are not FDAP, such as most gains from the sale of property
Chapter 3 withholding rate pool. A chapter 3 withholding
(including market discount and option premiums), as well as
rate pool is a payment of a single type of income, based on
other specific items of income described in Regulations
the categories of income reported on Form 1042-S (for
section 1.1441-2 (such as interest on bank deposits and
example, interest or dividends), that is not subject to
short-term OID).
withholding under chapter 4 but is subject to a single rate of
Amounts subject to chapter 4 withholding are payments of
withholding for chapter 3 purposes and is paid to foreign
U.S. source FDAP income that are withholdable payments as
persons or, in the case of a zero-percent pool, U.S. exempt
defined in Regulations section 1.1473-1(a) and to which no
recipients not included in a separate pool of exempt
exception under Regulations section 1.1473-1(a)(4) applies
recipients.
(for example, certain nonfinancial payments are excepted
Chapter 4. Chapter 4 means chapter 4 of the Internal
from the definition of withholdable payment). The exemptions
Revenue Code (Taxes to Enforce Reporting on Certain
from withholding provided for under chapter 3 are not
Foreign Accounts). Chapter 4 contains sections 1471
applicable when determining whether withholding applies
through 1474.
under chapter 4.
Chapter 4 status. The term chapter 4 status means a
For purposes of section 1446, the amount subject to
person’s status as a U.S. person, specified U.S. person,
withholding is the foreign partner’s share of the partnership’s
foreign individual, participating FFI, deemed-compliant FFI,
effectively connected taxable income.
restricted distributor, exempt beneficial owner,
Beneficial owner. For payments other than those for which
nonparticipating FFI, territory financial institution, excepted
a reduced rate of, or exemption from, withholding is claimed
NFFE, or passive NFFE.
under an income tax treaty, the beneficial owner of income is
Chapter 4 withholding rate pool. The term chapter 4
generally the person who is required under U.S. tax
withholding rate pool means a pool identified on a
principles to include the payment in gross income on a tax
withholding statement provided by an intermediary or
return. A person is not a beneficial owner of income,
flow-through entity with respect to a withholdable payment
however, to the extent that person is receiving the income as
that is allocated to payees that are nonparticipating FFIs. The
a nominee, agent, or custodian, or to the extent the person is
term chapter 4 withholding rate pool also includes a pool
a conduit whose participation in a transaction is disregarded.
identified on an FFI withholding statement provided by a
In the case of amounts paid that do not constitute income,
participating FFI or registered deemed-compliant FFI with
beneficial ownership is determined as if the payment were
respect to a withholdable payment that is allocated to a class
income.
of recalcitrant account holders as described in Regulations
Foreign partnerships, foreign simple trusts, and foreign
section 1.1471- 4(d)(6) (or with respect to an FFI that is a QI,
grantor trusts are not the beneficial owners of income paid to
a single pool of recalcitrant account holders without the need
the partnership or trust. The beneficial owners of income paid
to subdivide into each class of recalcitrant account holder),
to a foreign partnership are generally the partners in the
including a pool of account holders to which the escrow
partnership, provided that the partner is not itself a
procedures for dormant accounts apply. Finally, a chapter 4
partnership, foreign simple or grantor trust, nominee, or other
withholding rate pool also includes a pool of U.S. persons
agent. The beneficial owners of income paid to a foreign
included in a U.S. payee pool described in Regulations
simple trust (that is, a foreign trust that is described in section
section 1.6049-4(c)(4) provided by a participating FFI
651(a)) are generally the beneficiaries of the trust, if the
(including a reporting Model 2 FFI), a registered
beneficiary is not itself a foreign partnership, foreign simple
deemed-compliant FFI (including a reporting Model 1 FFI), or
or grantor trust, nominee, or other agent. The beneficial
a QI.
owners of income paid to a foreign grantor trust (that is, a
Deemed-compliant FFI. Under section 1471(b)(2), certain
foreign trust to the extent that all or a portion of the income of
FFIs are deemed to comply with the regulations under
the trust is treated as owned by the grantor or another person
chapter 4 without the need to enter into an FFI agreement
under sections 671 through 679) are the persons treated as
with the IRS. However, certain deemed-compliant FFIs are
the owners of the trust. The beneficial owner of income paid
required to register with the IRS and obtain a GIIN. These
to a foreign complex trust (that is, a foreign trust that is not a
FFIs are referred to as registered deemed-compliant FFIs.
foreign simple trust or foreign grantor trust) is the trust itself.
See Regulations section 1.1471-5(f)(1) and also an
The beneficial owner of income paid to a foreign estate is
applicable IGA for entities treated as registered
the estate itself.
deemed-compliant FFIs.
Note. A payment to a U.S. partnership, U.S. trust, or U.S.
Disregarded entity. A business entity that has a single
estate is treated as a payment to a U.S. payee that is not
owner and is not a corporation under Regulations section
subject to 30% withholding for purposes of chapter 3 and
301.7701-2(b) is disregarded as an entity separate from its
chapter 4. A U.S. partnership, trust, or estate should provide
owner. A disregarded entity does not submit Form W-8IMY to
the withholding agent with a Form W-9. For purposes of
a withholding agent or FFI. Instead, the owner of such entity
section 1446, a U.S. grantor trust or disregarded entity shall
provides the appropriate documentation (for example, a
not provide the withholding agent a Form W-9 in its own right.
Form W-8BEN-E if the owner is a foreign entity that is not a
Rather, the grantor or other owner shall provide the
QDD). However, if a disregarded entity receiving a
withholding agent the appropriate form.
withholdable payment is an FFI outside the single owner’s
country of organization or has its own GIIN, see the
Chapter 3. Chapter 3 means chapter 3 of the Internal
instructions to Part II of Form W-8IMY for when to provide the
Revenue Code (Withholding of Tax on Nonresident Aliens
chapter 4 status of the disregarded entity receiving the
and Foreign Corporations). Chapter 3 contains sections 1441
payment.
through 1464.
-4-
Instructions for Form W-8IMY (Rev. 6-2017)