IRS Releases Proposed Qualified Intermediary Agreement

IRS Release Proposed Qualified Intermediary Agreement

This new QI agreement makes modifications to a number of key areas, and once it has been finalized, it will replace the existing agreement.

IRS Releases Proposed Qualified Intermediary Agreement

Once the QI agreement has been finalized, it will replace the existing agreement that is set forth in Rev. Proc. 2014-39. This Notice was released on July 1, 2016 and makes a number of significant changes including the introduction of new rules regarding "Qualified Derivatives Dealers" and QIs that make substitute interest payments. As well, the new agreement contains important additions to the compliance review requirements.

Many Canadian and other non-U.S. financial institutions have entered into an agreement with the IRS to act as a QI. The primary purpose of the QI regime is to ensure that U.S. withholding tax is properly applied to certain U.S.-source payments made to non-U.S. persons. Under the QI agreement, the QI generally acts as an agent of the IRS in performing U.S. withholdings on such payments.

The existing QI agreement is generally effective from July 1, 2014 through December 31, 2016. The proposed QI agreement, when finalized, will come into effect on January 1, 2017.

Overview of key changes
The proposed QI agreement has modified the existing agreement in a number of key areas by creating the following updates (among others):

  • A new "Qualified Derivatives Dealer" regime and rules surrounding payments of substitute interest
  • Additional reporting requirements
  • Detailed guidance for compliance review, including the possibility of a waiver for small QIs
  • New requirements relating to treaty claims
  • Modifications to private arrangement intermediaries, joint account, and agency rules
  • Changes to responsible officer rules
  • Term of agreement and renewal instructions
  • Removal of references to the term "limited FFIs".

For more information, contact your KPMG adviser.

Information is current to July 12, 2016.

We respectfully acknowledge that KPMG offices across Turtle Island (North America) are located on the traditional, treaty, and unceded territories of First Nations, Inuit and Métis peoples.

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