citizen on Form 1099-INT. You do not need to establish the chapter 4 status of the trust because the payment is not a withholdable payment. Fiscally transparent entities claiming treaty benefits. For purposes of claiming treaty benefits, if an entity is fiscally transparent for U.S. tax purposes (for example, a disregarded entity or flow-through entity for U.S. tax purposes) and the entity is or is treated as a resident of a treaty country, it will derive the item of income and may be eligible for treaty benefits. In such case, the entity is the payee for chapter 3 purposes. It does not need to be taxed by the treaty country on such item, but the item must be accounted for as the entity’s income, not the interest holders’ income, under the law of the treaty country whose treaty it is invoking. It must also meet any other requirements for claiming benefits, including the provisions of the limitation on benefits (LOB) article, if any, in the treaty. The entity should provide a Form W-8BEN-E to the U.S. withholding agent in such circumstances. If, for chapter 3 purposes, the payee is a foreign corporation or other non-flow-through entity for U.S. tax purposes, it is nonetheless not entitled to claim treaty benefits if the entity is fiscally transparent in its country of residence (that is, a foreign reverse hybrid). Instead, any interest holder resident in that country will derive its allocable share of the items of income paid to the foreign reverse hybrid and may be eligible for benefits. If an interest holder is a resident of a third country, the interest holder may claim treaty benefits under the third country’s treaty with the United States, if any, only if the foreign reverse hybrid is fiscally transparent under the laws of the third country. If an interest holder is entitled to treaty benefits under a treaty between the United States and its country of residence, the payee may provide a Form W-8IMY and attach Form W-8BEN or W-8BEN-E from any interest holder that claims treaty benefits on such income. The determination of whether an entity is fiscally transparent is made on an item of income basis (that is, the determination is made separately for interest, dividends, royalties, etc.). An interest holder in an entity makes the determination by applying the laws of the jurisdiction where the interest holder is organized, incorporated, or otherwise considered a resident. An entity is considered to be fiscally transparent with respect to the income generally to the extent the laws of that jurisdiction require the interest holder to separately take into account on a current Publication 515 (2026) basis the interest holder’s share of the income, whether or not distributed to the interest holder, and the character and source of the income to the interest holder are determined as if the income was realized directly from the source that paid it to the entity. Subject to the standards of knowledge for purposes of chapter 3 and standards of knowledge for purposes of chapter 4, discussed later, you generally make the determination that an entity is fiscally transparent based on a Form W-8IMY provided by the entity. For chapter 3 purposes, the payees of a payment made to a fiscally transparent entity are the interest holders of the entity if the interest holders are claiming treaty benefits with respect to the payment. For chapter 4 purposes, if you are making a withholdable payment to a fiscally transparent entity, you must apply the rules of chapter 4 to determine the payee (applying the rules described earlier) and whether chapter 4 withholding applies to the payment based on the payee’s chapter 4 status. Thus, chapter 4 withholding may apply to a withholdable payment made to a fiscally transparent entity based on the chapter 4 status of the entity even when the interest holders in the entity would be eligible for reduced withholding under an income tax treaty with respect to the payment. Treaty benefits may be granted to the interest holder when the payment made is not subject to chapter 4 withholding based on the chapter 4 status of both the entity and the interest holder. Example. Afloat Entity is a business organization organized under the laws of country X that has an income tax treaty in force with the United States. Afloat has two interest holders, Benson and Carlson. Benson is a corporation organized under the laws of country Y. Carlson is a corporation organized under the laws of country Z. Both countries Y and Z have an income tax treaty in force with the United States. Afloat receives royalty income from U.S. sources that is not effectively connected with the conduct of a trade or business in the United States and that is not a withholdable payment. The chapter 4 status of Afloat does not need to be determined because the payment is not a withholdable payment. For U.S. income tax purposes, Afloat is treated as a partnership. Country X treats Afloat as a partnership and requires the interest holders in Afloat to separately take into account on a current basis their respective shares of the income paid to Afloat even if the income is not distributed. The laws of country X provide that the character and source of the income to Afloat’s interest holders are determined as if the income were realized directly from the source that paid it to Afloat. Accordingly, Afloat is fiscally transparent in its jurisdiction, country X. Benson and Carlson are not fiscally transparent under the laws of their respective countries of incorporation. Country Y requires Benson to separately take into account on a current basis Benson’s share of the income paid to Afloat, and the character and source of the income to Benson is determined as if the income were realized directly from the source that paid it to Afloat. Accordingly, Afloat is fiscally transparent for that income under the laws Publication 515 (2026) of country Y, and Benson is treated as deriving its share of the U.S. source royalty income for purposes of the U.S.–Y income tax treaty. Country Z, on the other hand, treats Afloat as a corporation and does not require Carlson to take into account its share of Afloat’s income on a current basis whether or not distributed. Therefore, Afloat is not treated as fiscally transparent under the laws of country Z. Accordingly, Carlson is not treated as deriving its share of the U.S. source royalty income for purposes of the U.S.–Z income tax treaty. Foreign Intermediaries In most cases, if you make payments to a foreign intermediary, the payees 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 chapter 3 withholding and for Form 1099 reporting and backup withholding and chapter 4 withholding, provided the intermediary is not a nonparticipating FFI to which you make a withholdable payment to which chapter 4 withholding applies. You may, however, treat a QI that has assumed primary withholding responsibility for a payment as the payee, and you are not required to withhold. 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 QI or an NQI. In most cases, you determine whether an entity is a QI or an NQI based on the representations the intermediary makes on Form W-8IMY. For purposes of chapter 3, 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, or exemption from, chapter 3 withholding applies. For purposes of chapter 4, you must generally determine the chapter 4 status of the account holders of a foreign intermediary if the payment is a withholdable payment. The determination for chapter 3 purposes is not required when withholding applies under chapter 4 (that is, when the chapter 4 status of the foreign intermediary is a nonparticipating FFI or an entity or branch treated as a nonparticipating FFI under an applicable IGA). 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 of chapter 3, and you must apply the presumption rules of chapter 4 to the foreign intermediary if the chapter 4 status of the entity (when required) cannot be determined. See Documentation and Presumption Rules, later. Special rule for chapter 4. For purposes of chapter 4, a foreign person acting as an intermediary is generally not the payee if the foreign person is: • An NFFE, unless the NFFE is a QI that has assumed primary chapters 3 and 4 withholding responsibility; or 9 • A participating FFI, deemed-compliant FFI, or restric- ted distributor, unless such entity is a QI that has assumed primary chapters 3 and 4 withholding responsibility. If you make a withholdable payment to one of the types of entities described above, the payee is the person for whom the agent or intermediary collects the payment. Nonqualified intermediary (NQI). An NQI is any intermediary that is a foreign person and that is not a QI. The payees of a payment made to an NQI for both chapter 3 and chapter 4 purposes are the customers or account holders on whose behalf the NQI is acting. Example. You make a payment of interest to a foreign bank that is an NQI. Assume the payment is subject to chapter 3 withholding but is not a withholdable payment. The bank gives you a Form W-8IMY, the Forms W-8BEN of two foreign persons, and a Form W-9 from a U.S. person for whom the bank is collecting the payments. The bank also associates with its Form W-8IMY a withholding statement on which it allocates the interest payment and provides all other information required to be on the withholding statement. The account holders are the payees of the interest payment. You should report the part of the interest paid to the two foreign persons on Forms 1042-S and the part paid to the U.S. person on Form 1099-INT. You do not need to establish the chapter 4 status of the NQI because the payment is not a withholdable payment. Qualified intermediary (QI). A QI is generally a foreign intermediary (or foreign branch of a U.S. intermediary) that has entered into a QI agreement (discussed later) with the IRS. Certain entities may also act as QIs even when they are not intermediaries. You may treat a QI as a payee to the extent it assumes primary chapters 3 and 4 withholding responsibility or primary Form 1099 reporting and backup withholding responsibility for a payment. In this situation, the QI is required to withhold the tax. You can determine whether a QI has assumed responsibility from the Form W-8IMY provided by the QI. A payment to a QI to the extent it does not assume primary chapters 3 and 4 withholding responsibility is considered made to the person on whose behalf the QI acts. If a QI does not assume Form 1099 reporting and backup withholding responsibility, you must report on Form 1099 and, if applicable, backup withhold as if you were making the payment directly to the U.S. person. See Qualified Intermediary (QI), later, for a discussion of withholding rate pools and when a QI may include a U.S. nonexempt recipient in a U.S. payee pool. Additionally, as of January 1, 2023, a QI may also assume primary withholding responsibilities with respect to PTP distributions (including withholding under section 1446(a)) and transfers of PTP interests for section 1446(f) purposes. For discussion of those provisions, see Publicly Traded Partnership Distributions and Section 1446(f): PTP Interests, later. Qualified derivatives dealers (QDDs). For the definition of QDD, see Qualified derivatives dealer (QDD), later. For QDD liability, see Amounts paid to QDDs, later. 10 Branches of FIs. Branches of FIs are not permitted to operate as QIs if they are located outside of countries having approved “know-your-customer” (KYC) rules. The countries with approved KYC rules are listed at IRS.gov/ KYCRules. QI agreement. FFIs, foreign clearing organizations, and foreign branches of U.S. FIs or clearing organizations can enter into an agreement with the IRS to become a QI. An eligible entity (as defined in Regulations section 1.1441-1(e)(6)(ii)) may also enter into a QI agreement for purposes of becoming a QDD. To enter into a QI agreement, an FFI must have a chapter 4 status as: • A participating FFI (including a reporting Model 2 FFI), • A registered deemed-compliant FFI (including a reporting Model 1 FFI and a nonreporting Model 2 FFI treated as registered deemed-compliant), or • An FFI treated as a deemed-compliant FFI under an applicable Model 1 IGA that is subject to similar due diligence and reporting requirements with respect to U.S. accounts as those applicable to a registered deemed-compliant FFI (a “registered deemed-compliant Model 1 IGA FFI”). Certain foreign corporations that are NFFEs acting on behalf of persons other than shareholders or foreign central banks of issue may also apply to the IRS to become QIs. See Revenue Procedure 2022-43, 2022-52 I.R.B. 570, available at IRS.gov/irb/2022-43_IRB#RP-2022-52, for more information on becoming a QI. An entity may apply for QI status at IRS.gov/QISystem. Note: A QI (other than an NFFE acting on behalf of persons other than shareholders and certain central banks) must also register at IRS.gov/FATCA to obtain its applicable chapter 4 status and global intermediary identification number (GIIN). Documentation requirements. For documentation requirements applicable to payments made to QIs, for chapters 3 and 4 purposes, see Responsibilities and Documentation, discussed later under Qualified Intermediary (QI). Reporting requirements. For the reporting requirements of QIs, see Form 1042-S reporting and Collective refund procedures, discussed later under Qualified Intermediary (QI). U.S. branches of foreign banks and foreign insurance companies. Special rules apply to a U.S. branch of a foreign bank subject to regulatory supervision by the Federal Reserve Board or a U.S. branch of a foreign insurance company required to file an annual statement on a form approved by the National Association of Insurance Commissioners with the Insurance Department of any U.S. state, a U.S. territory, or the District of Columbia. If you make a payment of an amount subject to chapter 3 withholding or a withholdable payment to a U.S. branch of either a foreign bank or foreign insurance company that agrees to be treated as a U.S. person, you may treat the Publication 515 (2026) U.S. branch as a payee that is a U.S. person, provided you receive a Form W-8IMY from the U.S. branch that you can reliably associate with the payment. If you treat the branch as a U.S. person, you are not required to withhold on an amount subject to chapter 3 withholding or a withholdable payment. Even though you agree to treat the branch as a U.S. person, you must report the payments made to the branch on Form 1042-S. A territory financial institution is an FI as defined for chapter 4 purposes (except when it is an investment entity that is not also a depository institution, custodial institution, or specified insurance company (each as defined in Regulations section 1.1471-5(e))), incorporated or organized under the laws of a territory of the United States. A territory financial institution that is an intermediary or flow-through entity is treated as a U.S. branch that agrees to be treated as a U.S. person. The special rules described in this section apply to a territory financial institution. If you are paying a U.S. branch an amount that is not subject to chapter 3 withholding and is not a withholdable payment, treat the payment as made to a foreign person, irrespective of any agreement to treat the branch as a U.S. person for such amounts. Consequently, amounts not subject to chapter 3 withholding and that are not withholdable payments that are paid to a U.S. branch are not subject to Form 1099 reporting or backup withholding. Alternatively, a U.S. branch may provide you with a Form W-8IMY with which it associates the documentation of the persons on whose behalf it acts. In this situation, the U.S. branch is not treated as a U.S. person, and the payees are the persons on whose behalf the branch acts provided you can reliably associate the payment with valid documentation from those persons. See Nonqualified Intermediary (NQI) under Documentation, later. If you cannot reliably associate the payment with a Form W-8IMY from the U.S. branch but you have obtained an employer identification number (EIN) for the branch, you should treat the payment as a payment to a foreign person of income that is effectively connected with the conduct of a trade or business in the United States. If you cannot reliably associate the payment with a Form W-8IMY from the U.S. branch and you have not obtained an EIN for the branch, you should treat the payment as a payment to a foreign person of income that is not effectively connected with the conduct of a trade or business in the United States. Withholding foreign partnership (WP) and withholding foreign trust (WT). A WP is any foreign partnership that has entered into a WP agreement with the IRS and is acting in that capacity with respect to its partners. A WT is a foreign simple or grantor trust that has entered into a WT agreement with the IRS and is acting in that capacity with respect to its owners and beneficiaries. In order to enter into a WP or WT agreement with the IRS, a WP or WT that is an FFI must have chapter 4 status as a: • Participating FFI (including a reporting Model 2 FFI), • Registered-deemed compliant FFI (including a reporting Model 1 FFI and a nonreporting Model 2 FFI treated as registered deemed compliant), Publication 515 (2026) • Registered deemed-compliant Model 1 IGA FFI, or • Retirement fund. A WP or WT that is an NFFE may also enter into a WP or WT agreement with the IRS. An FFI that is a foreign reverse hybrid entity may apply to enter into a WP agreement, provided that the FFI is a participating FFI, a registered deemed-compliant FFI, or a registered deemed-compliant Model 1 IGA FFI. A WP or WT must act in that capacity for reportable amounts that are distributed to, or included in the distributive share of, its direct partners, beneficiaries, or owners. A WP or WT may act in that capacity for reportable amounts that are distributed to, or included in the distributive share of, its indirect partners, beneficiaries, or owners that are not U.S. nonexempt recipients (except for a U.S. nonexempt recipient that is included in a chapter 4 withholding rate pool of U.S. payees). A WP or WT acting in that capacity must assume primary chapters 3 and 4 withholding responsibility for payments subject to withholding and must assume certain reporting requirements with respect to its U.S. partners, beneficiaries, and owners. You may treat a WP or WT as a payee if it has provided you with documentation (discussed later) that represents that it is acting as a WP or WT for such amounts. See Revenue Procedure 2017-21, 2017-6 I.R.B. 791, available at IRS.gov/irb/2017-06_IRB#RP-2017-21, for more information on becoming a WP or WT. WP agreement and WT agreement. The WP agreement and WT agreement and the application procedures for the agreements are in Revenue Procedure 2017-21, earlier. An entity applies for WP or WT status at IRS.gov/ QISystem. The WP or WT will be assigned a WP-EIN or WT-EIN to be used only when acting in that capacity. A WP or WT that is an FFI (other than a retirement fund) must also register with the IRS at IRS.gov/FATCARegistration to obtain its applicable chapter 4 status and GIIN. Documentation. A WP or WT must provide you with a Form W-8IMY that certifies that the WP or WT is acting in that capacity and provides all other information and certifications required by the form, including its WP-EIN or WT-EIN. When you make a withholdable payment to a WP or WT, the WP or WT may also generally provide a certificate of a chapter 4 status permitted of a WP or WT (and GIIN, if applicable). The WP or WT, when acting in such capacity, is not required to provide a withholding statement and is not required to disclose any information regarding its direct partners, beneficiaries, or owners, or any indirect partner, beneficiary, or owner for which it acts as a WP or WT that is not a U.S. nonexempt recipient (except for a U.S. nonexempt recipient included in a chapter 4 withholding rate pool of U.S. payees). A chapter 4 withholding rate pool also means a payment of a single type of income that is allocated to U.S. payees when the WP provides the certification required on Form W-8IMY for allocating payments to this pool. When a WP or WT is not acting as a WP or WT with respect to an amount distributed to, or included in the distributive share of, an indirect partner, beneficiary, or owner, it must provide you with 11 a nonwithholding foreign partnership or nonwithholding foreign trust withholding certificate on a Form W-8IMY and documentation for its indirect partners, beneficiaries, and owners that are not included in a chapter 4 withholding rate pool. Foreign Persons Rules relevant to chapters 3 and 4. A payee is subject to withholding only if it is a foreign person. A foreign person includes a nonresident alien individual, foreign corporation, foreign partnership, foreign trust, foreign estate, and any other person that is not a U.S. person. It also includes a foreign branch of a U.S. FI if the foreign branch is a QI. In most cases, the U.S. branch of a foreign corporation or partnership is treated as a foreign person. The determination of whether a foreign person is treated as an entity (that is, as opposed to being disregarded as separate from its owner), or as a foreign corporation, foreign partnership, or foreign trust, is made under U.S. tax rules. If an amount is both a withholdable payment and an amount subject to chapter 3 withholding and the withholding agent withholds under chapter 4, it may credit this amount against any tax due under chapter 3. Nonresident alien. A nonresident alien is an individual who is not a U.S. citizen or a resident alien. A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding. Married to U.S. citizen or resident alien. Nonresident alien individuals married to U.S. citizens or resident aliens may choose to be treated as resident aliens for certain income tax purposes. However, these individuals are still subject to the chapter 3 withholding rules that apply to nonresident aliens for all income except wages. Wages paid to these individuals are subject to graduated withholding. See Wages Paid to Employees, later. Resident alien. A resident alien is an individual who is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year. • Green card test. An alien is a resident alien if the in- dividual was a lawful permanent resident of the United States at any time during the calendar year. This is known as the green card test because these aliens hold immigrant visas (also known as green cards). • Substantial presence test. An alien is considered a resident alien if the individual meets the substantial presence test for the calendar year. Under this test, the individual must be physically present in the United States on at least: 1. 31 days during the current calendar year; and In most cases, the days the alien is in the United States as a teacher, student, or trainee on an “F,” “J,” “M,” or “Q” visa are not counted. This exception is for a limited period of time. For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Pub. 519. Note: If your employee is late in notifying you that their status changed from nonresident alien to resident alien, you may have to make an adjustment to Form 941 if that employee was exempt from withholding of social security and Medicare taxes as a nonresident alien. For more information on making adjustments, see chapter 13 of Pub. 15 (Circular E) . Resident of a U.S. territory. A bona fide resident of Puerto Rico, the U.S. Virgin Islands (USVI), Guam, the Commonwealth of the Northern Mariana Islands (CNMI), or American Samoa who is not a U.S. citizen or a U.S. national is treated as a nonresident alien for the withholding rules explained here. A bona fide resident of a territory is someone who: • Meets the presence test, • Does not have a tax home outside the territory, and • Does not have a closer connection to the United States or to a foreign country than to the territory. For more information, see Pub. 570. Foreign corporations. A foreign corporation is one that does not fit the definition of a domestic corporation. A domestic corporation is one that was created or organized in the United States or under the laws of the United States, any of its states, or the District of Columbia. Guam or CNMI corporations. A corporation created or organized in, or under the laws of, Guam or the CNMI is not considered a foreign corporation for the purpose of withholding tax for the tax year if: • At all times during the tax year less than 25% in value of the corporation’s stock is owned, directly or indirectly, by foreign persons; and • At least 20% of the corporation’s gross income is de- rived from sources within Guam or the CNMI for the 3-year period ending with the close of the preceding tax year of the corporation (or the period the corporation has been in existence, if less). Note: The provisions discussed below under USVI and American Samoa corporations will apply to Guam or CNMI corporations when an implementing agreement is in effect between the United States and that territory. USVI and American Samoa corporations. A corporation created or organized in, or under the laws of, the 2. 183 days during the current year and the 2 preceding years, counting all the days of physical presence in the current year, but only 1/3 the number of days of presence in the first preceding year, and only 1/6 the number of days in the second preceding year. 12 Publication 515 (2026) USVI or American Samoa is not considered a foreign corporation for the purposes of withholding tax for the tax year if: • At all times during the tax year less than 25% in value of the corporation’s stock is owned, directly or indirectly, by foreign persons; • At least 65% of the corporation’s gross income is ef- fectively connected with the conduct of a trade or business in the USVI, American Samoa, Guam, the CNMI, or the United States for the 3-year period ending with the close of the tax year of the corporation (or the period the corporation or any predecessor has been in existence, if less); and • No substantial part of the income of the corporation is used, directly or indirectly, to satisfy obligations to a person who is not a bona fide resident of the USVI, American Samoa, Guam, the CNMI, or the United States. Foreign private foundations. A private foundation that was created or organized under the laws of a foreign country is a foreign private foundation. Gross investment income from sources within the United States paid to a qualified foreign private foundation is subject to withholding at a 4% rate (unless exempted by a treaty) rather than the ordinary statutory 30% rate. Other foreign organizations, associations, and charitable institutions. An organization may be exempt from income tax under section 501(a) and chapter 4 withholding tax even if it was formed under foreign law. In most cases, you do not have to withhold tax on payments of income to these foreign tax-exempt organizations unless the IRS has determined that they are foreign private foundations. Payments to these organizations, however, must be reported on Form 1042-S if the payment is subject to chapter 3 withholding, even though no tax is withheld. You must withhold tax on the unrelated business income (as described in Pub. 598) of foreign tax-exempt organizations in the same way that you would withhold tax on similar income of nonexempt organizations when the organization does not provide you a Form W-8ECI to certify that the income is effectively connected with a U.S. trade or business of the organization. means any entity that is not a U.S. person and includes a territory entity as defined in Regulations section 1.1471-1(b)(129). A foreign entity is subject to chapter 4 withholding if it is a nonparticipating FFI or a passive NFFE that does not provide the appropriate certification regarding its substantial U.S. owners. A nonparticipating FFI is an FFI other than a participating FFI, deemed-compliant FFI, or exempt beneficial owner. See Definitions, later, for the definitions of these terms. A passive NFFE is: • An NFFE other than a publicly traded corporation, • Certain affiliated entities related to a publicly traded corporation, • Certain territory entities, • Active NFFEs, or • Excluded FFIs. For chapter 4 purposes, a U.S. person does not include a foreign insurance company that has made an election under section 953(d) if it is a specified insurance company (defined in Regulations section 1.1471-5(e)(1)(iv)) and is not licensed to do business in any state. Notwithstanding the foregoing, a withholding agent should treat such entity as a U.S. person for purposes of documenting the entity’s status for purposes of chapters 3 and 4. Documentation Documentation for Chapter 3 For purposes of chapter 3, in most cases, you must withhold 30% from the gross amount paid to a foreign payee unless you can reliably associate the payment with valid documentation that establishes either of the following. • The payee is a U.S. person. • The payee is a foreign person that is the beneficial owner of the income and is entitled to a reduced rate of withholding under the Internal Revenue Code, or an applicable income tax treaty. U.S. branches of foreign persons. In most cases, a payment to a U.S. branch of a foreign person is a payment made to the foreign person. However, you may treat payments to U.S. branches of foreign banks and foreign insurance companies (discussed earlier) as payments made to a U.S. person, if you and the U.S. branch have agreed to do so, and if their agreement is evidenced by a withholding certificate, Form W-8IMY. For this purpose, a territory financial institution acting as an intermediary or that is a flow-through entity is treated as a U.S. branch. For rules related to when a withholding agent may rely on an otherwise valid withholding certificate received electronically from a third-party repository, see Regulations section 1.1441-1(e)(4)(iv)(E). Additional Rules Specific to Chapter 4 If you make a withholdable payment, you must determine the chapter 4 status of payees, beneficial owners, intermediaries, and flow-through entities receiving the payment to the extent required for chapter 4 purposes. You must also A payee may be subject to chapter 4 withholding only if it is a foreign entity. A foreign entity for chapter 4 purposes Publication 515 (2026) If withholding is applied under chapter 4 on a payment, no withholding will be required on such payment under chapter 3. Documentation for Chapter 4 13 determine the chapter 4 status of persons that own an interest in an entity receiving a withholdable payment that you treat as an owner-documented FFI, provided you are either a U.S. FI, participating FFI, or reporting Model 1 FFI. To establish chapter 4 status, you must generally obtain a valid withholding certificate or documentary evidence that you can reliably associate with the payment. If you make a payment to a passive NFFE, you must obtain either a certification that the NFFE does not have any substantial U.S. owners, or the name, address, and TIN of each substantial U.S. owner of the NFFE (or, under an applicable IGA, each controlling person that is a specified U.S. person). You can reliably associate a payment with a Form W-8 for purposes of establishing a payee’s chapter 4 status in most cases if, prior to the payment, you: • Obtain a valid form that contains the information required for chapter 4 purposes, • Can reliably determine how much of the payment relates to the form, and • Have no actual knowledge or reason to know that any of the information, certifications, or statements in, or associated with, the form is unreliable or incorrect for chapter 4 purposes. See Standards of Knowledge for Purposes of Chapter 4, later, for the reason to know standards that apply for chapter 4 purposes. For the requirements for documenting specific chapter 4 statuses of persons receiving withholdable payments, see Regulations section 1.1471-3(d). For rules related to when a withholding agent may rely on an otherwise valid withholding certificate received electronically from a third-party repository, see Regulations section 1.1441-1(e)(4)(iv)(E). Also, see Regulations section 1.1471-3(d) for the extent to which a withholding agent may rely on documentary evidence (other than a Form W-8) to establish the chapter 4 status of an entity payee, including the forms of documentary evidence permitted for each specific chapter 4 status. For the requirements for documentary evidence, see Regulations section 1.1471-3(c)(5). If you make a withholdable payment to an entity payee and cannot reliably associate the payment with a valid withholding certificate or valid documentary evidence, you must apply the chapter 4 presumption rules described in Presumption Rules for Chapter 4, later. You may rely on the same documentation for purposes of both chapters 3 and 4 provided the documentation is sufficient to meet the requirements of each chapter. For example, you may use a Form W-8BEN-E to obtain both the chapter 3 and chapter 4 statuses of an entity providing the form. Additional Documentation Rules Applicable to Chapters 3 and 4 In most cases, you must reliably associate the payment with valid documentation to apply reduced withholding and must get the documentation before you make the payment. The documentation is not valid if you know, or 14 have reason to know, that it is unreliable or incorrect. See Standards of Knowledge for Purposes of Chapter 3 and Standards of Knowledge for Purposes of Chapter 4, later. If you cannot reliably associate a payment with valid documentation, you must use the presumption rules discussed later to determine the rate of withholding. For example, if you do not have documentation or you cannot determine the part of a payment that is allocable to specific documentation, you must use the presumption rules of section 1441. The specific types of documentation are discussed in this section. However, see Withholding on Specific Income, later, as well as the instructions to the particular forms. As the withholding agent, you may also want to see the Instructions for the Requester of Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and W-8IMY. Sections 1446(a) and (f) withholding. Under section 1446(a), a partnership must withhold tax on its ECTI allocable to its foreign partner(s) or, for a partnership that is a PTP, the PTP or a nominee for a PTP distribution must withhold on the amount of the distribution subject to section 1446(a) withholding made to its foreign partner(s). In most cases, a partnership (or nominee when applicable) determines if a partner is a foreign partner and the partner’s tax classification is based on the withholding certificate provided by the partner. This is the same documentation that is provided for chapter 3 withholding, but may require additional information, as discussed under each of the forms in this section. For information on section 1446(a) withholding, go to Partnership Withholding on ECTI, later. For information on section 1446(f) withholding, go to Section 1446(f) Withholding, later. Documentation rule for joint payees. If you make a payment to joint payees (such as holders of a joint account), you need to get documentation from each payee. If you make a payment to joint payees and cannot reliably associate the payment with documentation from all of the payees, you must generally presume the payment is made to an unidentified U.S. person. If the payment is a withholdable payment and any of the payees do not appear, by name or other information in the account file, to be an individual, you must treat the entire amount as a payment made to an undocumented foreign person. However, if one of the joint payees has provided you with a Form W-9, you must treat the payment as made to that payee. Form W-9. In most cases, you can treat the payee as a U.S. person if the payee gives you a Form W-9. The Form W-9 can be used only by a U.S. person and must contain the payee’s TIN. U.S. persons are not subject to chapter 3 withholding (or withholding under section 1446(a) or (f)), but may be subject to: • Form 1099 reporting and backup withholding under section 3406, • Reporting as a U.S. account holder of a participating FFI or registered deemed-compliant FFI, and Publication 515 (2026) • Classification as a recalcitrant account holder of a participating FFI or registered deemed-compliant FFI for chapter 4 purposes (including chapter 4 withholding) when the FFI is unable to report the information required with respect to the account holder. Forms W-8. In most cases, a foreign payee of the income should give you a form in the Form W-8 series. If certain requirements are met, the foreign person can give you documentary evidence, rather than a Form W-8 for chapter 3 or 4 purposes. You can rely on documentary evidence in lieu of a Form W-8 for an amount paid outside the United States with respect to an offshore obligation. Refer to Offshore obligations, later, to determine whether a payment qualifies as such a payment. Other documentation. Other documentation may be required to claim an exemption from, or a reduced rate of, chapter 3 withholding on pay for personal services. The nonresident alien individual may have to give you a Form W-4 or a Form 8233. These forms are discussed in Pay for Personal Services Performed under Withholding on Specific Income, later. Beneficial Owners If all the appropriate requirements have been established on a Form W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, or, if applicable, on documentary evidence, you can treat the payee as a foreign beneficial owner. Claiming treaty benefits for purposes of chapter 3. You may apply a reduced rate of withholding under chapter 3 to a foreign person that provides a Form W-8 claiming a reduced rate of withholding under an income tax treaty only if the person provides a U.S. or foreign TIN and certifies that: • It is a resident of a treaty country; • It is the beneficial owner of the income; • If it is an entity, it derives the income within the meaning of section 894 (it is not fiscally transparent); and • It meets any of the applicable LOB tests contained in the treaty and specifies the test under which it qualifies for benefits. If the payment you make is a withholdable payment to an entity, a requirement to withhold under chapter 4 may apply based on the chapter 4 status of the payee regardless of whether a claim of treaty benefits may apply to such payee or other person receiving the income. An entity derives income for which it is claiming treaty benefits only if the entity is not treated as fiscally transparent for that income. See Fiscally transparent entities claiming treaty benefits, discussed earlier under Flow-Through Entities. LOB provisions in income tax treaties generally prevent third-country residents (unless the treaty contains a derivative benefits rule) and others that do not have a substantial nexus to the treaty country from obtaining treaty benefits. For example, a foreign corporation may not be entitled to a reduced rate of withholding unless a minimum Publication 515 (2026) percentage of its owners are citizens or residents of the United States or the treaty country. Foreign entities that are residents of a country whose income tax treaty with the United States contains an LOB article are eligible for treaty benefits only if they satisfy one of the objective tests under the LOB article or obtain a favorable discretionary determination from the U.S. competent authority. The exemptions from, or reduced rates of, U.S. tax vary under each treaty. You must check the provisions of the tax treaty that apply. See Tax Treaties, later, for information on how to access tax treaties. If you know, or have reason to know, that an owner of income is not eligible for treaty benefits claimed or if the United States does not have an income tax treaty in force with that country, you may not reduce the rate of withholding. You are not, however, responsible for misstatements on a Form W-8, documentary evidence, or statements accompanying documentary evidence for which you did not have actual knowledge, or reason to know, that the statements were incorrect. Certain withholding agents, such as FIs, have limited reason-to-know requirements for this purpose. See Regulations section 1.1441-7(b) for these requirements. Exceptions to TIN requirement. A foreign person does not have to provide a U.S. or foreign TIN to claim a reduced rate of withholding under a treaty for chapter 3 purposes if the requirements for the following exceptions are met. • Income from marketable securities (discussed next). • Unexpected payments to an individual (discussed under U.S. or Foreign TINs, later). The allowance to provide a foreign TIN (rather than a U.S. TIN) does not apply to a payment to compensate an individual for personal services. See U.S. or Foreign TINs, later, for when a foreign person is required to provide a foreign TIN for purposes other than making a treaty claim. Marketable securities. A Form W-8 provided to claim treaty benefits does not need a U.S. or foreign TIN if the foreign beneficial owner is claiming the benefits on income from marketable securities for chapter 3 purposes. For this purpose, income from a marketable security consists of the following items. • Dividends and interest from stocks and debt obligations that are actively traded. • Dividends from any redeemable security issued by an investment company registered under the Investment Company Act of 1940 (mutual fund). • Dividends, interest, or royalties from units of beneficial interest in a unit investment trust that are (or were upon issuance) publicly offered and are registered with the SEC under the Securities Act of 1933. • Income related to loans of any of the above securities. Offshore obligations. An offshore obligation is an account maintained at an office or branch of a bank or other FI located outside the United States or an obligation, contract, or other instrument with respect to which the payer 15 of the payment is either engaged in business as a broker or dealer in securities or an FI that engages in significant activities at an office or branch located outside the United States. A payment is made outside the United States if you complete the acts necessary to effect the payment outside the United States. However, an amount paid by a bank or other FI on a deposit or account will usually be treated as paid at the branch or office where the amount is credited unless the other requirements of Regulations section 1.6049-5(e)(2) are met with respect to the branch or office, unless the amount is collected by the FI as an agent of the payee. If a payment is made outside the United States with respect to an offshore obligation, a payee may give you documentary evidence, rather than a Form W-8, to establish that the payee is a foreign person. See Regulations section 1.6049-5(c)(1) for the requirements for documentary evidence for offshore obligations. For accounts opened on or after July 1, 2014, through December 31, 2014, you may use the rules regarding the use of documentary evidence under Regulations sections 1.6049-5(c) (1) and (c)(4) as in effect prior to the issuance of the temporary regulations. You may rely on documentary evidence given to you by an NQI or a flow-through entity with its Form W-8IMY. This rule applies even though you make the payment to an NQI or flow-through entity in the United States. In most cases, the NQI or flow-through entity that gives you documentary evidence will also have to give you a withholding statement, discussed later. Documentary evidence. You may apply a reduced rate of withholding to income from marketable securities (discussed earlier) paid outside the United States for chapter 3 purposes with respect to an offshore obligation if the beneficial owner gives you documentary evidence in place of a Form W-8. To claim treaty benefits, the documentary evidence must be one of the following. 1. A certificate of residence that: a. Is issued by a tax official of the treaty country of which the foreign beneficial owner claims to be a resident, b. States that the person has filed its most recent income tax return as a resident of that country, and c. Is issued within 3 years before it is presented to you. 2. Documentation for an individual that: a. Includes the individual’s name, address, and photograph; b. Is an official document issued by an authorized governmental body; and c. Is issued no more than 3 years prior to being presented to you. 3. Documentation for an entity that: b. Includes the address of its principal office in the treaty country, and c. Is an official document issued by an authorized governmental body. In addition to the documentary evidence, a foreign beneficial owner that is an entity must provide a statement that it derives the income for which it claims treaty benefits and that it meets one or more of the tests set forth in an LOB article, if any (or similar provision), contained in the applicable treaty and must identify the specific test in the LOB article under which it qualifies for benefits. In the case of a withholdable payment made to an entity, you must also obtain the applicable documentation to establish that withholding does not apply under chapter 4. Form W-8BEN. This form is used by a foreign individual to: • Establish foreign status; • Claim that such individual is the beneficial owner of the income for which the form is being furnished or a partner in a partnership subject to withholding under section 1446(a) or a transferee of an interest in a partnership under section 1446(f); and • If applicable, claim a reduced rate of, or exemption from, withholding under an income tax treaty. A withholding agent, in some cases, may substitute its own form for a Form W-8BEN for individuals. Form W-8BEN may also be used to claim that the foreign individual is exempt from Form 1099 reporting and backup withholding for income that is not subject to chapter 3 withholding and is not a withholdable payment. For example, a foreign person may provide a Form W-8BEN to a broker to establish that the gross proceeds from the sale of securities are not subject to Form 1099 reporting or backup withholding. Date of birth requirement for certain account holders. If you are a U.S. office or branch of a depository institution, custodial institution, investment entity, or specified insurance company (each as defined in Regulations section 1.1471-5(e)) documenting an individual account holder (as defined in Regulations section 1.1471-5(a)(3)) of an account that is a financial account (as defined in Regulations section 1.1471-5(b)), you must obtain the individual account holder’s date of birth on the Form W-8BEN in order for the form to not be invalid for a payment of U.S. source income reportable on Form 1042-S. If the individual’s date of birth is not provided on the Form W-8BEN, the form is still valid if you otherwise have the date of birth in your account files for the account holder or you obtain the date of birth on a written statement (including a written statement transmitted by email) from the account holder and associate the written statement with the Form W-8BEN. See the related foreign TIN requirement discussed under Foreign TIN requirement for account holders, later, which also generally applies with respect to accounts described in this paragraph. a. Includes the name of the entity, 16 Publication 515 (2026) Form W-8BEN-E. This form is used by a foreign entity to: • Establish foreign status; • Establish an entity’s chapter 4 status to the extent required for chapter 4 purposes; • Claim that such entity is the beneficial owner of the income for which the form is being furnished or a partner in a partnership subject to withholding under section 1446(a) or (f) (excluding a partnership or grantor trust); and • If applicable, claim a reduced rate of, or exemption from, chapter 3 withholding under an income tax treaty. Form W-8BEN-E may also be used to claim that the foreign entity is exempt from Form 1099 reporting and backup withholding for income that is not subject to chapter 3 withholding and is not a withholdable payment. For example, a foreign entity may provide a Form W-8BEN-E to a broker to establish that the gross proceeds from the sale of securities are not subject to Form 1099 reporting or backup withholding. An entity payee may also provide a Form W-8BEN-E to establish that certain income from notional principal contracts is not effectively connected with the conduct of a U.S. trade or business. In addition, a foreign hybrid entity claiming treaty benefits on its own behalf should provide you with a Form W-8BEN-E with respect to the income for which treaty benefits are being claimed. In certain cases, a similar agreed form may be associated with the payment instead of a Form W-8BEN-E. Form W-8ECI. This form is used by a foreign person to: • Establish foreign status, • Claim that such person is the beneficial owner of the income for which the form is being furnished, and • Claim that the income is effectively connected with the conduct of a trade or business in the United States. (See Effectively Connected Income, later.) • Claim that the person is a dealer in securities for the exception to withholding under Regulations section 1.1446(f)-4(b)(6). See Section 1446(f): PTP Interests, later. ECI for which a valid Form W-8ECI has been provided is generally not subject to chapter 3 or chapter 4 withholding. If a partner submits this form to a partnership, the income claimed to be effectively connected with the conduct of a U.S. trade or business is subject to withholding under section 1446. If the partner has made, or will make, an election under section 871(d) or 882(d), the partner must submit Form W-8ECI, and attach a copy of the election, or a statement of intent to elect, to the form. Caution: If the partner’s only ECI is the income allocated from the partnership and the partner is not making the election under section 871(d) or 882(d), the partner should provide Form W-8BEN or W-8BEN-E to the partnership. Publication 515 (2026) Form W-8EXP. This form is used by a foreign government, international organization, foreign central bank of issue, foreign tax-exempt organization, foreign private foundation, or government of a U.S. territory to: • Establish foreign status, • Establish the entity’s chapter 4 status to the extent required for chapter 4 purposes, • Claim that such person is the beneficial owner of the income for which the form is being furnished, and • Claim an exemption from withholding under both chapter 3 and chapter 4 for such entity or that the entity is a foreign private foundation subject to the 4% tax. See section 1443 for the withholding required for a payment made to such an entity. If the government or organization named on the form is a partner in a partnership carrying on a trade or business in the United States, the ECTI allocable to the partner is subject to withholding under section 1446. See also Foreign Governments and Certain Other Foreign Organizations, later. Foreign Intermediaries and Foreign Flow-Through Entities Payments made to a foreign intermediary or foreign flow-through entity that is not a QI that assumes primary chapters 3 and 4 withholding responsibility, a WP, a WT, or a branch treated as a U.S. person (see U.S. branches of foreign banks and foreign insurance companies, earlier) are treated as made to the payees on whose behalf the intermediary or entity acts except when the intermediary or flow-through entity is subject to chapter 4 withholding. See Flow-Through Entities and Foreign intermediaries, earlier. The Form W-8IMY provided by a foreign intermediary or flow-through entity must be accompanied by additional information for you to be able to reliably associate the payment with a payee. The additional information required depends on the type of intermediary or flow-through entity and the extent of the withholding responsibilities it assumes. Form W-8IMY. This form is used by foreign intermediaries and foreign flow-through entities, as well as certain U.S. branches for chapter 3 or 4 purposes, or when applicable, for section 1446(a) or (f) purposes, to: • Represent that a foreign person is a QI or an NQI; • Establish the entity’s chapter 4 status when required for chapter 4 purposes; • When applicable, certify that the entity is a participat- ing FFI, a registered deemed-compliant FFI, or a QI that may provide a withholding statement allocating a payment to a chapter 4 withholding rate pool of U.S. payees; • Represent, if applicable, that the QI is assuming pri- mary chapters 3 and 4 withholding responsibility and/or primary Form 1099 reporting and backup withholding responsibility; 17 • Represent that a foreign partnership or a foreign simple or grantor trust is a WP or a WT; • Represent that a foreign flow-through entity is a nonwithholding foreign partnership, or a nonwithholding foreign trust; • Represent that the provider is a U.S. branch of a for- eign bank or insurance company and either is agreeing to be treated as a U.S. person or is transmitting documentation of the persons on whose behalf it is acting for the payments; • Represent its status as a qualified securities lender with respect to payments of U.S. source substitute dividends; • Represent its status as a QI acting as a QDD for certain payments; and • Represent that, for purposes of section 1446, it is an upper-tier foreign partnership or a foreign grantor trust and that the form is being used to transmit the required documentation. For information on qualifying as an upper-tier foreign partnership, see Regulations section 1.1446-5. For purposes of chapter 4, an intermediary or flow-through entity that is a participating FFI or registered deemed-compliant FFI receiving a withholdable payment may, instead of providing documentation for each payee, provide pooled allocation information, as described under FFI withholding statement next. FFI withholding statement. An FFI withholding statement must be provided by a participating FFI or registered deemed-compliant FFI (including a U.S. branch of a participating FFI that is not treated as a U.S. person) that is an NQI, nonwithholding foreign partnership, nonwithholding foreign trust, or a QI that makes an election to be withheld on for chapter 4 purposes (that is, a QI that does not assume chapter 3 or 4 withholding responsibility), as described under qualified intermediary (QI), later. An FFI withholding statement may include either payee-specific information or pooled information. If the withholding statement includes pooled information, the withholding statement must indicate the portion of the payment allocable to: • A chapter 4 withholding rate pool of U.S. payees, • Each class of recalcitrant account holders under Regulations section 1.1471-4(d)(6) or a single pool for a QI, or • A class of nonparticipating FFIs. If the withholding statement includes payee-specific information, it must indicate both the portion of the payment allocated to each payee and each payee’s chapter 4 status. Any withholding statement provided by an FFI other than an FFI acting as a WP, WT, or QI with respect to the account must also identify each intermediary or flow-through entity that receives the payment and such entity’s chapter 4 status and GIIN, when applicable. 18 For additional information on the requirements for FFI withholding statements, see Regulations section 1.1471-3(c)(3)(iii)(B)(2). Chapter 4 withholding statement. A chapter 4 withholding statement must be provided by the following. • A territory financial institution that does not agree to be treated as a U.S. person. • A U.S. branch that is not a U.S. branch of a participating FFI. • An NFFE or certified deemed-compliant FFI that is an NQI, nonwithholding foreign partnership, or nonwithholding foreign trust and is not the payee. A chapter 4 withholding statement must contain the following. • The name, address, TIN (if any), entity type, and chapter 4 status of each payee. • The amount allocated to each payee. • A valid withholding certificate or other appropriate documentation sufficient to establish the chapter 4 status of each payee, and each intermediary or flow-through entity that receives the payment on behalf of the payee. • Any other information the withholding agent reasonably requests in order to fulfill its obligations under chapter 4. A chapter 4 withholding statement is permitted to provide pooled allocation information with respect to payees that are treated as nonparticipating FFIs. Caution: A Form W-8 must include a U.S. TIN for a partner to be valid for purposes of a claim of exemption or reduced withholding under section 1446(a) or (f). See the instructions for the applicable Form W-8. Qualified Intermediary (QI) In most cases, a QI is any foreign intermediary that has entered into a QI agreement (discussed earlier) with the IRS with respect to the withholding and reporting required under chapters 3 and 4 and for purposes of Form 1099 reporting and backup withholding under section 3406. Additionally, starting January 1, 2023, a QI may also assume certain withholding responsibilities with respect to PTP distributions (including withholding under section 1446(a)) and certain transfers of PTP interests for section 1446(f) purposes when acting as an intermediary. For discussion of those provisions, see Publicly Traded Partnership Distributions and Section 1446(f): PTP Interests, later. A foreign entity that is a QI acting as a QDD or that is acting with respect to payments of substitute interest (as permitted by the QI agreement) can act as a QI even though it is not receiving payments as an intermediary. A foreign entity that has received a QI employer identification number (QI-EIN) may represent on Form W-8IMY that it is a QI. The QI can claim that it is a QI until the IRS revokes its QI-EIN. A QI can be either an FFI or an NFFE. An FFI that is a QI must be a participating FFI (including a reporting Model Publication 515 (2026) 2 FFI), a registered deemed-compliant FFI (including a reporting Model 1 FFI and a nonreporting Model 2 FFI treated as a registered deemed-compliant FFI), or an FFI treated as a deemed-compliant FFI under an applicable Model 1 IGA that is subject to similar due diligence and reporting requirements with respect to its U.S. accounts as those applicable to a registered deemed-compliant FFI (including the requirement to register with the IRS) (defined in the QI agreement as a “registered deemed-compliant Model 1 IGA FFI”). Thus, you must identify the chapter 4 status of an FFI, certifying its status as a QI as one of the chapter 4 statuses referenced in the preceding sentence on a Form W-8IMY when a chapter 4 status is required for chapter 4 purposes. Responsibilities and documentation for chapters 3 and 4. Payments made to a QI that does not assume primary chapters 3 and 4 withholding responsibilities are treated as paid to its account holders. However, a QI is not required to provide you with documentation it obtains from its foreign account holders or from U.S. exempt recipients (U.S. persons exempt from Form 1099 reporting). Instead, it provides you with a withholding statement that contains either chapter 3 or chapter 4 withholding rate pool information. A chapter 4 withholding rate pool is a payment of a single type of income that is a withholdable payment that is allocated to payees that are nonparticipating FFIs or recalcitrant account holders (in a single pool). A chapter 4 withholding rate pool also means a payment of a single type of income that is allocated to U.S. payees when the QI provides the certification required on Form W-8IMY for allocating payments to this pool and a withholding statement. A QI may include in its chapter 4 withholding rate pools its direct account holders as well as account holders of another QI or a participating FFI or registered deemed-compliant FFI. With respect to a payment to a foreign person for which no chapter 4 withholding is required, a chapter 3 withholding rate pool is a payment of a single type of income that is subject to a single rate of withholding and that is reported on Form 1042-S under a single chapter 4 exemption code. Payments made to U.S. exempt recipients may also be included in a chapter 3 withholding rate pool to which withholding does not apply. A QI is required to provide you with information regarding U.S. nonexempt recipients (U.S. persons subject to Form 1099 information reporting) and to provide you withholding rate pool information separately for each such U.S. person unless it has assumed primary Form 1099 reporting and backup withholding responsibility and meets the requirements to include these recipients in a U.S. payee pool. For the alternative procedure for providing withholding rate pool information for U.S. nonexempt persons not included in a chapter 4 withholding rate pool of U.S. payees, see the Instructions for Form W-8IMY. The withholding statement must: 1. Designate those accounts for which it acts as a QI; 2. Designate those accounts for which it assumes primary chapters 3 and 4 withholding responsibility and/or primary Form 1099 reporting and backup withholding responsibility; Publication 515 (2026) 3. If applicable, designate the accounts for which it acts as a qualified securities lender with respect to any U.S. source substitute dividend payments; 4. If applicable, designate those accounts for which it acts as a QDD (see the QDD withholding statement section of the Instructions for Form W-8IMY for additional requirements); 5. Provide sufficient information for you to allocate the payment, as applicable, to chapter 3 withholding rate pools and, for payments that are withholdable payments, chapter 4 withholding rate pools of nonparticipating FFIs and recalcitrant account holders when the QI has not assumed primary chapter 3 or 4 withholding responsibility; and 6. Provide sufficient information for you to allocate payments to each U.S. nonexempt recipient or to a pool of U.S. payees to the extent described earlier under this heading. The extent to which you must have withholding rate pool information depends on the withholding and reporting obligations assumed by the QI. If a QI that is permitted to do so by the QI agreement obtains documentary evidence under the “KYC” rules that apply to the QI under local law, and the documentary evidence is of a type specified in an attachment to the QI agreement, the documentary evidence remains valid until there is a change in circumstances or the QI knows the information is incorrect. A QI may rely on a Form W-8 until its validity expires under Regulations section 1.1441-1(e) (4)(ii) and may rely on documentary evidence not obtained pursuant to “KYC” rules until its validity expires under Regulations section 1.6049-5(c). Primary chapters 3 and 4 withholding responsibilities not assumed. If a QI does not assume primary chapters 3 and 4 withholding responsibility or primary Form 1099 reporting and backup withholding responsibility for the payment, you can reliably associate the payment with valid documentation only to the extent you can reliably determine the part of the payment that relates to each withholding rate pool for foreign and U.S. payees. Unless the alternative procedure applies and the QI is permitted to include U.S. nonexempt recipients in a chapter 4 withholding rate pool of U.S. payees, the QI must provide you with a separate withholding rate pool for each U.S. nonexempt recipient that must be reported on Form 1099. If you and the QI agree, the QI may apply the alternative procedures for U.S. nonexempt recipients by establishing a single withholding rate pool (not subject to backup withholding) for all U.S. nonexempt recipient account holders for whom the QI is required to report on Form 1099 and has provided you with Forms W-9 prior to you making the reportable payment, or, if applicable, designated broker proceeds to which backup withholding does not apply. The QI must provide a Form W-9 or, in the absence of the form, the name, address, and TIN, if available, for each U.S. nonexempt recipient. Primary chapters 3 and 4 withholding responsibilities assumed. If you make a payment to a QI that 19 assumes primary chapters 3 and 4 withholding responsibilities (but not primary Form 1099 reporting and backup withholding responsibility), you can reliably associate the payment with valid documentation only to the extent you can reliably determine the part of the payment that relates to the chapter 4 withholding rate pools and chapter 3 withholding rate pools, as applicable, and the part of the payment attributable to withholding rate pools for each U.S. nonexempt recipient, unless the alternative procedure applies for Form 1099 reporting and/or backup withholding purposes. The QI must provide a Form W-9 or, in the absence of the form, the name, address, and TIN, if available, for such person. Primary chapters 3 and 4 withholding responsibilities and Form 1099 reporting and backup withholding responsibilities assumed. If you make a payment to a QI that assumes primary chapters 3 and 4 withholding responsibilities and primary Form 1099 reporting and backup withholding responsibility, you can reliably associate the payment with valid documentation provided that you receive a valid Form W-8IMY. It is not necessary to associate the payment with any chapter 3 or chapter 4 withholding rate pools. If you make a payment to a QI that also acts as a QDD, the QI must provide a withholding statement designating the accounts for which it acts as a QDD even if it assumes primary withholding responsibility for all payments. In addition, the QI must provide all information required for the QDD accounts. Example. You make a payment of U.S. source dividends to a QI. It has five customers: two are foreign persons who have provided documentation entitling them to a 15% rate of withholding on dividends; two are foreign persons subject to a 30% rate of withholding on dividends; and one is a U.S. individual who provides it with a Form W-9. Each customer is entitled to 20% of the dividend payment. The QI does not assume any primary withholding responsibility. The QI gives you a Form W-8IMY with which it associates the Form W-9 and a withholding statement that allocates 40% of the dividend to a 15% withholding rate pool, 40% to a 30% withholding rate pool, and 20% to the U.S. individual. You should report on Forms 1042-S, 40% of the payment as made to a 15% rate dividend pool and 40% of the payment as made to a 30% rate dividend pool. The part of the payment allocable to the U.S. individual (20%) is reportable on Form 1099-DIV. Joint account treatment for chapters 3 and 4. A QI may apply joint account treatment to a partnership or trust if the partnership or trust meets the following conditions. • It is a nonwithholding foreign partnership or nonwithholding foreign trust that is either a simple or grantor trust. • It is a certified deemed-compliant FFI (other than a registered deemed-compliant Model 1 IGA FFI), an owner-documented FFI with respect to the QI, an exempt beneficial owner, an NFFE, or is covered as an account that is excluded from the definition of financial account under Annex II of an applicable IGA or under 20 Regulations section 1.1471-5(a) and has provided the QI with a certification that it has maintained such chapter 4 status during each certification period. • It is a direct account holder of the QI. • None of its partners, beneficiaries, or owners is a flow-through entity or is acting as an intermediary for a payment made by the QI to the partnership or trust, and none of its partners, beneficiaries, or owners is a U.S. person. • None of its foreign partners, beneficiaries, or owners is subject to withholding or reporting under chapter 4. • It agrees to make available upon request to the QI (or QI’s reviewer) records that establish it has provided the QI with documentation for purposes of chapters 3 and 4 for all of its partners, beneficiaries, or owners. For information on these rules, see section 4.05 of the QI agreement in Revenue Procedure 2022-43. Agency option. A QI may apply the agency option to a partnership or trust under which the partnership or trust agrees to act as an agent of the QI and to apply the provisions of the QI agreement to its partners, beneficiaries, or owners, except for any account holder for which it acts as a QDD. A QI and a partnership or trust may only apply the agency option if the partnership or trust meets the following conditions. • It is a nonwithholding foreign partnership or nonwithholding foreign trust that is either a simple or grantor trust. • It is either a direct account holder of the QI or an indi- rect account holder of the QI that is a direct partner, beneficiary, or owner of a partnership or trust to which the QI also applies the agency option. • It is an FFI that is a certified deemed-compliant FFI (other than a registered deemed-compliant Model 1 IGA FFI), an owner-documented FFI with respect to the QI, an NFFE, an exempt beneficial owner, or is covered as an account that is excluded from the definition of financial account under Annex II of an applicable IGA or under Regulations section 1.1471-5(a) and has provided the QI with a certification that it has maintained such chapter 4 status during each certification period. • None of its partners, beneficiaries, or owners is a WT, WP, participating FFI, registered deemed-compliant FFI, registered deemed-compliant Model 1 IGA FFI, or another QI acting as an intermediary for a payment made by the QI to the partnership or trust. • It agrees to permit the QI to treat its direct and indirect partners, beneficiaries, or owners as direct and indirect account holders, respectively, of the QI under the QI agreement. • It agrees to comply with the compliance procedures of the QI agreement. For information on these rules, see section 4.06 of the QI agreement in Revenue Procedure 2022-43. Publication 515 (2026) Form 1042-S reporting. A QI is generally permitted to report payments made to its foreign account holders on a pooled basis rather than reporting payments to each account holder specifically. Pooled basis reporting is not available for payments to certain account holders, such as NQIs, QDDs, flow-through entities (discussed earlier) and certain of their account holders and owners, private arrangement intermediaries, and, in certain circumstances, QIs, WPs, and WTs. Notwithstanding these requirements, separate Forms 1042-S are not issued to account holders that the QI is permitted to include in a chapter 4 withholding rate pool. Collective refund procedures. A QI may seek a refund of tax withheld under chapters 3 and 4 on behalf of its account holders when the QI has not issued a Form 1042-S to the account holders that received the payment that was subject to overwithholding. The account holders, therefore, are not required to file claims for refund with the IRS to obtain refunds, but rather may obtain them from the QI. A QI may obtain a refund of tax withheld under chapter 4, however, to the extent permitted under the QI agreement. Nonqualified Intermediary (NQI) If you are making a payment to an NQI or U.S. branch that is using Form W-8IMY to transmit information about the branch’s account holders or customers for chapter 3 or 4 purposes, you can treat the payment (or a part of the payment) as reliably associated with valid documentation from a specific payee only if, before making the payment: • You can allocate the payment to a valid Form W-8IMY; • You can reliably determine how much of the payment relates to valid documentation provided by a payee (a person that is not itself a foreign intermediary, flow-through entity, or U.S. branch with a chapter 4 withholding rate pool) (see Pooled withholding information, later); and • You have sufficient information to report the payment on Form 1042-S or Form 1099, if reporting is required. Withholding statement. The NQI or U.S. branch must give you certain information on a withholding statement that is associated with the Form W-8IMY for chapter 3 or 4 purposes. A withholding statement must be updated to keep the information accurate prior to each payment. See, however, Regulations section 1.1441-1(e)(3)(iv)(C)(3) for when a withholding agent may instead accept an alternative withholding statement. For chapter 4 purposes. An NQI receiving a withholdable payment must provide a withholding statement that satisfies the requirements of an FFI withholding statement or, if the NQI is not a participating FFI or registered deemed-compliant FFI, a chapter 4 withholding statement. An FFI withholding statement may allocate the payment to chapter 4 reporting rate pools (as appropriate), including a chapter 4 withholding rate pool for nonparticipating FFIs, recalcitrant account holders (in each class of account holders, as described in the chapter 4 regulations), Publication 515 (2026) and, for an NQI that is a participating FFI (including a reporting Model 2 FFI) or a registered deemed-compliant FFI (including a reporting Model 1 FFI), U.S. payees. However, an NQI may allocate a payment of a reportable amount (regardless of whether the payment is a withholdable payment) to a chapter 4 withholding rate pool of U.S. payees when the NQI satisfies the requirements for providing such a pool, including the requirement to certify to its status as a participating FFI, including a reporting Model 2 FFI, or registered deemed-compliant FFI, including a reporting Model 1 FFI. If the FFI withholding statement instead includes payee-specific information for purposes of chapter 4, it must indicate both the portion of the payment allocated to each payee and each payee’s chapter 4 status. The withholding statement must also identify each intermediary or flow-through entity that is receiving a payment (excluding any intermediary or flow-through entity that is an account holder or interest holder in another QI, WP, or WT), each such entity’s chapter 4 status and GIIN (if applicable) when required for chapter 4 purposes, and the chapter 4 withholding rate pools associated with each such entity. A chapter 4 withholding statement must contain the name, address, TIN (if any), entity type, chapter 4 status of each payee, the amount allocated to each payee, and a valid withholding certificate or other documentation sufficient to establish each payee’s chapter 4 status for payees that are not included in a chapter 4 withholding rate pool of nonparticipating FFIs. The withholding statement must also identify each intermediary or flow-through entity that is receiving a payment (excluding any intermediary or flow-through entity that is an account holder or interest holder in another QI, WP, or WT), each such entity’s chapter 4 status and GIIN (if applicable), and the chapter 4 withholding rate pools associated with each such entity. An allocation of a payment to an NQI, nonwithholding foreign partnership, or nonwithholding foreign trust of an amount subject to chapter 3 withholding to a chapter 4 withholding rate pool of U.S. payees must identify the payees consistent with the description in Regulations section 1.1471-3(c)(3)(iii)(B)(2)(iii). For chapter 3 purposes. The withholding statement should allocate for chapter 3 purposes only the portion of the payment that was not allocated to a chapter 4 withholding rate pool or to a payee identified on a withholding statement to whom withholding was applied under chapter 4. For chapter 3 purposes, a withholding statement must include the information described below for a reportable amount. 1. The name, address, and TIN (if any, or if required) of each person for whom documentation is provided. 2. The type of documentation (documentary evidence, Form W-8, or Form W-9) for every person for whom documentation has been provided, and, for a withholdable payment, that the documentation establishes the payee’s chapter 4 status to the extent required for chapter 4 purposes. 3. The status of the person for whom the documentation has been provided, such as whether the person is a 21 U.S. exempt recipient, U.S. nonexempt recipient, or a foreign person. For a foreign person, the statement must indicate whether the person is the beneficial owner or a foreign intermediary, flow-through entity, or a U.S. branch that is not included in a chapter 4 withholding rate pool or in a pool of payees under the alternative procedures (see Alternative procedure, later). 4. The type of recipient the person is, based on the recipient codes used on Form 1042-S. 5. Information allocating each payment, by income type, to each payee (including U.S. exempt and nonexempt recipients) for whom documentation has been provided that is not included in a chapter 4 withholding rate pool or in a pool of payees under the alternative procedures (see Alternative procedure, later). 6. The rate of withholding that applies to each foreign person to whom a payment is allocated. 7. A foreign payee’s country of residence. 8. If a reduced rate of withholding is claimed under chapter 3, the basis for a reduced rate of withholding (for example, portfolio interest, treaty benefit, etc.). 9. In the case of treaty benefits claimed by entities, whether the applicable LOB statement and the statement that the foreign person derives the income for which treaty benefits are claimed, have been made. 10. The name, address, and TIN (if any) and, for a withholdable payment, the chapter 4 status (if required) and GIIN (if applicable) of any other NQI, flow-through entity, or U.S. branch from which the payee will directly receive a payment. 11. Any other information a withholding agent requests to fulfill its reporting and withholding obligations. Alternative procedure. Under this alternative procedure, the NQI can give you the information that allocates each payment to each foreign and U.S. exempt recipient or chapter 4 withholding rate pool by January 31 following the calendar year of payment, rather than before the payment is made, as otherwise required. To take advantage of this procedure, the NQI must (a) inform you, on its withholding statement, that it is using the alternative procedure; [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3Af59d2d457dc8eafc. Public record. Not legal advice.