Department of the Treasury

Internal Revenue Service

Publication 515

Cat. No. 15019L

Withholding of 

Tax on 

Nonresident 

Aliens and 

Foreign 

Entities

For use in 2024

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Future Developments

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

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, effective for Form 

1042 returns required to be filed on or after January 1, 

2024.

Also, see Pub. 1187, Specifications for Electronic Filing 

of Form 1042-S, Foreign Person's U.S. Source Income 

Subject to Withholding and Filing Information Returns 

Electronically (FIRE).

Termination of 1979 Tax Convention with Hungary. 

On July 15, 2022, the U.S. Treasury Department (Treasury) 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. In respect of other taxes, the treaty ceases to have effect with 

respect to taxable periods beginning on or after January 1, 

2024.

Reminders

Central Withholding Agreement (CWA) simplified application process. We’ve temporarily waived the income 

requirement for which form to use when applying for a 

CWA. Form 13930-A is currently unavailable. While the 

waiver is in effect, individuals with income below $10,000 

can apply for a CWA using Form 13930, Instructions on 

How to Apply for a Central Withholding Agreement PDF. 

For more information on how to apply for a CWA, see 

Form 13930.

For more information, go to IRS.gov/Individuals/

International-Taxpayers/Central-Withholding-Agreements.

Deposit interest paid to certain nonresident alien individuals. Deposit interest of $10 or more paid to certain 

nonresident alien individuals must be reported on Form 

1042-S. See Deposit interest paid to certain nonresident 

alien individuals for more information.

Electronic deposits. You must make all deposits of 

taxes paid with respect to Form 1042-S (including taxes 

Feb 9, 2024
withheld under either chapter 3 or chapter 4) electronically.

Requests for extensions on Form 8809. Requests on 

Form 8809 for an extension of time to file Form 1042-S 

should be made electronically. See Extension to file Form 

1042-S with the IRS, later.

Withholding and reporting under sections 1446(a) 

and (f) starting in 2023. T.D. 9926 (85 FR 76910) , published on November 30, 2020 (as corrected at 86 FR 

13191), contains final regulations (section 1446(f) regulations) relating to the withholding and reporting required 

under section 1446(f) on transfers of interests in certain 

partnership interests, which include withholding requirements that apply to brokers effecting transfers of interests 

in publicly traded partnerships (PTPs). While section 

1446(f) withholding generally applies to transfers occurring on or after January 1, 2018, certain provisions of the 

section 1446(f) regulations apply to transfers on or after 

January 1, 2023, including:

• The requirements for withholding on transfers of interests in PTPs under section 1446(f)(1);

• Certain changes to the withholding requirements under Regulations section 1.1446-4 for distributions 

made by PTPs (PTP distributions), which include an 

allowance for Qualified Intermediaries (QIs) and U.S. 

branches to act as withholding agents for the distributions; and

• Partnership withholding under section 1446(f)(4) on 

distributions to transferees of non-PTP interests that 

failed to properly withhold under section 1446(f)(1).

For further information regarding the effective date of 

these provisions, see Notice 2021-51, 2021-36 I.R.B. 361, 

available at IRS.gov/irb/2021-36_IRB#NOT-2021-51. For 

additional guidance on certain issues related to the section 1446(f) regulations, see Notice 2023-8, 2023–2 I.R.B. 

344, available at IRS.gov/irb/2023-2_IRB#NOT-2021-51.

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.

Introduction

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 

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

(Circular E), Employer's Tax Guide

Employer's Supplemental Tax Guide

1-B Employer's Tax Guide to Fringe Benefits

1-T Federal Income Tax Withholding Methods

1 (Circular A), Agricultural Employer's Tax Guide

0 Tax Withholding and Estimated Tax

19 U.S. Tax Guide for Aliens

901 U.S. Tax Treaties

1179 General Rules and Specifications for 

Substitute Forms 1096, 1098, 1099, 5498, and 

Certain Other Information Returns

1187 Specifications for Electronic Filing of Form 

1042-S, Foreign Person's U.S. Source Income 

Subject to Withholding

5124 FATCA XML User Guide

 15

 15-A

 15-B

 15-T

 51

 505

 519

 901

 1179

 1187

 5124

2 Publication 515 (2024)
Form (and Instructions)

Application for Employer Identification Number

age and Tax Statement

Employee's Withholding Certificate

ithholding Certificate for Periodic Pension or 

Annuity Payments

Application for IRS Individual Taxpayer 

Identification Number

Certificate of Foreign Status of Beneficial 

Owner for United States Tax Withholding and 

Reporting (Individuals)

Certificate of Status of Beneficial Owner 

for United States Tax Withholding and 

Reporting (Entities)

ertificate of Foreign Person's Claim That 

Income Is Effectively Connected With the 

Conduct of a Trade or Business in the United 

States

Certificate of Foreign Government or Other 

Foreign Organization for United States Tax 

Withholding and Reporting

Certificate of Foreign Intermediary, Foreign 

Flow-Through Entity, or Certain U.S. Branches 

for United States Tax Withholding and 

Reporting

snstructions for the Requester of Forms 

W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and 

W-8IMY

Request for Taxpayer Identification Number and 

Certification

snstructions for the Requester of Form W-9

Employer's QUARTERLY Federal Tax Return

Annual Return of Withheld Federal Income Tax

Annual Withholding Tax Return for U.S. Source 

Income of Foreign Persons

Foreign Person's U.S. Source Income 

Subject to Withholding

1042-T Annual Summary and Transmittal of Forms 

1042-S

13930 Instructions on how to apply for a Central 

Withholding Agreement

13930-A Simplified Central Withholding Agreement 

Application

8233 Exemption From Withholding on 

Compensation for Independent (and Certain 

Dependent) Personal Services of a Nonresident 

Alien Individual

8288 U.S. Withholding Tax Return for Certain 

Dispositions by Foreign Persons

8288-A Statement of Withholding on Certain 

Dispositions by Foreign Persons

 SS-4

 W-2

 W-4

 W-4P

 W-7

 W-8BEN

 W-8BEN-E

 W-8ECI

 W-8EXP

 W-8IMY

 W-8 Inst.

 W-9

 W-9 Inst.

 941

 945

 1042

 1042-S

 1042-T

 13930

 13930-A

 8233

 8288 

 8288-A

Application for Withholding Certificate for 

Dispositions by Foreign Persons of U.S. Real 

Property Interests

Statement of Withholding Under Section 

1446(f)(4) on Dispositions by Foreign Persons 

of Partnership Interests

FATCA Report

See How To Get Tax Help at the end of this publication for 

information about getting publications and forms.

Withholding of Tax

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.

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.

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 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.

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-B

 8288-C

 8966

CAUTION

!

Publication 515 (2024) 3
Withholding Agent

Chapter 3 Withholding Requirements

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 

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, or withholding foreign trust in accordance 

with the terms of its withholding agreement, discussed 

later.

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.

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.

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 

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 distributable 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.

Chapter 4 Withholding Requirements

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 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, 

4 Publication 515 (2024)
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 FlowThrough Entities on Form 1099 in the General Instructions 

for Certain Information Returns.

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, FATCA Report, 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 traded partnership, 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 

TIP

Publication 515 (2024) 5
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.

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, 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. financial institution 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 financial institution or insurance broker as the payee if 

you do not have reason to know that the financial institution or insurance broker will not comply with its obligations 

to withhold under chapter 4. See Definitions, later, for the 

definition of financial institution.

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 

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 

6 Publication 515 (2024)
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 withholding foreign 

partnership).

• A foreign simple or foreign grantor trust (other than a 

withholding foreign trust).

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-compliant 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).

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.

Withholding foreign partnerships and withholding foreign trusts 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 withholding foreign 

partnership, 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 

withholding foreign partnership that is not acting as an 

agent or intermediary with respect to the payment. If the 

partnership is not a withholding foreign partnership, 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.

You must treat all three partners as the payees of their 

part of the interest payment as if the payment were made 

Publication 515 (2024) 7
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 withholding foreign partnership. 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 withholding foreign 

partnership. 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.

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 a limitation on benefits 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 to the 

extent the laws of that jurisdiction require the interest 

holder to separately take into account on a current basis 

the interest holder's share of the income, whether or not 

8 Publication 515 (2024)
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. Entity A is a business organization organized under the laws of country X that has an income tax 

treaty in force with the United States. A has two interest 

holders, B and C. B is a corporation organized under the 

laws of country Y. C 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.

A 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 A does not need to be 

determined because the payment is not a withholdable 

payment.

For U.S. income tax purposes, A is treated as a partnership. Country X treats A as a partnership and requires the 

interest holders in A to separately take into account on a 

current basis their respective shares of the income paid to 

A even if the income is not distributed. The laws of country 

X provide that the character and source of the income to 

A's interest holders are determined as if the income were 

realized directly from the source that paid it to A. Accordingly, A is fiscally transparent in its jurisdiction, country X.

B and C are not fiscally transparent under the laws of 

their respective countries of incorporation. Country Y requires B to separately take into account on a current basis 

B's share of the income paid to A, and the character and 

source of the income to B is determined as if the income 

were realized directly from the source that paid it to A. Accordingly, A is fiscally transparent for that income under 

the laws of country Y, and B 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 A 

as a corporation and does not require C to take into 

account its share of A's income on a current basis whether 

or not distributed. Therefore, A is not treated as fiscally 

transparent under the laws of country Z. Accordingly, C 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 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

• A participating FFI, deemed-compliant FFI, or restricted distributor, unless such entity is a QI that has assumed primary chapters 3 and 4 withholding responsibility.

Publication 515 (2024) 9
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, starting 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 (PTP 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.

Branches of financial institutions. Branches of financial institutions 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/Businesses/

International-Businesses/List-of-Approved-KYC-Rules.

QI agreement. FFIs, foreign clearing organizations, 

and foreign branches of U.S. financial institutions 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/

Businesses/Corporations/Qualified-Intermediary-System.

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 Federal Reserve Board supervision 

or a foreign insurance company subject to state regulatory 

supervision. If you make a payment of an amount subject 

to chapter 3 withholding or a withholdable payment to a 

U.S. branch of a foreign bank or insurance company that 

agrees to be treated as a U.S. person, you may treat the 

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 

10 Publication 515 (2024)
U.S. person, you must report the payments made to the 

branch on Form 1042-S.

A territory financial institution is a financial institution 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) 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 and withholding foreign trust. A withholding foreign partnership (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 withholding foreign trust (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),

• 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/

Businesses/Corporations/Qualified-Intermediary-System. 

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/

Businesses/Corporations/FATCA-Foreign-FinancialInstitution-Registration-System 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 generally may also 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 

a nonwithholding foreign partnership or nonwithholding 

foreign trust withholding certificate on a Form W-8IMY and 

documentation for its indirect partners, beneficiaries, and 

Publication 515 (2024) 11
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. financial institution 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—Graduated 

Withholding, 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 individual 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

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.

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 derived 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 

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;

12 Publication 515 (2024)
• At least 65% of the corporation's gross income is effectively 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.

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) that are subject to 

U.S. regulatory supervision 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.

Additional Rules Specific to Chapter 4

A payee may be subject to chapter 4 withholding only if it 

is a foreign entity. A foreign entity for chapter 4 purposes 

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 

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.

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).

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

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 

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. financial institution, 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 

Publication 515 (2024) 13
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 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 a foreign partner 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 a foreign partner. In 

most cases, a partnership (or nominee when applicable) 

determines if a partner is a foreign partner and the partner's tax classification 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(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

• 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.

14 Publication 515 (2024)
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 limitation on benefits provision contained 

in the treaty, if applicable, and specifies the category 

of the limitation on benefits provision.

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.

Limitations on benefits (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 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 

financial institutions, 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 

financial institution located outside the United States or an 

obligation, contract, or other instrument with respect to 

which the payer of the payment is either engaged in business as a broker or dealer in securities or a financial institution that engages in significant activities at an office or 

branch located outside the United States.

Publication 515 (2024) 15
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 financial institution on a deposit or account usually 

will 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 financial institution 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:

a. Includes the name of the entity,

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 conditions set forth in 

a limitation on benefits article, if any (or similar provision), 

contained in the applicable treaty and must identify the 

specific limitation on benefits provision. 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.

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;

16 Publication 515 (2024)
• 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.

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.

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,

CAUTION

!

• 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 NQI;

• Establish the entity’s chapter 4 status when required 

for chapter 4 purposes;

• When applicable, certify that the entity is a participating 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 primary chapters 3 and 4 withholding responsibility 

and/or primary Form 1099 reporting and backup withholding responsibility;

• Represent that a foreign partnership or a foreign simple or grantor trust is a withholding foreign partnership 

or a withholding foreign trust;

Publication 515 (2024) 17
• 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 foreign 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, later.

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.

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.

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 to 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 (PTP 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 

2 FFI), a registered deemed-compliant FFI (including a reporting Model 1 FFI and a nonreporting Model 2 FFI 

CAUTION

!

18 Publication 515 (2024)
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;

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;

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 assumes primary chapters 3 and 4 withholding responsibilities (but not primary Form 1099 reporting and backup 

Publication 515 (2024) 19
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 is also 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, unless it 

is acting as a QDD for all payments it receives.

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 

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, available at 

IRS.gov/irb/2022-52_IRB#RP-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. 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 indirect 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 withholding foreign trust, withholding foreign partnership, 

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, available at 

IRS.gov/irb/2022-52_IRB#RP-2022-43.

20 Publication 515 (2024)
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 

nonqualified intermediaries, flow-through entities (discussed earlier) and certain of their account holders and 

owners, private arrangement intermediaries, and, in certain circumstances, qualified intermediaries, withholding 

foreign partnerships, and withholding foreign trusts. 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 1.1441-3(e)(4)(iv)(C) 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 

which 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), 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.

Publication 515 (2024) 21
3. The status of the person for whom the documentation 

has been provided, such as whether the person is a 

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 limitation on benefits 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; and (b) obtain your consent. You must receive the 

withholding statement with all the required information 

(other than item 5) before the NQI makes the payment.

The alternative procedure cannot, however, be 

used for payments to U.S. nonexempt recipients 

other than those recipients included in a chapter 4 

withholding rate pool of U.S. payees. See Chapter 4, later. 

Therefore, an NQI must provide you with allocation information for any U.S. nonexempt recipients not included in a 

chapter 4 withholding rate pool of U.S. payees before the 

NQI makes a payment.

CAUTION

!

Pooled withholding information for chapters 3 and 

4. If an NQI uses the alternative procedure, it must provide you with withholding rate pool information, as opposed to individual allocation information, before the payment of a reportable amount. The NQI must provide you 

with the payee specific allocation information (information 

allocating each payment to each payee) by January 31 following the calendar year of payment, except as otherwise 

permitted for chapter 4 purposes, when using this procedure.

Chapter 4. In the case of a reportable amount that is 

also a withholdable payment, an NQI may include 

amounts allocable to a chapter 4 withholding rate pool 

(other than a chapter 4 withholding rate pool of U.S. payees) and payees subject to chapter 4 withholding for 

whom the NQI will provide payee-specific information in a 

30% rate pool together with payees subject to chapter 3 

withholding at the 30% rate. For the amount of the payment allocable to a chapter 4 withholding rate pool of U.S. 

payees, an NQI may include amounts allocable to the pool 

with other amounts exempt from withholding (and an NQI 

may allocate payments to this pool regardless of whether 

the payment is a withholdable payment) and may not otherwise apply these provisions for payments made to U.S. 

nonexempt recipients. The NQI must identify prior to the 

payment each chapter 4 withholding rate pool to be allocated a portion of the payment, in addition to each payee 

to be allocated the payments that is not included in such a 

pool. The NQI must then also allocate, by January 31 following the calendar year of the payment, the portion of the 

payment to each such pool in addition to allocating the 

payment to each payee that is not included in the pool.

Failure to provide allocation information. If an NQI 

fails to provide you with the payee specific allocation information for a withholding rate pool or chapter 4 withholding 

rate pool by January 31, you must not apply the alternative 

procedure to any of the NQI's withholding rate pools from 

that date forward. You must treat the payees as undocumented and apply the presumption rules, discussed later 

in Presumption Rules. An NQI is deemed to have failed to 

provide specific allocation information if it does not give 

you such information for more than 10% of any one withholding rate pool.

However, if you receive such information by February 

14, you may make the appropriate adjustments to repay 

any excess withholding incurred between February 1 and 

on or before February 14.

If the NQI fails to allocate more than 10% of the payment to a withholding rate pool by February 14 following 

the calendar year of payment, you must file a Form 

1042-S for each account holder in the pool on a pro-rata 

basis (treating a chapter 4 withholding rate pool as an account holder for this purpose and excluding U.S. exempt 

recipients). For example, if there are four account holders 

in a withholding rate pool that receive a $100 payment and 

the NQI fails to allocate more than $10 of the payment, 

you must file four Forms 1042-S, one for each account 

holder in the pool, showing $25 of income to each. You 

22 Publication 515 (2024)
must also check the “Pro-rata Basis Reporting” box at the 

top of each form. If, however, the NQI provides allocation 

information for 90% or more of the payment to a withholding rate pool, the pro-rata reporting method is not required. Instead, you must file a Form 1042-S for each account holder for whom you have allocation information and 

report the unallocated part of the payment on a Form 

1042-S issued to “unknown recipient.”

Withholding Foreign Partnerships (WPs)

If you are making payments to a WP for chapter 3 or 4 purposes, you do not have to withhold if the WP is acting in 

that capacity. The WP must assume primary chapters 3 

and 4 withholding responsibility for amounts that are distributed to, or included in the distributive share of, any direct partner and may assume chapters 3 and 4 withholding responsibilities for certain of its indirect partners. The 

WP must withhold the amount required to be withheld. A 

WP must provide you with a Form W-8IMY that certifies 

that the WP is acting in that capacity and provides all 

other information and certifications required by the form. 

The Form W-8IMY must contain the WP-EIN and GIIN (if 

applicable).

A WP can be either an FFI or an NFFE. An FFI (other 

than a retirement fund) that is a WP must be a participating FFI, 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 

under Regulations section 1.1471-5(f)(1) (including the requirement to register with the IRS) (defined in the WP 

agreement as a “registered deemed-compliant Model 1 

IGA FFI”). Thus, an FFI certifying its status as a WP must 

provide you a Form W-8IMY that certifies to one of the 

chapter 4 statuses referenced in the preceding sentence 

when a chapter 4 status is required.

Responsibilities of the WP. The WP must withhold under chapter 3 or 4 on the date it makes a distribution of a 

withholdable payment or an amount subject to chapter 3 

withholding to a direct foreign partner based on the Form 

W-8 or W-9 it receives from its partners. If the partner's 

distributive share has not been distributed, the WP must 

withhold on the partner's distributive share on the earlier 

of the date that the partnership must mail or otherwise 

provide to the partner a Schedule K-1 (Form 1065) or the 

due date for furnishing the statement (whether or not the 

WP is required to furnish the statement).

The WP may determine the amount of withholding 

based on a reasonable estimate of the partner's distributive share of income subject to withholding for the year. 

The WP must correct the estimated withholding to reflect 

the actual distributive share on the earlier of the dates 

mentioned in the preceding paragraph. If that date is after 

the earlier of the due date (including extensions) for filing 

the WP's Form 1042-S or the date the WP actually issues 

Form 1042-S for the calendar year, the WP may withhold 

and report any adjustments required by correcting the information for the following calendar year.

Form 1042 filing. The WP must file Form 1042 even 

if no amount was withheld. In addition to the information 

that is required for the Form 1042, the WP must attach a 

statement showing the amounts of any over- or under-withholding adjustments and an explanation of those 

adjustments.

Form 1042-S reporting. The WP can elect to report 

payments made to its foreign direct partners on a pooled 

basis for chapter 3 purposes rather than reporting payments to each direct partner in addition to reporting payments in a chapter 4 withholding rate pool to the extent 

the WP is permitted to do so based on its chapter 4 status. 

A WP can treat as its direct partners those indirect partners of the WP for which it applies joint account treatment 

or the agency option (described later). A WP must otherwise issue a Form 1042-S to each partner to the extent it 

is required to do so under the WP agreement. You may issue a single Form 1042-S for all payments you make to a 

WP other than payments for which the entity does not act 

as a WP. You may, however, have Form 1099 requirements 

for certain indirect partners of a WP that are U.S. nonexempt recipients.

Collective refund procedures. A WP may seek a refund of tax withheld under chapters 3 and 4 on behalf of 

its partners when the WP has not issued a Form 1042-S to 

the partners that received the payment that was subject to 

overwithholding. The partners, therefore, are not required 

to file claims for refund with the IRS to obtain refunds, but 

rather may obtain them from the WP. A WP may obtain a 

refund of tax withheld under chapter 4 to the extent permitted under the WP agreement.

Reporting of U.S. partners. A WP must report its 

U.S. partners on Schedule K-1 to the extent required under the WP agreement. If the WP is an FFI, it is also required to report each of its U.S. accounts (or U.S. reportable accounts if a reporting Model 1 FFI) on Form 8966 

consistent with its chapter 4 requirements or the requirements of an IGA. If the WP is an NFFE, the WP must file 

Form 8966 to report any partner that is an NFFE (other 

than an excepted NFFE) with one or more substantial U.S. 

owners (or, under an applicable IGA, controlling persons 

that are specified U.S. persons) if the NFFE is the beneficial owner of a withholdable payment received by the WP. 

The WP must also file a Form 8966 to report withholdable 

payments made to a pass-through partner for which the 

WP acts under the WP agreement that provides information on an account holder (or interest holder) that is an 

NFFE (other than an excepted NFFE) with one or more 

substantial U.S. owners (or, under an applicable IGA, controlling persons that are specified U.S. persons) and that 

is the beneficial owner of the withholdable payment received by the WP, unless the pass-through partner certifies to the WP that it is reporting on the account holder (or 

interest holder) pursuant to its U.S. account reporting requirements. The preceding sentence applies with respect 

to a pass-through partner to which the WP applies the 

agency option or which has partners, beneficiaries, or 

owners that are indirect partners of the WP.

Publication 515 (2024) 23
Joint account treatment. Under special procedures 

provided in the WP agreement, a WP may apply joint account treatment to a partnership or trust that is a direct 

partner of the WP. A WP that applies the joint account option must elect to perform pool reporting for amounts subject to chapter 3 withholding that either are not withholdable payments or are withholdable payments for which no 

chapter 4 withholding is required and that the WP distributes to, or includes in the distributive share of, a foreign direct partner. These rules only apply to a partnership or 

trust that 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, as defined in the WP agreement), an owner-documented 

FFI, an exempt beneficial owner, or an NFFE (other 

than a WP or WT).

• It is a direct partner of the WP.

• None of its partners, beneficiaries, or owners is a 

flow-through entity or intermediary.

• None of the partnership’s or trust’s partners, beneficiaries, or owners is a U.S. person or is subject to withholding or reporting under chapter 4.

• It agrees to make available upon request to the WP (or 

the WP’s auditor) records that establish it has provided the WP with documentation for purposes of chapters 3 and 4 for all of its partners, beneficiaries, or 

owners.

For more information on applying these rules, see section 9.01 of the WP agreement in section 6 of Revenue 

Procedure 2017-21, available at IRS.gov/irb/

2017-06_IRB#RP-2017-21.

Agency option. A WP may apply the agency option to a 

partnership or trust under which the partnership or trust 

agrees to act as an agent of the WP and to apply the provisions of the WP agreement to its partners, beneficiaries, 

or owners. A WP that applies the agency option must elect 

to perform pool reporting for amounts subject to chapter 3 

withholding that either are not withholdable payments or 

are withholdable payments for which no chapter 4 withholding is required and that the WP distributes to, or includes in the distributive share of, a foreign direct partner. 

A WP 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 partner of the WP or an indirect 

partner of the WP that is a direct partner, beneficiary, 

or owner of a partnership or trust to which the WP 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, as defined in the WP agreement), an 

owner-documented FFI, an NFFE, or an exempt beneficial owner.

• None of its partners, beneficiaries, or owners is a WT, 

WP, participating FFI, registered deemed-compliant 

FFI, registered deemed-compliant Model 1 IGA FFI 

(as defined in the WP agreement), or QI acting as an 

intermediary for a payment made by the WP to the 

partnership or trust.

• The WP may not act as a withholding foreign partnership with respect to any direct or indirect partner of the 

partnership or trust that is a U.S. nonexempt recipient, 

unless the U.S. nonexempt recipient is a partner of an 

owner-documented FFI or passive NFFE to which the 

WP applies the agency option and is included in the 

WP’s U.S. payee pool.

• It agrees to comply with the compliance procedures 

described in section 8.05 of the WP agreement by 

providing the WP with the certification described in 

section 8.03 of the WP agreement and providing the 

WP with documentation or other information for review.

• It agrees to comply with the documentation requirements of a WP in the WP agreement.

For more information on applying these rules, see section 9.02 of the WP agreement in section 6 of Revenue 

Procedure 2017-21, available at IRS.gov/irb/

2017-06_IRB#RP-2017-21.

WP acting for indirect partners. A WP may act as a 

WP with respect to an indirect partner of the WP that is not 

a U.S. nonexempt recipient. However, a WP may act as a 

WP for an indirect partner that is a U.S. nonexempt recipient if the indirect partner is included in a pass-through 

partner’s chapter 4 withholding rate pool of recalcitrant account holders or U.S. payees. A WP acting as a WP for an 

indirect partner is not required to forward to its withholding 

agent the documentation and the withholding statement of 

the pass-through partner and indirect partner that the WP 

would have otherwise been required to provide under the 

requirements of a nonwithholding foreign partnership. See 

Not acting as a WP, later. However, a WP must provide 

the withholding agent with documentation and any other 

information from any pass-through partner whose direct or 

indirect partner, beneficiary, or owner is a U.S. nonexempt 

recipient unless the recipient is included in the 

pass-through partner’s chapter 4 withholding rate pool of 

recalcitrant account holders or U.S. payees.

If a WP is making a payment that is a withholdable payment, the pass-through partner’s withholding statement 

must meet the requirements of Regulations section 

1.1471-3(c)(3)(iii)(B). The pass-through partner’s withholding statement must include the account holders or interest holders of the pass-through partner in chapter 4 

withholding rate pools (to the extent permitted), and, for 

an amount subject to chapter 3 withholding that is not a 

withholdable payment or is a withholdable payment for 

which chapter 4 withholding is not required, valid documentation provided by the account holders or interest 

24 Publication 515 (2024)
holders of the pass-through partner that are not themselves QIs or flow-through entities.

For more information on applying these rules, see section 9.03 of the WP agreement in section 6 of Revenue 

Procedure 2017-21, available at IRS.gov/irb/

2017-06_IRB#RP-2017-21.

Not acting as a WP. A foreign partnership that is not acting as a WP is a nonwithholding foreign partnership. This 

occurs if a WP is not acting in that capacity for some or all 

of the amounts it receives from you.

You must treat payments made to a nonwithholding foreign partnership as made to the partners of the partnership. The partnership must provide you with a Form 

W-8IMY (with Part VIII completed), a withholding statement identifying the amounts, the withholding certificates 

or documentary evidence of the partners, and the information shown earlier under Withholding statement under 

Nonqualified Intermediary (NQI).

Withholding Foreign Trusts (WTs)

If you are making payments to a WT for chapter 3 or 4 purposes, you do not have to withhold if the WT is acting in 

that capacity. The WT must assume primary chapters 3 

and 4 withholding responsibility for amounts that are distributed to, or included in the distributive share of, any direct beneficiary or owner and may assume primary chapters 3 and 4 withholding responsibility for certain of its 

indirect beneficiaries or owners. The WT must withhold 

the amount required to be withheld. A WT must provide 

you with a Form W-8IMY that certifies that the WT is acting in that capacity and provides all other information and 

certifications required by the form. The Form W-8IMY 

must contain the WT-EIN and GIIN (if applicable).

A WT can be either an FFI or an NFFE. An FFI (other 

than a retirement fund) that is a WT must be a participating FFI, 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 

under Regulations section 1.1471-5(f)(1) (including the requirement to register with the IRS) (defined in the WT 

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 WT 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 of a WT. The WT must withhold on the 

date it makes a distribution of a withholdable payment or 

an amount subject to chapter 3 withholding to a direct foreign beneficiary or owner. If the beneficiary's or owner's 

distributive share has not been distributed, the WT must 

withhold on the beneficiary's or owner's distributive share 

on the earlier of the date that the trust must mail or otherwise provide to the beneficiary or owner the statement required under section 6048(b) or the due date for furnishing 

the statement (whether or not the WT is required to furnish 

the statement).

The WT may determine the amount of withholding 

based on a reasonable estimate of the beneficiary's or 

owner's distributive share of income subject to withholding 

for the year. The WT must correct the estimated withholding to reflect the actual distributive share on the earlier of 

the dates mentioned in the preceding paragraph. If that 

date is after the earlier of the due date (including extensions) for filing the WT's Form 1042-S or the date the WT 

actually issues Form 1042-S for the calendar year, the WT 

may withhold and report any adjustments required by correcting the information for the following calendar year.

Form 1042 filing. The WT must file Form 1042 even if 

no amount was withheld. In addition to the information that 

is required for the Form 1042, the WT must attach a statement showing the amounts of any over- or under-withholding adjustments and an explanation of those adjustments. 

Form 1042-S reporting. The WT can elect to report 

payments made to its foreign direct beneficiaries or owners on a pooled basis for chapter 3 purposes rather than 

reporting payments made to each foreign direct beneficiary or owner in addition to reporting payments in a chapter 4 withholding rate pool to the extent the WT is permitted to do so based on its chapter 4 status. A WT can treat 

as its direct beneficiaries or owners those indirect beneficiaries or owners of the WT for which it applies joint account treatment or the agency option (described later). A 

WT must otherwise issue a Form 1042-S to each beneficiary or owner to the extent it is required to do so under 

the WT agreement. You may issue a single Form 1042-S 

for all payments you make to a WT other than payments 

for which the entity does not act as a WT. You may, however, have Form 1099 requirements for certain indirect 

beneficiaries or owners of a WT that are U.S. nonexempt 

recipients.

Collective refund procedures. A WT may seek a refund of tax withheld under chapters 3 and 4 on behalf of 

its beneficiaries or owners when the WT has not issued a 

Form 1042-S to the beneficiaries or owners that received 

the payment that was subject to overwithholding. The beneficiaries or owners, therefore, are not required to file 

claims for refund with the IRS to obtain refunds, but rather 

may obtain them from the WT. A WT may obtain a refund 

of tax withheld under chapter 4 to the extent permitted under the WT agreement.

Reporting of U.S. beneficiaries or owners. If the 

WT is a grantor trust with U.S. owners, the WT is required 

to file Form 3520-A, and to provide statements to a U.S. 

owner, as well as each U.S. beneficiary who is not an 

owner and receives a distribution. If the WT is an FFI, it is 

required to report each of its U.S. accounts (or U.S. reportable accounts if a reporting Model 1 FFI) on Form 8966 

consistent with its FATCA requirements or the requirements of an IGA. If the WT is an NFFE, the WT must file 

Form 8966 to report any beneficiary or owner that is an 

NFFE (other than an excepted NFFE) with one or more 

substantial U.S. owners (or, under an applicable IGA, controlling persons that are specified U.S. persons) if the 

Publication 515 (2024) 25
NFFE is the beneficial owner of a withholdable payment 

received by the WT.

The WT must also file a Form 8966 to report withholdable payments made to a pass-through beneficiary or 

owner for which the WT acts under the WT agreement 

that provides information on an account holder (or interest 

holder) that is an NFFE (other than an excepted NFFE) 

with one or more substantial U.S. owners (or, under an applicable IGA, controlling persons that are specified U.S. 

persons) and that is the beneficial owner of the withholdable payment received by the WT, unless the pass-through 

beneficiary or owner certifies to the WT that it is reporting 

on the account holder (or interest holder) pursuant to its 

U.S. account reporting requirements. The preceding sentence applies with respect to a pass-through beneficiary 

or owner to which the WT applies the agency option or 

which has partners, beneficiaries, or owners that are indirect beneficiaries or owners of the WT. In addition, if the 

WT is not a participating FFI, a registered deemed-compliant FFI, or a registered deemed-compliant Model 1 IGA 

FFI and is not required to report with respect to a U.S. 

beneficiary of the WT on Form 3520-A, then the WT must 

report with respect to such beneficiary on Form 8966, as 

required in the WT agreement. A beneficiary for this purpose means a beneficiary that receives a distribution from 

the WT during the year or that is required to include an 

amount in gross income with respect to the WT under sections 652(a) or 662(a).

Joint account treatment. Under special procedures 

provided in the WT agreement, a WT may apply joint account treatment to a partnership or trust that is a direct 

beneficiary or owner of the WT. A WT that applies the joint 

account option must elect to perform pool reporting for 

amounts subject to chapter 3 withholding that either are 

not withholdable payments or are withholdable payments 

for which no chapter 4 withholding is required and that the 

WT distributes to, or includes in the distributive share of, a 

foreign direct beneficiary or owner. These rules only apply 

to a partnership or trust that 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, as defined in the WT agreement), an owner-documented 

FFI, an exempt beneficial owner, or an NFFE (other 

than a WP or WT).

• It is a direct beneficiary or owner of the WT.

• None of its partners, beneficiaries, or owners is a 

flow-through entity or intermediary.

• None of the partnership’s or trust’s partners, beneficiaries, or owners is a U.S. person or is subject to withholding or reporting under chapter 4.

• It agrees to make available upon request to the WT (or 

the WT’s auditor) records that establish it has provided the WT with documentation for purposes of chapters 3 and 4 for all of its partners, beneficiaries, or 

owners.

For more information on applying these rules, see section 9.01 of the WT agreement found in section 7 of Revenue Procedure 2017-21, available at IRS.gov/irb/

2017-06_IRB#RP-2017-21.

Agency option. A WT may apply the agency option to a 

partnership or trust under which the partnership or trust 

agrees to act as an agent of the WT and to apply the provisions of the WT agreement to its partners, beneficiaries, 

or owners. A WT that applies the agency option must elect 

to perform pool reporting for amounts subject to chapter 3 

withholding that either are not withholdable payments or 

are withholdable payments for which no chapter 4 withholding is required and that the WT distributes to, or includes in the distributive share of, a foreign direct beneficiary or owner. A WT 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 beneficiary or owner of the WT or 

an indirect beneficiary or owner of the WT that is a direct partner, beneficiary, or owner of a partnership or 

trust to which the WT 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, as defined in the WT agreement), an 

owner-documented FFI, an NFFE, or an exempt beneficial owner.

• None of its partners, beneficiaries, or owners is a WT, 

WP, participating FFI, registered deemed-compliant 

FFI, registered deemed-compliant Model 1 IGA FFI 

(as defined in the WT agreement), or a QI acting as an 

intermediary for a payment made by the WT to the 

partnership or trust.

• The WT may not act as a withholding foreign trust with 

respect to any direct or indirect beneficiary or owner of 

the partnership or trust that is a U.S. nonexempt recipient, unless the U.S. nonexempt recipient is a beneficiary or owner of an owner-documented FFI or passive NFFE to which the WT applies the agency option 

and is included in the WT’s U.S. payee pool.

• It agrees to comply with the compliance procedures 

described in section 8.05 of the WT agreement by 

providing the WT with the certification described in 

section 8.03 of the WT agreement and providing the 

WT with documentation or other information for review.

• It agrees to comply with the documentation requirements of a WT in the WT agreement.

For more information on applying these rules, see section 9.02 of the WT agreement in section 7 of Revenue 

Procedure 2017-21, available at IRS.gov/irb/

2017-06_IRB#RP-2017-21.

26 Publication 515 (2024)
WT acting for indirect beneficiaries or owners. A WT 

may act as a WT with respect to an indirect beneficiary or 

owner of the WT that is not a U.S. nonexempt recipient. 

However, a WT may act as a WT for an indirect beneficiary or owner that is a U.S. nonexempt recipient if the indirect beneficiary or owner is included in a pass-through 

beneficiary’s or owner’s chapter 4 withholding rate pool of 

recalcitrant account holders or U.S. payees. A WT acting 

as a WT for an indirect beneficiary or owner is not required 

to forward to its withholding agent the documentation and 

the withholding statement of the pass-through beneficiary 

or owner and indirect beneficiary or owner that the WT 

would have otherwise been required to provide under the 

requirements of a nonwithholding foreign trust. See Not 

acting as a WT, later. However, a WT must provide the 

withholding agent with documentation and any other information from any pass-through beneficiary or owner whose 

direct or indirect partner, beneficiary, or owner is a U.S. 

nonexempt recipient unless the recipient is included in the 

pass-through beneficiary’s or owner’s chapter 4 withholding rate pool of recalcitrant account holders or U.S. payees. If a WT is making a payment that is a withholdable 

payment, the pass-through beneficiary’s or owner’s withholding statement must meet the requirements of Regulations section 1.1471-3(c)(3)(iii)(B). The pass-through beneficiary’s or owner’s withholding statement must include 

the account holders or interest holders of the 

pass-through beneficiary or owner in chapter 4 withholding rate pools (to the extent permitted), and, for an amount 

subject to chapter 3 withholding that is not a withholdable 

payment or is a withholdable payment for which chapter 4 

withholding is not required, valid documentation provided 

by the account holders or interest holders of the 

pass-through beneficiary or owner that are not themselves 

QIs or flow-through entities.

For more information on applying these rules, see section 9.03 of the WT agreement in section 7 of Revenue 

Procedure 2017-21, available at IRS.gov/irb/

2017-06_IRB#RP-2017-21.

Not acting as a WT. A foreign trust that is not acting as 

a WT is a nonwithholding foreign trust. This occurs if a WT 

is not acting in that capacity for some or all of the amounts 

it receives from you.

In most cases, you must treat payments made to a nonwithholding foreign trust as made to the beneficiaries of a 

simple trust or the owners of a grantor trust. The trust must 

provide you with a Form W-8IMY (with Part VIII completed), a withholding statement identifying the amounts, the 

withholding certificates or documentary evidence of the 

beneficiaries or owners, and the information shown earlier 

under Withholding statement under Nonqualified Intermediary (NQI).

Standards of Knowledge for 

Purposes of Chapter 3

You must withhold in accordance with the presumption 

rules (discussed later) if you know or have reason to know 

that a withholding certificate or documentary evidence 

provided by a payee is unreliable or incorrect to establish 

the payee's status for chapter 3 purposes. If you rely on an 

agent to obtain documentation, you are considered to 

know, or have reason to know, the facts that are within the 

knowledge of your agent for this purpose. If you receive 

notification from the IRS that a payee's claim of status for 

chapter 3 purposes is incorrect or unreliable, you may not 

rely upon the claim except to the extent indicated by the 

IRS.

Reason To Know

In general, you are considered to have reason to know 

that a claim of foreign status or of a reduced rate of withholding is incorrect if statements contained in the withholding certificate or other documentation, or other relevant facts of which you have knowledge, would cause a 

reasonably prudent person in your position to question the 

claims made.

For an obligation that is not a preexisting obligation 

(that is, an obligation, including an account, held by an individual that is outstanding on June 30, 2014, or an obligation, including an account, held by an entity that is 

opened, executed, or issued before January 1, 2015), you 

have reason to know that an account holder’s chapter 3 

claim is unreliable or incorrect if any information contained 

in your account opening files or other account information 

conflicts with the account holder’s claim. For an obligation 

other than a preexisting obligation, you will not be considered to have reason to know that a person’s chapter 3 

claim is unreliable or incorrect based on documentation 

collected for anti-money laundering (AML) purposes until 

30 days after the obligation is executed, or 30 days after 

the account is opened for such person, whichever is applicable.

Financial institutions, insurance companies, or brokers 

or dealers in securities have reason to know that documentation provided by a direct account holder is unreliable or incorrect only in the circumstances discussed next. 

If the documentation is considered unreliable or incorrect, 

you must get new documentation to support the payee’s 

claimed status or may rely on the original documentation if 

you receive the additional statements and/or documentation discussed later and are a withholding agent described 

above with respect to a direct account holder (defined in 

Regulations section 1.1441-7(b)(3)(i)). Such documentation is described in Regulations section 1.1471-3(c)(5)(i).

The circumstances, discussed next, also apply to other 

withholding agents. However, these withholding agents 

are not limited to these circumstances in determining if 

they have reason to know that documentation is unreliable 

or incorrect. These withholding agents cannot base their 

determination on the receipt of additional statements or 

documents. They need to get new documentation.

Publication 515 (2024) 27
Withholding Certificates

You have reason to know that a Form W-8 provided by a 

direct account holder that is a foreign person is unreliable 

or incorrect if:

• The Form W-8 is incomplete with respect to any item 

on the form that is relevant to the claims made by the 

account holder;

• The Form W-8 contains any information that is inconsistent with the account holder's claim;

• The Form W-8 lacks information necessary to establish entitlement to a reduced rate of withholding, if a 

reduced rate is claimed; or

• You have information not contained on the form that is 

inconsistent with the claims made on the form.

The rules below apply to withholding agents that are financial institutions, insurance companies, or brokers or 

dealers in securities.

Limits on reason to know for preexisting obligations. 

With respect to a preexisting obligation (that is, an obligation, including an account, held by an individual that is outstanding on June 30, 2014, or an obligation, including an 

account, held by an entity that is opened, executed, or issued before January 1, 2015), if you have documented the 

foreign status of an account holder for purposes of chapter 3 or 61 prior to July 1, 2014, you may continue to rely 

on that documentation. In addition, if you make a payment 

to a new entity account holder that you treat as a preexisting entity account under Notice 2014-33, 2014-20 I.R.B. 

1006, available at IRS.gov/irb/

2014-21_IRB#NOT-2014-33, you may apply the standards 

of knowledge in Regulations sections 1.1441-7(b)(5) and 

(b)(8), that were applicable prior to the issuance of the 

temporary regulations. See Notice 2014-59, 2014-44 

I.R.B. 747, available at IRS.gov/irb/

2014-44_IRB#NOT-2014-59.

However, if you review documentation for an individual 

account holder claiming foreign status that contains a U.S. 

place of birth or if you are notified of a change in circumstances, the obligation will be treated as having a change 

in circumstances as of the date you review the documentation or receive the notification, and you will then have 

reason to know that the documentation is unreliable or incorrect. However, if you are reviewing documentation provided by an entity before January 1, 2015, you will not be 

required to treat the additional U.S. indicia added to Regulations section 1.1441-7(b) by the temporary regulations 

as a change in circumstances. See Notice 2014-59, for 

more information.

Establishment of foreign status by certain withholding agents. You have reason to know that a Form 

W-8BEN or W-8BEN-E is unreliable or incorrect to establish a direct account holder's status as a foreign person if:

1. The Form W-8 has a current permanent residence address in the United States,

2. The Form W-8 has a current mailing address in the 

United States,

3. You have a current residence or current mailing address as part of your account information that is an 

address in the United States,

4. The account holder notifies you of a new residence or 

mailing address in the United States,

5. You have classified the account holder as a U.S. person in your account information, or

6. You have a current telephone number for the account 

holder in the United States and no telephone number 

for the account holder outside the United States (only 

to the extent described in Regulations section 

1.1441-7(b)(5)).

You may, however, rely on a Form W-8 as establishing 

the account holder's foreign status if any of the following 

apply.

1. You receive the Form W-8BEN from an individual and:

a. You possess or obtain documentary evidence 

(that does not contain a U.S. address) that supports the claim of foreign status, and the individual 

provides you with a reasonable explanation, in 

writing, supporting the claim of foreign status;

b. If you make a payment outside the United States 

with respect to an offshore obligation and you possess or obtain documentary evidence establishing 

foreign status that does not contain a U.S. address;

c. With respect to an offshore obligation, if you classify the individual as a resident of the country 

where the obligation is maintained and you are required to report payments to the individual annually to the tax authority of the country where the 

obligation is maintained and that country has a tax 

treaty or information exchange agreement in effect 

with the United States; or

d. You have classified the account holder as a U.S 

person in your account information and you possess or obtain documentary evidence evidencing 

citizenship in a country other than the United 

States.

2. You receive the Form W-8BEN-E from an entity that is 

not a flow-through entity and:

a. You have in your possession or obtain documentation establishing foreign status that substantiates 

that the entity is organized or created under foreign law; or

b. With respect to an offshore obligation, if you classify the entity as a resident of the country where 

the obligation is maintained and you are required 

to report payments to the entity annually to the tax 

authority of the country where the obligation is 

maintained and that country has a tax treaty or information exchange agreement in effect with the 

United States.

28 Publication 515 (2024)
3. The account holder (whether an individual or an entity) has provided standing instructions to make payments with respect to an offshore obligation to an address in, or an account maintained in, the United 

States, unless the account holder provides a reasonable explanation, in writing, that supports its foreign 

status or provides documentary evidence supporting 

its foreign status.

4. If an individual account holder provides a Form 

W-8BEN to establish the individual’s foreign status, 

and you have, either an accompanying documentation or as part of your account information, an unambiguous indication of a place of birth for the individual 

in the United States, you may not rely on the Form 

W-8BEN unless you possess or obtain documentary 

evidence evidencing citizenship in a country other 

than the United States, and either (i) a copy of the individual’s Certificate of Loss of Nationality of the United States, or (ii) a reasonable written explanation for 

the individual’s renunciation of U.S. citizenship (or, under an applicable IGA, the reason the individual does 

not have a Certificate of Loss of Nationality of the United States despite relinquishing its U.S. citizenship), 

or the reason the individual did not obtain U.S. citizenship at birth.

Claim of reduced rate of withholding under treaty by 

certain withholding agents. You have reason to know 

that a Form W-8BEN or W-8BEN-E provided by a direct 

account holder to claim a reduced rate of withholding under a treaty is unreliable or incorrect for purposes of establishing the account holder's residency in a treaty country if:

• The permanent residence address on the Form W-8 is 

not in the treaty country or the beneficial owner notifies you of a new permanent residence address that is 

not in the treaty country,

• The permanent residence address on the Form W-8 is 

in the treaty country but the withholding certificate (or 

your account information) contains a mailing address 

that is not in the treaty country,

• You have a current mailing address in your account information outside the treaty country, or

• The account holder has standing instructions for you 

to pay amounts from its account to an address or an 

account not in the treaty country.

You may, however, rely on a Form W-8 as establishing 

an account holder's claim of a reduced rate of withholding 

under a treaty if any of the following apply.

1. The permanent residence address is not in the treaty 

country and:

a. The account holder provides a reasonable explanation for the permanent residence address outside 

the treaty country, or

b. You possess or obtain documentary evidence described in Regulations section 1.1471-3(c)(5)(i) 

that establishes residency in a treaty country.

2. The mailing address is not in the treaty country and:

a. You possess or obtain documentary evidence described in Regulations section 1.1471-3(c)(5)(i) 

(that does not contain an address outside the 

treaty country) supporting the beneficial owner's 

claim of residence in the treaty country,

b. You possess or obtain documentation that establishes that the beneficial owner is an entity organized in a treaty country,

c. You know that the address outside the treaty country is a branch of the account holder that is a resident of the treaty country, or

d. You obtain a written statement from the beneficial 

owner that reasonably establishes its entitlement 

to treaty benefits.

3. You have instructions to pay amounts outside the 

treaty country and the account holder gives you a reasonable explanation, in writing, establishing residence 

in the applicable treaty country or you possess or obtain documentary evidence described in Regulations 

section 1.1471-3(c)(5)(i) establishing the account 

holder’s residence in the treaty country.

Hold mail instruction. An address that is provided subject to an instruction to hold all mail to that address is not a 

permanent residence address such that you may not rely 

upon the Form W-8. However, the address can be used as 

a permanent residence address if the person has provided you with the documentary evidence that is permitted 

under Regulations section 1.1441-1(c)(38)(ii). If, after a 

Form W-8 is provided, a person’s permanent residence 

address is subsequently subject to a hold mail instruction, 

this is a change in circumstances requiring the person to 

provide the documentary evidence described in the preceding sentence in order to use the address as a permanent residence address.

Documentary Evidence

You have reason to know that documentary evidence provided by a direct account holder to support a claim of foreign status is unreliable or incorrect if:

• The documentary evidence does not reasonably establish the identity of the person presenting the documentary evidence;

• The documentary evidence contains information that 

is inconsistent with the account holder's claim of a reduced rate of withholding; or

• You have account information that is inconsistent with 

the account holder's claim of a reduced rate of withholding, or the documentary evidence lacks information necessary to establish a reduced rate of withholding. For example, the documentary evidence does not 

contain, or is not supplemented by, statements regarding the derivation of the income or compliance with 

limitations on benefits provisions in the case of an entity claiming treaty benefits.

Publication 515 (2024) 29
Establishment of foreign status. You have reason to 

know that documentary evidence is unreliable or incorrect 

to establish a direct account holder's status as a foreign 

person if any of the following apply.

• For documentary evidence received prior to January 

1, 2001, if you have actual knowledge that the account 

holder is a U.S. person or if you have a mailing or residence address for the account holder in the United 

States.

• For documentary evidence received after December 

31, 2000, if you do not have a permanent residence 

address for the account holder, if you have classified 

the account holder as a U.S. person in your account 

information, if you have a current mailing or current 

permanent residence address (whether or not on the 

documentation) for the account holder in the United 

States, if the account holder notifies you of a new residence or mailing address in the United States, or if 

you have a current telephone number for the account 

holder in the United States and no telephone number 

for the account holder outside the United States.

• If the account holder is an individual and you have, either on the documentary evidence or as part of your 

account information, an unambiguous place of birth 

for the individual in the United States.

• With respect to an offshore obligation, the account 

holder has standing instructions directing you to pay 

amounts from the account to an address or account 

maintained in the United States.

You may, however, rely on documentary evidence as 

establishing an account holder's foreign status if any of 

the following apply.

1. The mailing or residence address or sole telephone 

number is in the United States, you receive the documentary evidence from an individual, and:

a. You possess or obtain additional documentary evidence (that does not contain a U.S. address) supporting the claim of foreign status and a reasonable explanation, in writing, supporting the account 

holder's foreign status;

b. You obtain a Form W-8 that contains a permanent 

residence address and mailing address outside 

the United States (or, if a mailing address is inside 

the United States, the account holder provides a 

reasonable explanation, in writing, supporting the 

account holder’s foreign status); or

c. For a payment made with respect to an offshore 

obligation, if you classify the individual as a resident of the country where the obligation is maintained, you are required to report a payment made 

to the individual annually on a tax information 

statement filed with that country’s tax authority as 

part of the resident reporting requirements, and 

that country has a tax information exchange 

agreement or income tax treaty in effect with the 

United States.

2. The mailing or residence address or sole telephone 

number is in the United States, you receive the documentary evidence from an entity (other than a 

flow-through entity), and:

a. You possess or obtain documentation to substantiate that the entity is actually organized or created 

under the laws of a foreign country;

b. You obtain a valid Form W-8 that contains a permanent residence address and mailing address 

outside the United States (or, if a mailing address 

is inside the United States, the account holder provides a reasonable explanation, in writing, supporting the account holder’s foreign status); or

c. For a payment made with respect to an offshore 

obligation, if you classify the entity as a resident of 

the country where the obligation is maintained and 

you are required to report a payment made to the 

entity annually on a tax information statement filed 

with that country’s tax authority as part of the resident reporting requirements, and that country has 

a tax information exchange agreement or income 

tax treaty in effect with the United States.

3. You have instructions to pay amounts to an address or 

an account in the United States and the account 

holder provides you with a reasonable explanation, in 

writing, that supports the account holder's foreign status or a valid beneficial owner withholding certificate 

claiming foreign status.

4. You have an unambiguous place of birth in the United 

States for an individual account holder and you possess or obtain documentary evidence demonstrating 

the individual’s citizenship in a country other than the 

United States and a copy of the individual’s Certificate 

of Loss of Nationality of the United States. Alternatively, you may treat such an individual as a foreign 

person if you obtain a valid beneficial owner withholding certificate that establishes the individual’s foreign 

status, documentary evidence evidencing citizenship 

in a country other than the United States, and a reasonable explanation, in writing, of the individual’s renunciation of U.S. citizenship (or, under an applicable 

IGA, the reason the individual does not have a Certificate of Loss of Nationality of the United States despite relinquishing U.S. citizenship) or the reason the 

individual did not obtain U.S. citizenship at birth.

Claim of reduced rate of withholding under treaty. 

You have reason to know that documentary evidence provided by a direct account holder to claim a reduced rate of 

withholding under a treaty is unreliable or incorrect for purposes of establishing the account holder's residency in a 

treaty country if:

• You have a mailing or residence address for the account holder that is outside the applicable treaty country,

• You have no permanent residence for the account 

holder, or

30 Publication 515 (2024)
• The account holder has standing instructions for you 

to pay amounts from its account to an address or account not in the treaty country.

You may, however, rely on documentary evidence as 

establishing an account holder's claim of a reduced rate of 

withholding under a treaty if any of the following apply.

1. The mailing or residence address is outside the treaty 

country and:

a. You possess or obtain additional documentary evidence supporting the account holder's claim of 

residence in the treaty country (and the documentary evidence does not contain an address outside 

the treaty country, a P.O. box, an in-care-of address, or the address of a financial institution),

b. You possess or obtain documentary evidence that 

establishes that the account holder is an entity organized in a treaty country, or

c. You obtain a valid Form W-8 that contains a permanent residence address and a mailing address 

in the applicable treaty country.

2. You have instructions to pay amounts outside the 

treaty country and the account holder gives you a reasonable explanation, in writing, establishing residence 

in the applicable treaty country or a valid beneficial 

owner withholding certificate that contains a permanent residence address and a mailing address in the 

applicable treaty country.

Indirect Account Holders' Chapter 3 Status

A withholding agent that receives documentation from a 

payee through an NQI, a flow-through entity, or a U.S. 

branch of a foreign bank or insurance company subject to 

U.S. or state regulatory supervision or a territory financial 

institution (other than a U.S. branch treated as a U.S. person) has reason to know that the documentary evidence is 

unreliable or incorrect for purposes of a claim of foreign 

status or a treaty claim if a reasonably prudent person in 

the withholding agent's position would question the claims 

made. This standard requires, but is not limited to, compliance with the following rules.

Withholding statement. You must review the withholding statement provided with Form W-8IMY and may not 

rely on information in the statement to the extent the information does not support the claims made for a payee. You 

may not treat a payee as a foreign person if a U.S. address is provided for the payee. You may not treat a person as a resident of a country with which the United 

States has an income tax treaty if the address for the person is outside the treaty country.

You may, however, treat a payee as a foreign person 

and may treat a foreign person as a resident of a treaty 

country if the withholding statement is accompanied by a 

valid withholding certificate and documentary evidence or 

a reasonable explanation is provided, by the NQI, 

flow-through entity, or U.S. branch supporting the payee’s 

foreign status or residency in a treaty country.

Withholding certificate. If you receive a Form W-8 for a 

payee in association with a Form W-8IMY, you must review each Form W-8 and verify that the information is consistent with the information on the withholding statement. 

If there is a discrepancy, you may rely on the Form W-8, if 

valid, and instruct the NQI, flow-through entity, or U.S. 

branch to correct the withholding statement, or, alternatively, you may apply the presumption rules, discussed 

later in Presumption Rules, to the payee.

If you choose to rely on the withholding certificate, you 

must, in addition to instructing the NQI, flow-through entity, 

or U.S. branch to correct the withholding statement, instruct the NQI, flow-through entity, or U.S. branch to confirm that it does not know or have reason to know that the 

withholding certificate is unreliable or inaccurate.

Documentary evidence. If you receive documentary evidence for a payee in association with a Form W-8IMY, you 

must review the documentary evidence provided by the 

NQI, flow-through entity, or U.S. branch to determine that 

there is no obvious indication that the payee is a U.S. person subject to Form 1099 reporting or that the documentary evidence does not establish the identity of the person 

who provided the documentation (for example, the documentary evidence does not appear to be an identification 

document).

Standards of Knowledge for 

Purposes of Chapter 4

If you make a withholdable payment, you must withhold in 

accordance with the presumption rules (discussed later) if 

you know or have reason to know that a withholding certificate or documentary evidence provided by the payee is 

unreliable or incorrect to establish a payee’s chapter 4 status. If you rely on an agent to obtain documentation, you 

are considered to know, or have reason to know, the facts 

that are within the knowledge of your agent for this purpose.

Notification by the IRS

If you receive notification from the IRS that a claim of status as a U.S. person, a participating FFI, a deemed-compliant FFI, or other entity entitled to a reduced rate of withholding under chapter 4 is incorrect, you are considered to 

have knowledge that such a claim is incorrect beginning 

30 days after you receive the notice.

GIIN Verification

If you have received a Form W-8BEN-E or Form W-8IMY 

from an entity payee that is claiming certain chapter 4 statuses, you must obtain and verify the entity’s GIIN against 

the published IRS FFI list. The IRS FFI list can be found at 

IRS.gov/Businesses/Corporations/FFI-List-ResourcesPage. You must obtain and verify against the published 

IRS FFI list a GIIN for the following chapter 4 statuses.

• Participating FFIs (including reporting Model 2 FFIs).

Publication 515 (2024) 31
• Registered deemed-compliant FFIs (including reporting Model 1 FFIs).

• Sponsored FFIs.

• Direct reporting NFFEs.

• Sponsored direct reporting NFFEs.

• Certain nonreporting IGA FFIs (as described below).

If you receive a Form W-8BEN-E or Form W-8IMY from 

a nonreporting IGA FFI that is a trustee-documented trust 

with a foreign trustee, you must obtain the GIIN of a foreign trustee, but you are not required to verify the GIIN. 

The GIIN that the trustee must provide is the GIIN that it 

received when it registered as a participating FFI or reporting Model 1 FFI, not the GIIN that it received when it 

registered as a trustee of a trustee-documented trust.

If you receive a Form W-8BEN-E or Form W-8IMY from 

a nonreporting IGA FFI that checks Model 2 IGA in Part XII 

of Form W-8BEN-E or Part XIX of Form W-8IMY (as applicable) and identifies a category of entity that is a registered deemed-compliant FFI under Annex II of an applicable Model 2 IGA, you must obtain and verify the GIIN of 

the nonreporting IGA FFI. Additionally, if you receive a 

Form W-8BEN-E or Form W-8IMY from a nonreporting 

IGA FFI that provides a citation to a section of the regulations for its registered deemed-compliant status in Part XII 

of Form W-8BEN-E or Part XIX of Form W-8IMY (as applicable), you must obtain and verify the GIIN of the nonreporting IGA FFI. You will have reason to know that such 

payee is not such a financial institution if the payee's name 

(including a name reasonably similar to the name the withholding agent has on file for the payee) and GIIN do not 

appear on the most recently published IRS FFI list within 

90 days of the date that the claim is made.

If you receive a Form W-8BEN-E or Form W-8IMY from 

an entity payee and the form contains “Applied for” in the 

box for the GIIN, the payee must provide you its GIIN 

within 90 days of providing the form. A Form W-8BEN-E or 

Form W-8IMY from such payee that does not include a 

GIIN, or includes a GIIN that does not appear on the published IRS FFI list, will be invalid for chapter 4 purposes 90 

days after the date the form is provided.

The GIIN that you must confirm is the GIIN assigned to 

the FFI identifying its country of residence for tax purposes (or place of organization if the FFI has no country of 

residence), except as otherwise provided.

Branches and disregarded entities. If you make a withholdable payment to a branch of, or an entity that is disregarded as an entity separate from, a participating FFI or 

registered deemed-compliant FFI located outside of the 

FFI's country of residence or organization, the GIIN you 

must verify is the GIIN of the branch or disregarded entity 

receiving the payment. You must identify a GIIN associated with a disregarded entity to the extent provided in the 

Instructions for Form W-8BEN-E or the Instructions for 

Form W-8IMY.

You will have reason to know that a withholdable payment is made to a branch (including a disregarded entity) 

of a participating FFI or registered deemed-compliant FFI 

that is not itself a participating FFI or registered 

deemed-compliant FFI when you are directed to make the 

payment to an address in a jurisdiction other than that of 

the participating FFI or registered deemed-compliant FFI 

(or branch of, or disregarded entity wholly owned by, such 

FFI) that is identified as the FFI (or branch of, or disregarded entity wholly owned by, such FFI) that is supposed to 

receive the payment and for which the FFI's GIIN is not 

confirmed, as described in the preceding paragraphs.

The preceding sentence does not apply to an FFI that 

is an investment entity. If an FFI (other than an investment 

entity) directs you to make the payment to an account held 

by the FFI and maintained by another financial institution, 

the FFI must provide to you a statement, in writing, that 

the FFI is not directing the payment to any branch of such 

FFI that is not a participating FFI or a registered 

deemed-compliant FFI.

Sponsored, closely held investment vehicles. If you 

make a withholdable payment to a certified deemed-compliant FFI that is a sponsored, closely held investment vehicle, you must obtain a GIIN for the sponsoring entity and 

verify it against the published IRS FFI list.

Reason To Know

In general, you have reason to know that a claim of chapter 4 status is unreliable or incorrect if your knowledge of 

relevant facts or statements contained in the withholding 

certificate or other documentation is such that a reasonably prudent person would question the claim being made. 

For an obligation other than a preexisting obligation (that 

is, an obligation other than an obligation, including an account, held by an individual that is outstanding on June 

30, 2014, or an obligation, including an account, held by 

an entity that is opened, executed, or issued before January 1, 2015), you have reason to know that a claim of 

chapter 4 status is unreliable or incorrect if any information 

contained in the account opening files or other customer 

account files, including documentation collected for AML 

due diligence purposes, conflicts with the chapter 4 status 

being claimed. You will not have reason to know that a 

claim of chapter 4 status is unreliable or incorrect based 

on documentation collected for AML due diligence purposes until the date that is 30 days after the obligation is created.

If you have classified an entity as engaged in a particular type of business based on your records, such as 

through the use of a standardized industry coding system, 

you have reason to know that the chapter 4 status claimed 

by the entity is unreliable or incorrect only if the entity’s 

claim conflicts with the withholding agent’s classification 

of the entity’s business type.

32 Publication 515 (2024)
Withholding Certificates

In general, you have reason to know that a withholding 

certificate from a person is unreliable or incorrect with respect to a claim of chapter 4 status if:

• The withholding certificate is incomplete with respect 

to any item on the certificate that is relevant to the 

claim made by the person;

• The withholding certificate contains any information 

that is inconsistent with the person’s claim;

• You have other account information that is inconsistent 

with the person’s claim;

• The withholding certificate lacks information necessary to establish entitlement to an exemption from 

withholding for chapter 4 purposes; or

• With respect to an alternative certification under an 

applicable IGA included with a withholding certificate, 

if you know or have reason to know the certification is 

incorrect.

If you obtain a withholding certificate associated with a 

withholdable payment to a participating FFI, a registered 

deemed-compliant FFI, a sponsoring entity, or a sponsored FFI, you do not need to apply the standards of 

knowledge described earlier with respect to an account 

holder’s claim of foreign status if you have confirmed the 

FFI’s GIIN on the current published IRS FFI list within 90 

days of receipt of the withholding certificate.

A withholding certificate used for chapter 4 purposes must also include the information required for 

chapter 3 purposes (that is, the entity’s tax classification) with regard to a payment that is a reportable 

amount under Regulations section 1.1441-1(e)(3)(vi).

Documentary Evidence

You have reason to know that documentary evidence provided by a person is unreliable or incorrect with respect to 

a claim of chapter 4 status if:

• The documentary evidence does not reasonably establish the identity of the person presenting the documentary evidence,

• The documentary evidence contains information that 

is inconsistent with the person’s claim as to its chapter 4 status,

• You have other account information that is inconsistent 

with the person’s chapter 4 status, or

• The documentary evidence lacks information necessary to establish the person’s chapter 4 status.

For standards of knowledge applicable to specific types 

of documentary evidence, see Regulations section 

1.1471-3.

CAUTION

!

Payee Documentation From Intermediaries 

or Flow-Through Entities

In general. If you receive documentation for a payee of a 

withholdable payment through one or more intermediaries 

or flow-through entities, you must, in addition to determining each such entity’s chapter 4 status when required for 

chapter 4 purposes, review all documentation obtained 

with respect to the payee. Under certain circumstances, 

you may rely on a withholding certificate with an electronic 

signature provided by an account holder that is an NQI, 

when you are permitted to do so under Regulations section 1.1441-1(e)(4)(i)(B). When withholding under chapter 4 is not applied based on the chapter 4 status of an intermediary or flow-through entity, you are not required to 

obtain documentation for a payee through an intermediary 

or flow-through entity that is a QI, WP, or WT, or a payee 

that is included in a chapter 4 withholding rate pool of U.S. 

payees.

Withholding statement. You must review the withholding statement provided and may not rely on information in the statement to the extent the information does not 

support the claims made regarding the chapter 4 status of 

the payee. You may not treat a person as a foreign person 

if a U.S. address is provided, unless the withholding statement is accompanied by a valid withholding certificate and 

documentary evidence establishing foreign status.

Withholding certificate. You must review each withholding certificate, written statement (as permitted for 

chapter 4 purposes with respect to certain payments to 

entities), or documentary evidence, and must verify that 

the information is consistent with the information on the 

withholding statement. If there is a discrepancy, you may 

rely on the documentation provided such documentation 

is valid and the intermediary or flow-through entity does 

not indicate that the documentation is unreliable or incorrect, or, alternatively, you may apply the presumption 

rules. If you choose to rely on the documentation, you 

must instruct the intermediary or flow-through entity to correct the withholding statement and confirm that the intermediary or flow-through entity does not know or have reason to know that the documentation is unreliable or 

incorrect. See Regulations section 1.1471-3(d) for when a 

written statement is permitted for chapter 4 purposes.

Documentation from participating FFIs and registered deemed-compliant FFIs. If you receive documentation for a payee of a withholdable payment through 

a participating FFI or registered deemed-compliant FFI 

that is an intermediary or flow-through entity receiving the 

payment, you may rely on the chapter 4 status provided in 

the withholding statement, including a chapter 4 status determined under the requirements of (and documentation 

or information that is publicly available that determines the 

chapter 4 status of the payee permitted under) an applicable IGA, provided that you have the information necessary 

to report on Form 1042-S, unless you have information 

that conflicts with the chapter 4 status provided. If underlying documentation is provided for the payee and information in the documentation or in your records conflicts with 

Publication 515 (2024) 33
the chapter 4 status claimed, you have reason to know 

that the chapter 4 status claimed is unreliable or incorrect. 

However, you are not required to verify the information 

contained in the documentation that is not facially incorrect, and you are generally not required to obtain supporting documentation for the payee. You may determine the 

recipient code of a payee for chapter 4 purposes (for filing 

Form 1042-S) that is not identified on a withholding statement when you are able to do so based on other information included on or with the withholding statement or in 

your records with respect to the payee.

Preexisting obligation of entities. If you make a 

withholdable payment with respect to a preexisting obligation to an entity, the scope of review is limited with respect 

to the time in which you must determine the entity’s chapter 4 status. For more information, see Regulations section 

1.1471-3(e)(4)(vii) or, if you are a reporting Model 1 FFI or 

a reporting Model 2 FFI, the requirements of the applicable IGA.

Presumption Rules

If you cannot reliably associate a payment with valid documentation, you must apply certain presumption rules or 

you may be liable for tax, interest, and penalties. If you 

comply with the presumption rules, you are not liable for 

tax, interest, and penalties even if the rate of withholding 

that should have been applied based on the payee's actual status is different from that presumed.

The presumption rules apply to determine the status of 

the person you pay as a U.S. or foreign person and other 

relevant characteristics, such as whether the payee is a 

beneficial owner or intermediary, and whether the payee is 

an individual, corporation, partnership, or trust. In the case 

of a withholdable payment you make to an entity, you must 

apply the presumption rules for chapter 4 purposes to 

treat the entity as a nonparticipating FFI when you cannot 

reliably associate the payment with documentation permitted for chapter 4 purposes. You are not permitted to apply 

a reduced rate of chapter 3 withholding based on a 

payee's presumed status if documentation is required to 

establish a reduced rate of withholding. For example, if the 

payee of interest is presumed to be a foreign person, you 

may not apply the portfolio interest exception or a reduced 

rate of withholding under a tax treaty since both exceptions require documentation.

If you rely on your actual knowledge about a payee's 

status and withhold an amount less than that required under the presumption rules or do not report a payment that 

is subject to reporting under the presumption rules, you 

may be liable for tax, interest, and penalties. You should, 

however, rely on your actual knowledge if doing so results 

in withholding an amount greater than would apply under 

the presumption rules or in reporting an amount that would 

not be subject to reporting under the presumption rules.

In the case of a participating FFI or registered 

deemed-compliant FFI that cannot report with respect to 

an individual account holder, the FFI must classify the account holder under the requirements (as applicable) of the 

FFI agreement, Regulations section 1.1471-5(f), or an applicable IGA. Whether withholding applies to payments 

made to such account holders classified as recalcitrant 

account holders (including payments to intermediaries or 

flow-through entities allocating payments to such account 

holders on an applicable withholding statement) differs 

under these requirements.

The presumption rules, in the absence of documentation, for the subject matter are discussed in the regulations section indicated on Chart A.

Chart A. Presumption Rules in the Absence 

of Documentation

For the presumption rules 

related to:

See Regulations section:

Payee's status

1.1441-1(b)(3); 1.6049-5(d); 

1.1471-3(f) (chapter 4 payees)

Effectively connected income 1.1441-4(a)(2)

Partnership and its partners 1.1441-5(d); 1.1446-1(c)(3)

Estate or trust and its 

beneficiaries or owner 1.1441-5(e)(6)

Foreign tax-exempt 

organizations (including 

private foundations) 1.1441-9(b)(3)

Presumption Rules for Chapter 4

If you determine that you are making a withholdable payment to an entity and cannot reliably associate the payment with a valid Form W-8 or other documentation that 

you are permitted to rely upon and that is sufficient to determine the chapter 4 status of the entity, you are required 

to treat the entity payee as a nonparticipating FFI such 

that withholding applies. For purposes of determining 

whether the payment is made to an individual or an entity, 

or to a U.S. person or a foreign person, if you cannot reliably associate a payment with a valid Form W-8 or other 

documentation that you are permitted to rely upon and 

from which you are able to determine the payee’s status 

as an individual or entity, or U.S. or foreign status, you 

must apply the presumption rules of Regulations section 

1.1441-1(b)(3)(ii) to determine the payee’s status as an individual or entity and Regulations section 1.1441-1(b)(3)

(iii) to determine the payee’s U.S. or foreign status.

If you are making a withholdable payment to joint payees and cannot reliably associate the payment with valid 

documentation from each payee and each of the payees 

appears to be an individual, the payment is presumed 

made to an unidentified U.S. person. If any of the joint 

payees does not appear, by its name or other information 

in its account file, to be an individual, then the entire payment is treated as made to a nonparticipating FFI. However, if you receive from one of the joint payees a Form 

W-9, the payment shall be treated as made to that payee.

34 Publication 515 (2024)
Income Subject to Withholding

This section explains how to determine if a payment is 

subject to chapter 3 withholding or is a withholdable payment.

Amounts Subject to Chapter 3 

Withholding

A payment is subject to chapter 3 withholding if it is from 

sources within the United States, and it is fixed or determinable annual or periodical (FDAP) income. Generally, excluding gains but including certain gains from the disposal 

of timber, coal, and iron ore, or from the sale or exchange 

of patents, copyrights, and similar intangible property.

In addition, a payment is subject to chapter 3 withholding if withholding is specifically required, even though it 

may not constitute U.S. source income or FDAP income. 

For example, corporate distributions may be subject to 

chapter 3 withholding even though a part of the distribution may be a return of capital or capital gain that is not 

FDAP income.

Amounts not subject to chapter 3 withholding. The 

following amounts are not subject to chapter 3 withholding.

• Portfolio interest paid on obligations that meet certain 

requirements. See Interest, later.

• Bank deposit interest that is not effectively connected 

with the conduct of a U.S. trade or business. See Interest, later.

• Original issue discount on certain short- term obligations. See Original issue discount, later.

• Nonbusiness gambling income of a nonresident alien 

playing blackjack, baccarat, craps, roulette, or big-6 

wheel in the United States. See Gambling winnings, 

later.

• Amounts paid as part of the purchase price of an obligation sold between interest payment dates. See Interest, later.

• Original issue discount paid on the sale of an obligation other than a redemption. See Original issue discount, later.

• Insurance premiums paid on a contract issued by a 

foreign insurer subject to the excise tax under section 

4371.

• U.S. source transportation income subject to a 4% tax 

on gross income.

Amounts Subject to Chapter 4 

Withholding

U.S. source FDAP income for purposes of chapter 4 is 

similar to U.S. source FDAP income for purposes of chapter 3, subject to certain modifications such as the 

exclusion of certain types of non-financial payments and 

the inclusion (as U.S. source interest) of deposit interest 

paid by a foreign branch of a U. S. corporation or partnership. Also, see Fixed or Determinable Annual or Periodical 

Income (FDAP), later.

A withholding agent must withhold on a payment of 

U.S. source FDAP income that is a withholdable payment 

to which an exception does not apply under chapter 4.

Amounts not subject to withholding under chapter 4. 

The following amounts are not subject to withholding under chapter 4.

• Interest or original issue discount from a short-term 

obligation.

• Payments made under a grandfathered obligation (for 

example, obligations outstanding on July 1, 2014).

Source of Income

In most cases, income is from U.S. sources if it is paid by 

domestic corporations, U.S. citizens or resident aliens, or 

entities formed under the laws of the United States or a 

state. Income is also from U.S. sources if the property that 

produces the income is located in the United States or the 

services for which the income is paid were performed in 

the United States or the income is a dividend equivalent. 

A payment is treated as being from sources within the United States if the source of the payment cannot be determined at the time of payment, such as fees for personal 

services paid before the services have been performed. 

Other source rules are summarized in Chart B and explained in detail in the separate discussions under Withholding on Specific Income, later.

In most cases, interest on an obligation of a foreign corporation or foreign partnership is foreign-source income. If 

the entity is engaged in a trade or business in the United 

States during its tax year, interest paid by such entity is 

treated as from U.S. sources only if the interest is paid by 

a U.S. trade or business conducted by the entity or is allocable to income that is treated as effectively connected 

with the conduct of a U.S. trade or business. This applies 

to a foreign partnership only if it is predominantly engaged 

in the active conduct of a trade or business outside the 

United States.

Guarantee income. Certain amounts paid, directly or indirectly, for the provision of a guarantee of indebtedness 

issued after September 27, 2010, are from U.S. sources. 

The amounts must be paid by one of the following.

1. A noncorporate U.S. resident or a U.S. corporation for 

the provision of a guarantee of the resident or corporation.

2. Any foreign person for the provision of a guarantee if 

the payment of income is effectively connected, or 

treated as effectively connected, with the conduct of a 

U.S. trade or business.

Personal service income (for purposes of chapter 3 

withholding). If the income is for personal services 

Publication 515 (2024) 35
performed in the United States, it is from U.S. sources. 

The place where the services are performed determines 

the source of the income, regardless of where the contract 

was made, the place of payment, or the residence of the 

payer.

However, under certain circumstances, payment for 

personal services performed in the United States is not 

considered income from sources within the United States. 

For information on this exception, see Pay for Personal 

Services Performed, later.

If the income is for personal services performed partly 

in the United States and partly outside the United States, 

you must make an accurate allocation of income for services performed in the United States based on the facts 

and circumstances. In most cases, you make this allocation on a time basis. That is, U.S. source income is the 

amount that results from multiplying the total amount of 

pay by the following fraction.

Number of days services are performed in the United States

Total number of days of service for which compensation is paid

Multiyear compensation. Generally, the source of multiyear compensation is determined on a time basis over the 

period to which the compensation is attributable. Multiyear 

compensation is compensation that is included in the taxable income of a recipient in 1 tax year but that is attributable to a period that includes 2 or more tax years. The determination of the period to which the compensation is 

attributable, for purposes of determining its source, is 

based on the facts and circumstances of each case. For 

example, an amount of compensation that specifically relates to a period of time that includes several calendar 

years is attributable to the entire multiyear period. Where 

determining the source of multiyear compensation on a 

time basis is appropriate, the amount of compensation 

treated as from U.S. sources is figured by multiplying the 

total multiyear compensation by a fraction. The numerator 

of the fraction is the number of days (or unit of time less 

than a day, if appropriate) that labor or personal services 

were performed in the United States in connection with 

the project. The denominator of the fraction is the total 

number of days (or unit of time less than a day, if appropriate) that labor or personal services were performed in 

connection with the project.

Employees. If the services are performed partly in the 

United States and partly outside the United States by an 

employee, the allocation of pay, other than certain fringe 

benefits, is determined on a time basis. The following 

fringe benefits are sourced on a geographical basis as 

shown in the following list.

• Housing—employee's main job location.

• Education—employee's main job location.

• Local transportation—employee's main job location.

• Tax reimbursement—jurisdiction imposing tax.

• Hazardous or hardship duty pay—location of pay 

zone.

• Moving expense reimbursement—employee's new 

main job location.

For information on what is included in these benefits, 

see Regulations section 1.861-4(b)(2)(ii)(D).

An employee's main job location (principal place of 

work) is usually the place where the employee spends 

most of their working time. If there is no one place where 

most of the work time is spent, the main job location is the 

place where the work is centered, such as where the employee reports for work or is otherwise required to base 

their work.

An employee can use an alternative basis based on 

facts and circumstances, rather than the time or geographical basis. The employee, not the employer, must 

demonstrate that the alternative basis more properly determines the source of the pay or fringe benefits.

Territorial limits. Wages received for services rendered inside the territorial limits of the United States and 

wages of an alien seaman earned on a voyage along the 

coast of the United States are regarded as from sources in 

the United States. Wages or salaries for personal services 

performed in a mine or on an oil or gas well located or being developed on the continental shelf of the United States 

are treated as from sources in the United States.

Income from the performance of services directly related to the use of a vessel or aircraft is treated as derived 

entirely from sources in the United States if the use begins 

and ends in the United States. This income is subject to 

withholding if it is not effectively connected with a U.S. 

trade or business. If the use either begins or ends in the 

United States, see Transportation income, later.

Crew members. Income from the performance of 

services by a nonresident alien in connection with the individual's temporary presence in the United States as a regular member of the crew of a foreign vessel engaged in 

transportation between the United States and a foreign 

country or a U.S. territory is not income from U.S. sources.

Multilevel marketing. Certain companies sell products through a multilevel marketing arrangement, such 

that an upper-tier distributor, who has sponsored a 

lower-tier distributor, is entitled to a payment from the 

company based on certain activities of that lower-tier distributor. Generally, depending on the facts, payments from 

such multilevel marketing companies to independent 

(nonemployee) distributors (upper-tier distributors) that 

are based on the sales or purchases of persons whom 

they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. 

The source of such income is generally based on where 

the services of the upper-tier distributor are performed, 

and may, depending on the facts, be considered multiyear 

compensation, with the source of income determined over 

the period to which such compensation is attributable.

Scholarships, fellowships, and grants. Scholarships, 

fellowships, and grants are sourced according to the residence of the payer. Those made by entities created or domiciled in the United States are generally treated as 

36 Publication 515 (2024)
income from sources within the United States. However, 

see Activities outside the United States next. Those made 

by entities created or domiciled in a foreign country are 

treated as income from foreign sources.

Activities outside the United States. A scholarship, 

fellowship, grant, targeted grant, or an achievement award 

received by a nonresident alien for activities conducted 

outside the United States is treated as foreign source income.

Pension payments. The source of pension payments is 

determined by the part of the distribution that constitutes 

the compensation element (employer contributions) and 

the part that constitutes the earnings element (the investment income).

The compensation element is sourced the same as 

compensation from the performance of personal services. 

The part attributable to services performed in the United 

States is U.S. source income, and the part attributable to 

services performed outside the United States is foreign 

source income.

Employer contributions to a defined benefit plan covering more than one individual are not made for the benefit 

of a specific participant, but are made based on the total 

liabilities to all participants. All funds held under the plan 

are available to provide benefits to any participant. If the 

payment is from such a plan, you can use the method in 

Revenue Procedure 2004-37, 2004-26 I.R.B. 1099, available at IRS.gov/irb/2004-26_IRB#RP-2004-37, to allocate 

the payment to sources within and without the United 

States.

The earnings part of a pension payment is U.S. source 

income if the trust is a U.S. trust.

Chart B. Summary of Source Rules for FDAP 

Income

IF you have... THEN the source of that income 

is determined by...

pay for personal services where the services are performed.

dividends the type of corporation (U.S. or 

foreign).

interest the residence of the payer.

rents where the property is located.

royalties—patents, copyrights, 

etc. where the property is used.

royalties—natural resources where the property is located.

pensions—distributions 

attributable to contributions where the services were performed.

pensions—investment earnings 

on contributions the location of pension trust.

scholarships and fellowship 

grants

in most cases, the residence of the 

payer.

guarantee of indebtedness the residence of the debtor or 

whether the payment is effectively 

connected with a U.S. trade or 

business.

Fixed or Determinable Annual or 

Periodical (FDAP) Income

FDAP income is all income except:

• Gains from the sale of property (not including original 

issue discount and certain gains that are referred to in 

Amounts Subject to Chapter 3 Withholding, earlier); 

and

• Items of income excluded from gross income without 

regard to U.S. or foreign status of the owner of the income, such as tax-exempt municipal bond interest 

and qualified scholarship income.

The following items are examples of FDAP income.

• Compensation for personal services paid to an individual or a sole proprietorship.

• Dividends and dividend equivalent payments.

• Interest.

• Original issue discount.

• Real estate mortgage investment conduit (REMIC) excess inclusion income.

• Pensions and annuities.

• Alimony (no longer income if the divorce or separation 

agreement is executed after December 31, 2018, or if 

executed before January 1, 2019, but modified after 

December 31, 2018, the modification must state that 

section 11051 of P.L. 115-97 (TCJA) applies to the 

modification).

• Real property income, such as rents, other than gains 

from the sale of real property.

• Royalties.

• Taxable scholarships and fellowship grants.

• Other taxable grants, prizes, and awards.

• A sales commission paid or credited monthly.

• A commission paid for a single transaction.

• The distributable net income of an estate or trust that 

is FDAP income and must be distributed currently, or 

has been paid or credited during the tax year.

• FDAP income distributed by a partnership that, or 

such an amount that, although not actually distributed, 

is includible in the gross income of a foreign partner.

• Taxes, mortgage interest, or insurance premiums paid 

to, or for the account of, a nonresident alien landlord 

by a tenant under the terms of a lease.

• Publication rights.

• Prizes awarded to nonresident alien artists for pictures 

exhibited in the United States.

• Purses paid to nonresident alien boxers for prize fights 

in the United States.

• Prizes awarded to nonresident alien professional golfers in golfing tournaments in the United States.

Publication 515 (2024) 37
Payments for the following purposes are examples of 

payments that are not withholdable payments.

• Services (including wages and other forms of employee compensation (such as stock options)).

• The use of property.

• Office and equipment leases.

• Software licenses.

• Transportation.

• Freight.

• Gambling winnings.

• Awards, prizes, and scholarships.

• Interest on outstanding accounts payable arising from 

the acquisition of goods or services.

Periodic or lump-sum payments. Income can be FDAP 

income whether it is paid in a series of repeated payments 

or in a single lump sum. For example, $5,000 in royalty income would be FDAP income whether paid in 10 payments of $500 each or in one payment of $5,000.

Insurance proceeds. Income derived by an insured 

nonresident alien from U.S. sources upon the surrender 

of, or at the maturity of, a life insurance policy, is FDAP income and is subject to chapter 3 withholding and is a withholdable payment. This includes income derived under a 

life insurance contract issued by a foreign branch of a U.S. 

life insurance company. The proceeds are income to the 

extent they exceed the cost of the policy.

However, certain payments received under a life insurance contract on the life of a terminally or chronically ill individual before death (accelerated death benefits) may not 

be subject to tax. This also applies to certain payments received for the sale or assignment of any part of the death 

benefit under contract to a viatical settlement provider. For 

more information, see Pub. 525.

Racing purses (for purposes of chapter 3 withholding). Racing purses are FDAP income and racetrack operators must withhold 30% on any purse paid to a nonresident alien racehorse owner in the absence of definite 

information contained in a statement filed together with a 

Form W-8 that the owner has not raced, or does not intend 

to enter, a horse in another race in the United States during the tax year. If available information indicates that the 

racehorse owner has raced a horse in another race in the 

United States during the tax year, then the statement and 

Form W-8 filed for that year are ineffective. The owner may 

be exempt from withholding of tax at 30% on the purses if 

the owner gives you Form W-8ECI, which provides that 

the income is effectively connected with the conduct of a 

U.S. trade or business and that the income is includible in 

the owner's gross income.

Covenant not to compete. Payment received for a 

promise not to compete is generally FDAP income. Its 

source is the place where the promisor forfeited their right 

to act. Amounts paid to a nonresident alien for their promise not to compete in the United States are subject to 

chapter 3 withholding and are withholdable payments.

Withholding on Specific 

Income

Different kinds of income are subject to different withholding requirements.

Effectively Connected Income

In most cases, when a foreign person engages in a trade 

or business in the United States, all income from sources 

in the United States connected with the conduct of that 

trade or business is considered effectively connected with 

a U.S. business. FDAP income may or may not be effectively connected with a U.S. business. For example, effectively connected income (ECI) includes rents from real 

property if the alien chooses to treat that income as effectively connected with a U.S. trade or business.

The factors to be considered in establishing whether 

FDAP income and similar amounts are effectively connected with a U.S. trade or business include:

• Whether the income is from assets used in, or held for 

use in, the conduct of that trade or business; or

• Whether the activities of that trade or business were a 

material factor in the realization of the income.

Income from securities. There is a special rule determining whether income from securities is effectively connected with the active conduct of a U.S. banking, financing, or similar business.

If the foreign person's U.S. office actively and materially 

participates in soliciting, negotiating, or performing other 

activities required to arrange the acquisition of securities, 

the U.S. source interest or dividend income from the securities, gain or loss from their sale or exchange, income 

or gain economically equivalent to such amounts, or 

amounts received for providing a guarantee of indebtedness, is attributable to the U.S. office and is ECI.

Withholding exemption. In most cases, you do not need 

to withhold tax on income for purposes of chapter 3 or 4 if 

you receive a Form W-8ECI on which a foreign payee represents that:

• The foreign payee is the beneficial owner of the income;

• The income is effectively connected with the conduct 

of a trade or business in the United States; and

• For purposes of chapter 3 withholding, the income is 

includible in the payee's gross income.

This withholding exemption applies to income for services performed by a foreign partnership or foreign corporation (unless item (4) below applies to the corporation). 

The exemption does not apply, however, to:

38 Publication 515 (2024)
1. Pay for personal services performed by an individual 

for purposes of chapter 3 (see Pay for Personal Services Performed, later),

2. Effectively connected taxable income of a partnership 

that is allocable to its foreign partners (see Partnership Withholding on ECTI, later),

3. Income from the disposition of a USRPI (see U.S. 

Real Property Interest, later), or

4. Payments to a foreign corporation for personal services if all of the following apply.

a. The foreign corporation otherwise qualifies as a 

personal holding company for income tax purposes;

b. The foreign corporation receives amounts under a 

contract for personal services of an individual 

whom the corporation has no right to designate;

c. 25% or more in value of the outstanding stock of 

the foreign corporation at some time during the tax 

year is owned, directly or indirectly, by or for an individual who has performed, is to perform, or may 

be designated as the one to perform, the services 

called for under the contract.

Withholding exemption for purposes of chapter 4. Income effectively connected with the conduct of a trade or 

business in the United States is not a withholdable payment under chapter 4 and thus is not subject to withholding for chapter 4 purposes. You do not need to withhold 

tax under chapter 4 if you receive a Form W-8ECI on 

which a foreign payee makes the representations described in Withholding exemptions, earlier.

Notional principal contract income. Certain payments 

attributable to a notional principal contract are not subject 

to withholding regardless of whether a Form W-8ECI is 

provided. However, payments of dividend equivalents that 

are not effectively connected with the conduct of a trade 

or business in the United States, pursuant to a specified 

notional principal contract (described later under Dividend 

equivalent payments) are subject to withholding.

Income from a notional principal contract is subject to 

reporting on Form 1042-S if it is effectively connected with 

the conduct of a trade or business in the United States. 

You must treat the income as effectively connected with a 

U.S. trade or business if you pay the income to, or to the 

account of, a qualified business unit (a branch) of a foreign person located in the United States or a qualified 

business unit located outside the United States and you 

know, or have reason to know, the income is effectively 

connected with the conduct of a U.S. trade or business. 

You do not need to treat notional principal contract income 

as effectively connected if you receive a Form W-8BEN-E 

that represents that the income is not effectively connected with the conduct of a U.S. trade or business or if the 

payee provides a representation in a master agreement or 

in the confirmation on the particular notional principal contract transaction that the payee is a U.S. person or a 

non-U.S. branch of a foreign person.

Income paid to U.S. branch of foreign bank or insurance company. A payment to a U.S. branch of a foreign 

bank or a foreign insurance company that is subject to 

U.S. regulation by the Federal Reserve or state insurance 

authorities is presumed to be effectively connected with 

the conduct of a trade or business in the United States if 

you have an EIN for the branch, unless the branch provides a Form W-8BEN-E or Form W-8IMY for the income. 

If a U.S. branch of a foreign bank or insurance company 

receives income that the payer did not withhold upon because of the presumption that the income was effectively 

connected with the U.S. branch's trade or business, the 

U.S. branch is required to withhold on the income if it is in 

fact not effectively connected with the conduct of its trade 

or business in the United States. Withholding is required 

whether the payment was collected on behalf of other persons or on behalf of another branch of the same entity.

Income Not Effectively Connected

This section discusses the specific types of income that 

are subject to chapter 3 withholding and where withholding under chapter 4 is required. The income codes contained in this section correspond to the income codes 

used on the 2024 Form 1042-S (discussed later).

For purposes of chapter 3, you must withhold tax at the 

statutory rates shown in Chart C unless a reduced rate or 

exemption under a tax treaty applies. For U.S. source 

gross income that is not effectively connected with a U.S. 

trade or business, the rate is usually 30%. In most cases, 

you must withhold the tax at the time you pay the income 

to the foreign person. See When to withhold, earlier.

Interest

Interest from U.S. sources paid to foreign payees is subject to chapter 3 withholding and is a withholdable payment (except when the interest is paid with respect to a 

grandfathered obligation or another exemption under 

chapter 4 applies). When making a payment on an interest-bearing obligation, you must withhold on the gross 

amount of stated interest payable on the interest payment 

date, even if the payment or a part of the payment may be 

a return of capital rather than interest.

A substitute interest payment made to the transferor of 

a security in a securities lending transaction or a sale-repurchase transaction is treated the same as the interest 

on the transferred security. Use Income Code 33 to report 

these substitute payments.

Interest paid by U.S. obligors—general (Income Code 

1). With specific exceptions, such as portfolio interest (for 

purposes of chapter 3), you must withhold on interest paid 

or credited on bonds, debentures, notes, open account indebtedness, governmental obligations, certain deferred 

payment arrangements (as provided in section 483), or 

other evidences of indebtedness of U.S. obligors. U.S. obligors include the U.S. Government or its agencies or instrumentalities, any U.S. citizen or resident, any U.S. corporation, and any U.S. partnership.

Publication 515 (2024) 39
If, in a sale of a corporation's property, payment of the 

bonds or other obligations of the corporation is assumed 

by the buyer, that buyer, whether an individual, partnership, or corporation, must deduct and withhold the taxes 

that would be required to be withheld by the selling corporation as if there had been no sale or transfer. Also, if interest coupons are in default, the tax must be withheld on the 

gross amount of interest whether or not the payment is a 

return of capital or the payment of income.

A resident alien paying interest on a margin account 

maintained with a foreign brokerage firm must withhold 

from the interest whether the interest is paid directly or 

constructively.

Interest on bonds of a U.S. corporation paid to a foreign 

corporation not engaged in a trade or business in the United States is subject to withholding even if the interest is 

guaranteed by a foreign corporation.

Domestic corporations must withhold on interest credited to foreign subsidiaries or foreign parents.

For withholding under chapter 4 on the interest payments described in this section, see the definition of withholdable payments in Regulations section 1.1473-1(a).

Original issue discount (Income Code 30). Original issue discount paid on the redemption of an obligation is 

subject to chapter 3 withholding and is a withholdable 

payment (except when paid with respect to a grandfathered obligation). Original issue discount paid as part of the 

purchase price of an obligation sold or exchanged, other 

than in a redemption, is not subject to chapter 3 withholding unless the purchase is part of a plan the principal purpose of which is to avoid tax and the withholding agent 

has actual knowledge or reason to know of the plan. However, such original issue discount is a withholdable payment (except when paid with respect to a grandfathered 

obligation). Withholding is required by a person other than 

the issuer of an obligation (or the issuer's agent).

The original issue discount that is subject to chapter 3 

withholding and is a withholdable payment (except when 

paid with respect to a grandfathered obligation) is the taxable amount of original issue discount. The taxable 

amount for both chapters 3 and 4 withholding purposes is 

the original issue discount that accrued while the obligation was held by the foreign beneficial owner up to the 

time the obligation was sold or exchanged or a payment 

was made, reduced by any original issue discount that 

was previously taxed. If a payment was made, the tax due 

on the original issue discount may not exceed the payment reduced by the tax imposed on the part of the payment that is qualified stated interest.

If you cannot determine the taxable amount, you must 

withhold on the entire amount of original issue discount 

accrued from the date of issue until the date of redemption 

(or sale or exchange, if subject to chapter 3 withholding or 

a withholdable payment) determined on the basis of the 

most recently published Pub. 1212.

For more information on original issue discount, see 

Pub. 550.

Chart C. Withholding Tax Rates for 

Purposes of Chapter 3

Note. You must withhold tax at the following rates on 

payments of income unless a reduced rate or exemption is 

authorized under a tax treaty. The President may apply 

higher tax rates on income paid to residents or 

corporations of foreign countries that impose burdensome 

or discriminatory taxes on U.S. persons.

IF you paid the following type of 

income...

THEN you must 

generally withhold at 

the following rate...

Taxable part of U.S. scholarship or 

fellowship grant paid to holder of “F,” “J,” “M,” 

or “Q” visa (see Scholarships and 

Fellowship Grants, later) 14%

Gross investment income from interest, 

dividends, rents, and royalties paid to a 

foreign private foundation 4%

Pensions—part paid for personal services 

(see Pensions, Annuities, and Alimony, 

later)

Graduated rates in 

Circular A or Circular E

Wages paid to a nonresident alien 

employee (see Pay for Personal Services 

Performed, later)

Graduated rates in 

Circular A or Circular E

Each foreign partner's allocable share of 

the partnership’s ECTI (see Partnership 

Withholding on ECTI, later)

37% for noncorporate 

partners;21% for 

corporate partners

Distributions of ECTI to foreign partners by 

publicly traded partnerships (see Publicly 

Traded Partnerships, later)

37% for noncorporate 

partners;21% for 

corporate partners

Dispositions of USRPI (see U.S. Real 

Property Interest, later) 15%*

Dispositions of partnership interests under 

section 1446(f) 10%

Dividends paid to Puerto Rican corporation 10%

All other income subject to withholding 30%

*21% in the case of certain distributions by corporations, partnerships, trusts, or estates.

Reduced Rates of Withholding on Interest

Notwithstanding the exception from withholding 

under chapter 3 on interest described under this 

heading, withholding may still apply under chapter 4 when the payment is a withholdable payment and an 

exception from withholding under chapter 4 does not apply.

Certain interest is subject to a reduced rate of, or exemption from, withholding.

Portfolio interest exempt from chapter 3 withholding. 

Interest and original issue discount that qualifies as portfolio interest is exempt from chapter 3 withholding. However, 

these amounts are not exempt from withholding under 

chapter 4 when the interest is a withholdable payment, unless an exception from chapter 4 withholding applies. To 

qualify as portfolio interest, the interest must be paid on 

CAUTION

!

40 Publication 515 (2024)
obligations issued after July 18, 1984, and otherwise subject to chapter 3 withholding.

Note. The rules for determining whether interest is 

portfolio interest changed for obligations issued after 

March 18, 2012. Before March 19, 2012, portfolio interest 

included interest on certain registered and nonregistered 

(bearer) bonds if the obligations meet the requirements 

described below.

For obligations issued after March 18, 2012, portfolio 

interest does not include interest paid on debt that is not in 

registered form, except for interest paid on foreign-targeted registered obligations issued before January 1, 2016, 

as described in Foreign-targeted registered obligations, 

later.

Obligations in registered form. Portfolio interest includes interest paid on an obligation that is in registered 

form, and for which you have received documentation that 

the beneficial owner of the obligation is not a U.S. person.

Generally, an obligation is in registered form if (i) the 

obligation is registered as to both principal and any stated 

interest with the issuer (or its agent) and any transfer of 

the obligation may be effected only by surrender of the old 

obligation and reissuance to the new holder, (ii) the right 

to principal and stated interest with respect to the obligation may be transferred only through a book entry system 

maintained by the issuer or its agent, or (iii) the obligation 

is registered as to both principal and stated interest with 

the issuer or its agent and can be transferred both by surrender and reissuance and through a book entry system.

An obligation that would otherwise be considered to be 

in registered form is not considered to be in registered 

form as of a particular time if it can be converted at any 

time in the future into an obligation that is not in registered 

form, except as otherwise provided in Notice 2012-20, 

2012-13 I.R.B. 574, available at IRS.gov/irb/

2012-13_IRB#NOT-2012-20, as described in the following 

section.

Dematerialized book-entry systems and effectively 

immobilized obligations. An obligation will be considered to be in registered form if it is issued through either a 

dematerialized book entry system maintained by a clearing organization (or agent thereof) or a clearing system in 

which the obligation (including a global obligation in 

bearer form) is effectively immobilized. See Notice 

2012-20, amplified by Notice 2013-43, 2013-31 I.R.B. 

113, available at IRS.gov/irb/2013-31_IRB#NOT-2013-43.

Under dematerialized book-entry systems, bonds are 

required to be represented only by book entries, and no 

physical certificates are issued or transferred. The bonds 

are transferred only by book entries.

An obligation will be considered to be effectively immobilized if (1) it is represented by one or more global securities in physical form that are issued to and held by a clearing organization (or by a custodian or depository acting as 

an agent of the clearing organization) for the benefit of 

purchasers and under arrangements that prohibit transfer 

except to a successor clearing organization subject to the 

same terms, and (2) beneficial interest in the underlying 

obligation is transferable only through a book-entry 

system maintained by the clearing organization or its 

agent.

These bonds are considered to be in registered form if 

the holder may only obtain a physical certificate in bearer 

form when (1) the clearing organization that maintains the 

book-entry system goes out of business without a successor, (2) the issuer defaults, or (3) definitive securities are 

issued at the issuer’s request upon a change in tax law adverse to the issuer. See Notice 2012-20 and proposed 

regulations in 82 FR 43720, for more information on registered form requirements.

Foreign-targeted registered obligations. A registered bond issued after March 18, 2012, and before January 1, 2016, will also be considered to be in registered 

form if it is targeted to foreign markets, and portfolio interest treatment may apply even when you do not receive 

documentation regarding the beneficial owner of the 

bond.

If the registered obligation is not targeted to foreign 

markets, you must receive documentation on which you 

may rely to treat the payee as a foreign person that is the 

beneficial owner of the interest. A registered obligation is 

targeted to foreign markets if it is sold (or resold in connection with its original issuance) only to foreign persons 

or to foreign branches of U.S. financial institutions in accordance with procedures similar to those provided in 

Regulations section 1.163-5(c)(2)(i). However, the procedure that requires the obligation to be offered for sale (or 

resale) only outside the United States does not apply if the 

registered obligation is offered for sale through a public 

auction. Also, the procedure that requires the obligation to 

be delivered outside the United States does not apply if 

the obligation is considered registered because it may be 

transferred only through a book-entry system and the obligation is offered for sale through a public auction. The 

documentation needed depends on whether the interest is 

paid to a financial institution, a member of a clearing organization, or to some other foreign person. See Notice 

2012-20 and Regulations section 1.871-14(e) for more information on foreign-targeted registered obligations.

Obligations not in registered form and obligations 

issued before March 19, 2012. For obligations issued 

before March 19, 2012, interest on an obligation that is not 

in registered form (bearer obligation) is portfolio interest if 

the obligation is foreign targeted. A bearer obligation is 

foreign targeted if:

• There are arrangements to ensure that the obligation 

will be sold, or resold in connection with the original issue, only to a person who is not a U.S. person;

• Interest on the obligation is payable only outside the 

United States and its territories; and

• The face of the obligation contains a statement that 

any U.S. person who holds the obligation will be subject to limits under the U.S. income tax laws.

Documentation is not required for interest on bearer obligations to qualify as portfolio interest. In some cases, 

however, you may need documentation for purposes of 

Form 1099 reporting and backup withholding.

Publication 515 (2024) 41
Interest on such obligations is not a withholdable payment under chapter 4, except when the instrument is materially modified after March 18, 2012.

Interest that does not qualify as portfolio interest. 

Payments to certain persons and payments of contingent 

interest do not qualify as portfolio interest. You must withhold at the statutory rate on such payments unless some 

other exception, such as a treaty provision, applies and 

withholding under chapter 4 does not apply.

Contingent interest. Portfolio interest generally does 

not include contingent interest. Contingent interest is interest that is determined by reference to any of the following.

• Any receipts, sales, or other cash flow of the debtor or 

a related person.

• Income or profits of the debtor or a related person.

• Any change in value of any property of the debtor or a 

related person.

• Any dividend, partnership distributions, or similar payments made by the debtor or a related person.

• Any amount that is a dividend equivalent.

The term “related person” is defined in section 871(h)

(4)(B) .

The contingent interest rule does not apply to any interest paid or accrued on any indebtedness with a fixed term 

that was issued:

• On or before April 7, 1993; or

• After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter 

before that indebtedness was issued.

10% owners. Interest paid to a foreign person that 

owns 10% or more of the total combined voting power of 

all classes of stock of a corporation, or 10% or more of the 

capital or profits interest in a partnership, that issued the 

obligation on which the interest is paid is not portfolio interest. To determine 10% ownership, see Regulations section 1.871-14(g).

Banks. Except in the case of interest paid on an obligation of the United States, interest paid to a bank on an 

extension of credit made pursuant to a loan agreement 

entered into in the ordinary course of the bank's trade or 

business does not qualify as portfolio interest.

Controlled foreign corporations. Interest paid to a 

controlled foreign corporation from a person related to the 

controlled foreign corporation is not portfolio interest.

Reduced rate or exemption from chapter 3 withholding for interest on real property mortgages (Income 

Code 2). Certain treaties permit a reduced rate or exemption for interest paid or credited on real property mortgages. This is interest paid on any type of debt instrument 

that is secured by a mortgage or deed of trust on real 

property located in the United States, regardless of 

whether the mortgagor (or grantor) is a U.S. citizen or a 

U.S. business entity.

REMIC excess inclusions. A domestic partnership 

must separately state a partner's allocable share of REMIC taxable income or net loss and the excess inclusion 

amount on Schedule K-1 (Form 1065). If the partnership 

allocates all or some part of its allocable share of REMIC 

taxable income to a foreign partner, the partner must include the partner's allocated amount in income as if that 

amount was received on the earlier of the following dates.

1. The date of distribution by the partnership.

2. The date the foreign partner disposed of its indirect interest in the REMIC residual interest.

3. The last day of the partnership's tax year.

For purposes of item (2), the disposition may occur as a 

result of:

• A termination of the REMIC,

• A disposition of the partnership's residual interest in 

the REMIC,

• A disposition of the foreign partner's interest in the 

partnership, or

• Any other reduction in the foreign partner's allocable 

share of the partnership's part of the REMIC net income or deduction.

The partnership must withhold tax on the part of the 

REMIC amount that is an excess inclusion. Excess inclusion income is treated as income from sources in the United States and is not eligible for any reduction in withholding tax (by treaty or otherwise). It is also a withholdable 

payment for chapter 4 purposes.

An excess inclusion allocated to the following foreign 

persons must be included in that person's income at the 

same time as other income from the entity is included in 

income.

• Shareholder of a real estate investment trust (REIT).

• Shareholder of a regulated investment company 

(RIC).

• Participant in a common trust fund.

• Patron of a subchapter T cooperative organization.

The entity must withhold on the excess inclusion.

For information on the taxation and reporting of excess 

inclusion income by REITs, RICs, and other pass-through 

entities, see Notice 2006-97, 2006-46 I.R.B. 904, available 

at IRS.gov/irb/2006-46_IRB#NOT-2006-97.

Reduced rate or exemption from chapter 3 withholding for interest paid to controlling foreign corporations (Income Code 3). A treaty may permit a reduced 

rate or exemption for interest paid by a domestic corporation to a controlling foreign corporation. The interest may 

be on any type of debt, including open or unsecured accounts payable, notes, certificates, bonds, or other evidences of indebtedness.

Reduced rate or exemption from chapter 3 withholding for interest paid by foreign corporations (Income 

Code 4). If a foreign corporation is engaged in a U.S. 

42 Publication 515 (2024)
trade or business, any interest paid by the foreign corporation's trade or business in the United States (branch interest) is subject to chapter 3 withholding as if paid by a domestic corporation (without considering the “payer having 

income from abroad” exception) and is a withholdable 

payment. As a result, the interest paid to foreign payees is 

generally subject to chapter 3 withholding and withholding 

may apply under chapter 4 absent an applicable withholding exception. In addition, if “allocable interest” exceeds 

the branch interest paid, the excess interest is also subject 

to tax and reported on the foreign corporation's income 

tax return, Form 1120-F. See the Instructions for Form 

1120-F for more information.

If there is no treaty provision that reduces the rate of 

withholding on branch interest, you must withhold tax under chapter 3 at the statutory rate of 30% on the interest 

paid by a foreign corporation's U.S. trade or business and 

you must withhold under chapter 4 when otherwise applicable and without regard to a treaty provision.

In general, payees of interest from a U.S. trade or business of a foreign corporation are entitled to reduced rates 

of, or exemption from, tax under a treaty in the same manner and subject to the same conditions as if they had received the interest from a domestic corporation. However, 

a foreign corporation that receives interest paid by a U.S. 

trade or business of a foreign corporation must also be a 

qualified resident of its country of residence to be entitled 

to benefits under that country's tax treaty. If the payee foreign corporation is a resident of a country that has entered 

into an income tax treaty since 1987 that contains a limitation on benefits article, the foreign corporation need only 

satisfy the limitation on benefits article in that treaty to 

qualify for a reduced rate of tax.

Alternatively, a payee may be entitled to treaty benefits 

under the payer's treaty if there is a provision in that treaty 

that applies specifically to interest paid by the payer foreign corporation. This provision may exempt all or a part 

of this interest. Some treaties provide for an exemption regardless of the payee's residence or citizenship, while others provide for an exemption according to the payee's status as a resident or citizen of the payer's country.

A foreign corporation that pays interest must be a qualified resident (under section 884) of its country of residence for the payer's treaty to exempt payments from tax 

by the foreign corporation. However, if the foreign corporation is a resident of a country that has entered into an income tax treaty since 1987 that contains a limitation on 

benefits article, the foreign corporation need only satisfy 

the limitation on benefits article in that treaty to qualify for 

the exemption.

Interest on deposits (Income Code 29). Foreign persons are not subject to chapter 3 withholding on interest 

that is not connected with a U.S. trade or business if it is 

from:

• Deposits with persons carrying on the banking business;

• Deposits or withdrawable accounts with savings institutions chartered and supervised under federal or 

state law as savings and loan or similar associations, 

such as credit unions, if the interest is or would be deductible by the institutions; or

• Amounts left with an insurance company under an 

agreement to pay interest on them.

Deposits include certificates of deposit, open account 

time deposits, Eurodollar certificates of deposit, and other 

deposit arrangements.

You may have to file Form 1042-S to report certain payments of interest on deposits. See Deposit interest paid to 

certain nonresident alien individuals under Returns Required, later. You may also have to file Form 1042-S when 

the deposit interest is a withholdable payment to which 

withholding applies (or was applied) to chapter 4.

Obligations issued before August 10, 2010. Interest 

received from a resident alien individual or a domestic corporation is not subject to chapter 3 withholding and is not 

a withholdable payment if the interest meets all of the following requirements.

• At least 80% of the payer’s gross income from all sources has been from active foreign business for the 3 tax 

years of the payer before the year in which the interest 

is paid, or for the applicable part of those 3 years.

• The recipient is not a related person. Use rules similar 

to those in section 954(d)(3) to determine if the recipient is a related person.

• The interest is paid on an obligation issued before August 10, 2010.

• The obligation has not been significantly modified 

since August 10, 2010.

Interest from foreign business arrangements. In 

certain cases, interest received from a domestic payer, 

most of whose gross income is active foreign business income, is not subject to chapter 3 withholding and is not a 

withholdable payment.

Active foreign business income is gross income which 

is:

• Derived from sources outside the United States, and

• Attributable to the active conduct of a trade or business in a foreign country or territory of the United 

States by the domestic payer.

Corporations existing on January 1, 2011. Certain interest received from a domestic corporation that is an existing 80/20 company is not subject to withholding. An existing 80/20 company must meet all of the following 

requirements.

• It was in existence on January 1, 2011.

• For the 3 tax years beginning before January 1, 2011 

(or for its years of existence if the corporation was in 

existence for less than 3 tax years), at least 80% of its 

gross income from all sources was active foreign business income.

Publication 515 (2024) 43
• It continues to meet the 80% test for every tax year beginning after December 31, 2010.

• It has not added a substantial line of business after 

August 10, 2010.

Transitional rule for active foreign business income. 

In most cases, the domestic corporation determines its 

active foreign business income by combining its income 

and the income of any subsidiary in which it owns, directly 

or indirectly, 50% or more of the stock. However, if the 

testing period includes 1 or more tax years beginning before January 1, 2011, the corporation can use only its 

gross income for any tax year beginning before January 1, 

2011, and will meet the 80% test if the weighted average 

percentage of active foreign business income is more than 

80%.

A foreign beneficial owner does not need to provide a 

Form W-8 or documentary evidence for this exception. 

However, documentation may be required for purposes of 

Form 1099 reporting and backup withholding.

Sales of bonds between interest dates. Amounts paid 

as part of the purchase price of an obligation sold or exchanged between interest payment dates is not subject to 

chapter 3 withholding. In addition, such a payment is not a 

withholdable payment. This does not apply if the sale or 

exchange is part of a plan the principal purpose of which 

is to avoid tax and you have actual knowledge or reason to 

know of the plan. The exemption from chapter 3 withholding and from withholdable payments applies even if you 

do not have any documentation from the payee. However, 

documentation may be required for purposes of Form 

1099 reporting and backup withholding.

Short-term obligations. Interest and original issue discount paid on an obligation that is payable 183 days or 

less from the date of its original issue (without regard to 

the period held by the taxpayer) that satisfy other requirements intended to ensure that the debt is not held by a 

U.S. nonexempt person are not subject to chapter 3 withholding. In addition, such a payment is not a withholdable 

payment. These exemptions apply even if you do not have 

any documentation from the payee. However, documentation may be required for purposes of Form 1099 reporting 

and backup withholding.

Income from U.S. Savings Bonds of residents of the 

Ryukyu Islands or the Trust Territory of the Pacific Islands. Interest from a Series E, Series EE, Series H, or 

Series HH U.S. Savings Bond is not subject to chapter 3 

withholding if the nonresident alien individual acquired the 

bond while a resident of the Ryukyu Islands or the Trust 

Territory of the Pacific Islands.

Dividends

The following types of dividends paid to foreign payees 

are generally subject to chapter 3 withholding and are 

generally withholdable payments such that withholding 

chapter 4 applies absent an exception available under 

chapter 4.

Dividends paid by U.S. corporations—general (Income Code 6). This category includes all distributions of 

domestic corporations (other than dividends qualifying for 

direct dividend rate—Income Code 7).

A corporation making a distribution with respect to its 

stock, or any intermediary making a payment of such a 

distribution, is required to withhold on the entire amount of 

the distribution at the rate applicable under chapter 3 

when withholding under chapter 4 does not apply. However, a distributing corporation or intermediary may elect 

to not withhold on the part of the distribution that:

1. Represents a nontaxable distribution payable in stock 

or stock rights;

2. Represents a distribution in part or full payment in exchange for stock;

3. Is not paid out of current or accumulated earnings and 

profits, based on a reasonable estimate of the anticipated amount of earnings and profits for the tax year 

of the distribution made at a time reasonably close to 

the date of the distribution;

4. Represents a capital gain dividend (use Income Code 

36) or an exempt interest dividend by a RIC; or

5. Is subject to withholding under section 1445 (withholding of tax on dispositions of USRPIs) and the distributing corporation is a U.S. real property holding 

corporation or a qualified investment entity (QIE).

The election is made by actually reducing the amount 

of withholding at the time the distribution is paid.

Dividends paid by a QIE (Income Code 24). A QIE 

is:

1. Any REIT, or

2. Any RIC that is a U.S. real property holding corporation.

A distribution by a QIE to a nonresident alien or a foreign corporation is treated as a dividend and is not subject 

to withholding under section 1445 as a gain from the sale 

or exchange of a USRPI if:

• The distribution is on stock regularly traded on a securities market in the United States, and

• The individual or corporation did not own more than 

10% of such stock in the case of a REIT or 5% of such 

stock in the case of a RIC at any time during the 

1-year period ending on the date of distribution.

Certain distributions by a REIT may be treated as a dividend and are not subject to withholding under section 

1445 as a gain from the sale or exchange of a USRPI. See 

Qualified investment entities (QIEs) under U.S. Real Property Interest, later.

Dividends paid by a domestic corporation (an existing “80/20” company). The active foreign business 

percentage of any dividend paid by a domestic corporation that is an existing 80/20 company is not subject to 

withholding. A domestic corporation is an existing 80/20 

company if it satisfies all of the following.

44 Publication 515 (2024)
1. It was in existence on January 1, 2011.

2. For the 3 tax years beginning before January 1, 2011 

(or for all years of existence if it was in existence for 

less than 3 tax years), at least 80% of its gross income from all sources was active foreign business income. Active foreign business income is gross income that is:

a. Derived from sources outside the United States, 

and

b. Attributable to the active conduct of a trade or 

business in a foreign country or territory of the United States by the corporation.

3. It continues to meet the 80% test for every tax year 

beginning after December 31, 2010.

4. It has not added a substantial line of business after 

August 10, 2010.

Transitional rule for item (2). In most cases, the domestic corporation determines its active foreign business 

income by combining its income and the income of any 

subsidiary in which it owns, directly or indirectly, 50% or 

more of the stock. However, if the testing period includes 1 

or more tax years beginning before January 1, 2011, the 

corporation can use only its gross income for any tax year 

beginning before January 1, 2011, and will meet the 80% 

test if the weighted average percentage of active foreign 

business income is more than 80%.

The active foreign business percentage is found by dividing the corporation’s active foreign business income for 

the testing period by the corporation’s total gross income 

for that period. The testing period is the 3 tax years before 

the year in which the dividends are declared (or shorter 

period if the corporation was not in existence for 3 years). 

If the corporation has no gross income for that 3-year period, the testing period is the tax year in which the dividend is paid.

Consent dividends. If you receive a Form 972, Consent of Shareholder To Include Specific Amount in Gross 

Income, from a nonresident alien individual or other foreign shareholder who agrees to treat the amount as a taxable dividend, you must pay and report on Form 1042 and 

Form 1042-S any withholding tax you would have withheld 

if the dividend actually had been paid.

Interest-related dividends and short-term capital 

gain dividends received from mutual funds. Certain 

interest-related dividends and short-term capital gain dividends paid by a mutual fund or other RIC are exempt from 

chapter 3 withholding.

Dividends qualifying for direct dividend rate (Income 

Code 7). A treaty may reduce the rate of withholding on 

dividends from that which generally applies under the 

treaty if the shareholder owns a certain percentage of the 

voting stock of the corporation when withholding under 

chapter 4 does not apply. In most cases, this preferential 

rate applies only if the shareholder directly owns the required percentage, although some treaties permit the percentage to be met by direct or indirect ownership. The 

preferential rate may apply to the payment of a deemed 

dividend under section 304(a)(1). Under some treaties, 

the preferential rate for dividends qualifying for the direct 

dividend rate applies only if no more than a certain percentage of the paying corporation's gross income for a 

certain period consists of dividends and interest other 

than dividends and interest from subsidiaries or from the 

active conduct of a banking, financing, or insurance business. A foreign person should claim the direct dividend 

rate by filing the appropriate Form W-8.

Consent dividends. If you receive a Form 972 from a 

foreign shareholder qualifying for the direct dividend rate, 

you must pay and report on Form 1042 and Form 1042-S 

any withholding tax you would have withheld if the dividend actually had been paid.

Dividends paid by foreign corporations (Income 

Code 8). Dividends paid by a foreign corporation generally are not subject to chapter 3 withholding and are not 

withholdable payments. This exception does not require a 

Form W-8. However, a Form W-8 may be required for purposes of Form 1099 reporting and backup withholding.

The payment to a foreign corporation by a foreign corporation of a deemed dividend under section 304(a)(1) is 

subject to chapter 3 withholding and may be a withholdable payment except to the extent it can be clearly determined to be from foreign sources.

Corporation subject to branch profits tax. If a foreign corporation is subject to branch profits tax for any tax 

year, withholding is not required on any dividends paid by 

the corporation out of its earnings and profits for that tax 

year. Dividends may be subject to withholding if they are 

attributable to any earnings and profits when the branch 

profits tax is prohibited by a tax treaty.

A foreign person may claim a treaty benefit on dividends paid by a foreign corporation to the extent the dividends are paid out of earnings and profits in a year in 

which the foreign corporation was not subject to the 

branch profits tax. However, you may apply a reduced rate 

of withholding under an income tax treaty only under rules 

similar to the rules that apply to treaty benefits claimed on 

branch interest paid by a foreign corporation. You should 

check the specific treaty provision.

Dividends paid to Puerto Rican corporation. For 

chapter 3 purposes, the tax rate on dividends paid to a 

corporation created or organized in, or under the law of, 

the Commonwealth of Puerto Rico is 10%, rather than 

30%, if:

• At all times during the tax year less than 25% in value 

of the Puerto Rican corporation's stock is owned, directly or indirectly, by foreign persons;

• At least 65% of the Puerto Rican corporation's gross 

income is effectively connected with the conduct of a 

trade or business in Puerto Rico or the United States 

for the 3-year period ending with the close of the tax 

year of that corporation (or the period the corporation 

or any predecessor has been in existence, if less); and

Publication 515 (2024) 45
• No substantial part of the income of the Puerto Rican 

corporation is used, directly or indirectly, to satisfy obligations to a person who is not a bona fide resident of 

Puerto Rico or the United States.

No special rules apply to Puerto Rican corporations for 

chapter 4 purposes, but special withholding rules do apply 

for withholdable payments made to territory financial institutions and nonfinancial entities. See the chapter 4 regulations for information on these special requirements.

Dividend Equivalents

Dividend equivalent payments. Dividend equivalent 

payments are treated as U.S. source dividends such that 

withholding under chapter 3 may apply. Use Income Code 

34 or 40 to report dividend equivalent payments. Dividend 

equivalent payments are withholdable payments except 

when an exception applies for chapter 4 purposes.

A dividend equivalent is a payment (as defined in Regulations section 1.871-15(c)) that, directly or indirectly, is 

contingent on, or determined by reference to, the payment 

of a dividend from U.S. sources. Dividend equivalent payments include the following payments.

1. A substitute dividend made under a securities lending 

or sale-repurchase transaction involving a U.S. stock.

2. A payment that references the payment of a dividend 

from an underlying security made under a specified 

notional principal contract.

3. A payment that references the payment of a dividend 

from an underlying security made to a specified 

equity-linked instrument.

Substitute dividend (Income Code 34). A substitute 

dividend is any payment made under a securities lending 

or sale-repurchase transaction that (directly or indirectly) 

is contingent upon, or determined by reference to, the 

payment of a dividend from sources in the United States.

Specified notional principal contracts (SNPCs) 

and specified equity-linked instruments (SELIs) (Income Code 40). Transactions entered into on or after 

January 1, 2017.

For transactions entered into on or after January 1, 

2017 (including as a result of a deemed exchange pursuant to section 1001), an SNPC or SELI is a notional 

principal contract (NPC), or equity linked instrument, respectively, with a delta of 0.8 or greater if it is a simple 

contract under Regulations section 1.871-15(a)(14)(i), or it 

meets the substantial equivalence test if it is a complex 

contract under Regulations section 1.871-15(a)(14)(ii). 

See Regulations section 1.871-15(g) for the delta test and 

Regulations section 1.871-15(h) for the substantial equivalence test.

Notwithstanding the preceding paragraph, for transactions entered into prior to January 1, 2025, transition relief 

provides that, subject to an anti-abuse rule, only delta-one 

transactions will be treated as SNPCs and SELIs. See Notice 2022-37, 2022-37 I.R.B. 234, available at IRS.gov/irb/

2022-37_IRB#NOT-2022-37.

NPCs entered into before January 1, 2017.

For transactions entered into before January 1, 2017, 

an SNPC is any NPC if:

• In connection with entering into the contract, any long 

party to the contract transfers the underlying security 

to any short party to the contract;

• In connection with the termination of the contract, any 

short party to the contract transfers the underlying security to any long party to the contract;

• The underlying security is not readily tradeable on an 

established securities market; or

• In connection with entering into the contract, the underlying security is posted as collateral by any short 

party to the contract with any long party to the contract.

For more information regarding dividend equivalents, 

see Regulations section 1.871-15 and Notice 2022-37.

Amounts paid to qualified securities lenders 

(QSLs). A withholding agent that makes substitute dividend payments to a QSL may apply the transition rules 

described in Notice 2010-46, Part III, for payments made 

before January 1, 2025. See Notice 2022-37.

Amounts paid to QDDs. Only an eligible entity that 

has entered into a QI agreement can be a QDD. An eligible entity is a home office or branch that is a QI and that 

is:

1. A dealer in equity derivatives that is subject to regulatory supervision as a dealer by a governmental authority in the jurisdiction in which it was organized or 

operates;

2. A bank or bank holding company that is subject to 

regulatory supervision as a bank or bank holding 

company (as applicable) by a governmental authority 

in the jurisdiction in which it was organized or operates;

3. An entity that is wholly owned (directly or indirectly) by 

a bank or bank holding company subject to regulatory 

supervision as a bank or bank holding company (as 

applicable) by a governmental authority in the jurisdiction in which the bank or bank holding company (as 

applicable) was organized or operates and that entity, 

in its capacity as a dealer in equity derivatives:

a. Issues potential section 871(m) transactions to 

customers; and

b. Receives dividends with respect to stock or dividend equivalent payments pursuant to potential 

section 871(m) transactions that hedge potential 

section 871(m) transactions that it issued;

4. A foreign branch of a U.S. financial institution if the foreign branch would be described in (1), (2), or (3) had 

it been a separate entity; or

5. Any person otherwise acceptable to the IRS.

46 Publication 515 (2024)
A QDD is liable for tax under section 881 on its section 

871(m) amount for each dividend on each underlying security. The section 871(m) amount is described in 

Regulations section 1.871-15(q)(3).

For more information on amounts paid to QDDs, see 

the chapter 3 regulations issued with the section 871(m) 

regulations. You can view the regulations at IRS.gov/irb/

2017-09_IRB#TD-9815.

Gains

You generally do not need to withhold under chapter 3 or 4 

on any gain from the sale of real or personal property because it is not FDAP income. However, see U.S. Real 

Property Interest, later.

Capital gains (Income Code 9). You must withhold at 

30%, or if applicable, a reduced treaty rate, on the gross 

amount of the following items.

• Gains on the disposal of timber, coal, or domestic iron 

ore with a retained economic interest, unless an election is made to treat those gains as income effectively 

connected with a U.S. trade or business.

• Gains on contingent payments received from the sale 

or exchange after October 4, 1966, of patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property.

• Gains on certain transfers of all substantial rights to, or 

an undivided interest in, patents if the transfers were 

made before October 5, 1966.

• Certain gains from the sale or exchange of original issue discount obligations issued after March 31, 1972. 

For more on withholding on original issue discount obligations, see Interest, earlier.

If you do not know the amount of the gain, you must 

withhold an amount necessary to ensure that the tax withheld will not be less than 30% of the recognized gain. The 

amount to be withheld, however, must not be more than 

30% of the amount payable because of the transaction.

Unless you have reason to believe otherwise, you may 

rely upon the written statement of the person entitled to 

the income as to the amount of gain. The Form W-8 or 

documentary evidence must show the beneficial owner's 

basis in the property giving rise to the gain.

Tax treaties. Many tax treaties exempt certain types of 

gains from U.S. income tax. Be sure to carefully check the 

provision of the treaty that applies before allowing an exemption from withholding.

Royalties

In general, you must withhold tax under chapter 3 on the 

payment of royalties from sources in the United States. 

However, certain types of royalties are given reduced 

rates or exemptions under some tax treaties. Accordingly, 

these different types of royalties are treated as separate 

categories for withholding purposes. For chapter 4 purposes, royalties are nonfinancial payments and are therefore 

excluded as withholdable payments.

Most treaties have more than one withholding rate 

on royalties, which varies by the classification of 

the payment in that treaty. Be sure to check your 

particular treaty for the specific rate that applies to you.

Industrial royalties (Income Code 10). This category 

of income includes royalties for the use of, or the right to 

use, patents, trademarks, secret processes and formulas, 

goodwill, franchises, “know-how,” and similar rights. It may 

also include payments for the use of, or right to use, industrial, commercial, and scientific equipment, when this is included in the treaty definition of royalties.

Motion picture or television copyright royalties (Income Code 11). This category refers to royalties paid for 

the use of motion picture and television copyrights.

Other royalties (for example, copyright, recording, 

publishing) (Income Code 12). This category refers to 

the royalties paid for the use of copyrights on books, periodicals, articles, etc., except motion picture and television 

copyrights.

Real Property Income and Natural 

Resources Royalties (Income Code 14)

You must withhold tax under chapter 3 on income (such as 

rents and royalties) from real property located in the United States and held for the production of income, unless 

the foreign payee elects to treat this income as effectively 

connected with a U.S. trade or business. If the foreign 

payee chooses to treat this income as effectively connected, the payee must give you Form W-8ECI (discussed 

earlier). This real property income includes royalties from 

mines, wells, or other natural deposits, as well as ordinary 

rents for the use of real property. For chapter 4 purposes, 

income from real property is either a nonfinancial payment 

(and therefore not a withholdable payment) or is excluded 

as a withholdable payment because it is ECI. For withholding that applies to the disposition of USRPI, see U.S. 

Real Property Interest, later.

Pensions, Annuities, and Alimony (Income 

Code 15)

The following rules apply to withholding on pensions, annuities, and alimony of foreign payees.

Pensions and annuities. In most cases, you must withhold tax on the gross amount of pensions and annuities 

that you pay that are from sources within the United 

States. This includes amounts paid under an annuity contract issued by a foreign branch of a U.S. life insurance 

company.

Most tax treaties provide an exemption from tax on 

non-government pensions and annuities. See the specific 

treaty rules for government pensions. The exemption may 

not apply to lump-sum payments. See, for example, Article 

CAUTION

!

Publication 515 (2024) 47
17(2) of the United States–United Kingdom income tax 

treaty. In addition, it does not apply to payments treated as 

deferred compensation, which is often treated as income 

from employment.

For purposes of chapter 3 withholding, in the absence 

of a treaty exemption, you must withhold at the statutory 

rate of 30% on the entire distribution that is from sources 

within the United States. You may, however, apply withholding at graduated rates to the part of a distribution that 

arises from the performance of services in the United 

States after December 31, 1986.

Employer contributions to a defined benefit plan covering more than one individual are not made for the benefit 

of a specific participant, but are made based on the total 

liabilities to all participants. All funds held under the plan 

are available to provide benefits to any participant. If the 

distribution is from such a plan, you can use the method in 

Revenue Procedure 2004-37 to allocate the distribution to 

sources in the United States.

The withholding rules that apply to payments to foreign 

persons generally take precedence over any other withholding rules that would apply to distributions from qualified plans and other qualified retirement arrangements.

Foreign pension plans are exempt from applying withholding under chapter 4 when they are exempt beneficial 

owners under Regulations section 1.1471-6(f). A payment 

from a U.S. pension plan to a foreign individual beneficiary 

in the plan is not subject to withholding under chapter 4.

No withholding. Do not withhold tax on an annuity payment to a nonresident alien if at the time of the first payment from the plan, 90% or more of the employees eligible 

for benefits under the plan are citizens or residents of the 

United States and the payment is:

1. For the nonresident's personal services performed 

outside the United States; or

2. For personal services by a nonresident individual 

present in the United States for 90 days or less during 

each tax year, whose pay for those services did not 

exceed $3,000, and the personal services were performed for:

a. A nonresident alien individual, foreign partnership, 

or foreign corporation not engaged in a trade or 

business in the United States; or

b. An office or place of business of a U.S. resident or 

citizen which was maintained outside the United 

States.

If the payment otherwise qualifies under these rules, 

but less than 90% of the employees eligible for benefits 

are citizens or residents of the United States, you still 

need not withhold tax on the payment if:

• The recipient is a resident of a country that gives a 

substantially equal exclusion to U.S. citizens and residents, or

• The recipient is a resident of a beneficiary developing 

country under the Trade Act of 1974.

The foreign person entitled to the payments must provide you with a Form W-8BEN that contains the TIN of the 

foreign person.

Alimony payments. In most cases, alimony payments 

made by U.S. resident aliens to nonresident aliens are taxable and subject to chapter 3 withholding whether the recipients are residing abroad or are temporarily present in 

the United States.

Many tax treaties, however, provide for an exemption 

from withholding for alimony payments. See Tax Treaties, 

later, for information about treaty benefits.

Alimony payments made to a nonresident alien by a 

U.S. ancillary administrator of a nonresident alien estate 

are from foreign sources and are not subject to withholding. Alimony payments are not subject to chapter 4 withholding.

Note. Under section 11051 of P.L. 115-97 (TCJA), alimony is no longer considered income if the divorce or 

separation agreement is executed after December 31, 

2018, or if executed before January 1, 2019, but modified 

after December 31, 2018, the modification must state that 

section 11051 of P.L. 115-97 applies to the modification.

Scholarships and Fellowship Grants Subject 

to Chapter 3 Withholding (Income Code 16)

A scholarship or fellowship grant is an amount given to an 

individual for study, training, or research, and which does 

not constitute compensation for personal services. For information about withholding on scholarship and fellowship 

grants that is treated as compensation for services, see 

Pay for services rendered, later. Whether a fellowship 

grant from U.S. sources is subject to chapter 3 withholding 

depends on the nature of the payments and whether the 

recipient is a candidate for a degree. These amounts are 

not subject to chapter 4 withholding. See Scholarships, 

fellowships, and grants under Source of Income, earlier.

Candidate for a degree. Do not withhold on a qualified 

scholarship from U.S. sources granted and paid to a candidate for a degree. A qualified scholarship means any 

amount paid to an individual as a scholarship or fellowship 

grant to the extent that, in accordance with the conditions 

of the grant, the amount is to be used for the following expenses.

• Tuition and fees required for enrollment or attendance 

at an educational organization.

• Fees, books, supplies, and equipment required for 

courses of instruction at the educational organization.

The payment of a qualified scholarship to a nonresident 

alien is not reportable and is not subject to withholding. 

However, the part of a scholarship or fellowship paid to a 

nonresident alien which does not constitute a qualified 

scholarship is reportable on Form 1042-S and is subject to 

withholding. For example, those parts of a scholarship devoted to travel, room, and board are subject to withholding 

and are reported on Form 1042-S. The withholding rate is 

14% on taxable scholarship and fellowship grants paid to 

nonresident aliens temporarily present in the United 

48 Publication 515 (2024)
States in “F,” “J,” “M,” or “Q” nonimmigrant status. Payments made to nonresident alien individuals in any other 

immigration status are subject to 30% withholding.

Nondegree candidate. If the person receiving the scholarship or fellowship grant is not a candidate for a degree, 

and is present in the United States in “F,” “J,” “M,” or “Q” 

nonimmigrant status, you must withhold tax at 14% on the 

total amount of the grant that is from U.S. sources if the 

following requirements are met.

1. The grant must be for study, training, or research in 

the United States.

2. The grant must be made by:

a. A tax-exempt organization operated for charitable, 

religious, educational, etc. purposes;

b. A foreign government;

c. A federal, state, or local government agency; or

d. An international organization, or a binational or 

multinational educational or cultural organization 

created or continued by the Mutual Educational 

and Cultural Exchange Act of 1961 (known as the 

Fulbright-Hays Act).

If the grant does not meet both (1) and (2) above, you 

must withhold at 30% on the amount of the grant that is 

from U.S. sources.

Alternate withholding procedure. You may choose to 

treat the taxable part of a U.S. source grant or scholarship 

as wages. The student or grantee must have been admitted into the United States on an “F,” “J,” “M,” or “Q” visa. 

The student or grantee will know that you are using this alternate withholding procedure when you ask for a Form 

W-4.

The student or grantee must complete Form W-4 annually following the instructions given here and forward it to 

you, the payer of the scholarship, or your designated withholding agent. You may rely on the information on Form 

W-4 unless you know or have reason to know it is incorrect. You must file a Form 1042-S (discussed later) for 

each student or grantee who gives you, or your withholding agent, a Form W-4.

Each student or grantee who files a Form W-4 must file 

an annual U.S. income tax return to take the deductions 

claimed on that form. If the individual is in the United 

States during more than 1 tax year, they must attach a 

statement to the annual Form W-4 indicating that the individual has filed a U.S. income tax return for the previous 

year. If they have not been in the United States long 

enough to have to file a return, the individual must attach a 

statement to the Form W-4 saying that a timely U.S. income tax return will be filed.

The payer of the grant or scholarship must review the 

Form W-4 to make sure all the necessary and required information is provided. If the withholding agent knows or 

has reason to know that the amounts shown on the Form 

W-4 may be false, the withholding agent must reject the 

Form W-4 and withhold at the appropriate statutory rate 

(14% or 30%).

After receipt and acceptance of the Form W-4, the 

payer must withhold at the graduated rates in Pub. 15-T as 

if the grant or scholarship income were wages. The gross 

amount of the income is reduced by the total amount of 

any deductions on the Form W-4 and the withholding tax 

is figured on the rest.

Pay for services rendered. Pay for services rendered 

as an employee by an alien who is also the recipient of a 

scholarship or fellowship grant is usually subject to graduated withholding under chapter 3 according to the rules 

discussed later in Wages Paid to Employees— Graduated 

Withholding. This includes taxable amounts an individual 

who is a candidate for a degree receives for teaching, doing research, and carrying out other part-time employment 

required as a condition for receiving the scholarship or fellowship grant (that is, compensatory scholarship or fellowship income).

Grants given to students, trainees, or researchers 

which require the performance of personal services as a 

necessary condition for disbursing the grant do not qualify 

as scholarship or fellowship grants. Instead, they are compensation for personal services considered to be wages. It 

does not matter what term is used to describe the grant 

(for example, stipend, scholarship, fellowship, etc.).

Withholding agents who pay grants that are in fact 

wages must report such grants on Forms 941 and 

W-2 and withhold income tax on them at the graduated rates. Withholding agents may not allow tax treaty 

exemptions that apply to scholarships and fellowships to 

be applied to grants that are really wages. It is the responsibility of the withholding agent to determine whether a 

grant is “wages” or a “scholarship or fellowship,” and to report and withhold on the grant accordingly. An alien student, trainee, or researcher may not claim a scholarship or 

fellowship treaty exemption against income that has been 

reported to them on Form W-2 as wages.

Per diem paid by the U.S. Government. Per diem for 

subsistence paid by the U.S. Government (directly or by 

contract) to a nonresident alien engaged in a training program in the United States funded by the U.S. Agency for 

International Development are not subject to 14% or 30% 

withholding. This is true even if the alien is subject to income tax on those amounts.

Tax treaties. Many treaties contain exemptions from U.S. 

taxation for scholarships and fellowships. Although usually 

found in the student articles of the tax treaties, many of 

these exemptions also apply to research grants received 

by researchers who are not students. See Tax Treaties, 

later, for information about treaty benefits. The treaty provision usually exempts the entire scholarship or fellowship 

amount, regardless of whether the grant is a “qualified 

scholarship” under U.S. law.

An alien student, trainee, or researcher may claim a 

treaty exemption for a scholarship or fellowship by submitting Form W-8BEN to the payer of the grant. However, a 

CAUTION

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Publication 515 (2024) 49
scholarship or fellowship recipient who receives both wages and a scholarship or fellowship from the same institution can claim treaty exemptions on both kinds of income 

on Form 8233.

The scholarship or fellowship recipient who is claiming 

a treaty exemption must provide you with a foreign TIN on 

Form W-8BEN or, in the case of a recipient who also received wages from the same institution, a U.S. TIN on 

Form 8233, or you cannot allow the treaty exemption. A 

copy of a completed Form W-7, showing that a TIN has 

been applied for, can be given to you with a Form 8233. 

See Form 8233, later, under Pay for Personal Services 

Performed.

Nonresident alien who becomes a resident alien. 

In most cases, only a nonresident alien individual may use 

the terms of a tax treaty to reduce or eliminate U.S. tax on 

income from a scholarship or fellowship grant. A student 

(including a trainee or business apprentice) or researcher 

who has become a resident alien for U.S. tax purposes 

may not use the terms of a tax treaty due to a provision 

known as a “saving clause.” However, an exception to the 

saving clause may permit an exemption from tax to continue for scholarship or fellowship grant income even after 

the recipient has otherwise become a U.S. resident alien 

for tax purposes. In this situation, the individual must give 

you a Form W-9 and an attachment that includes all the 

following information.

• The treaty country.

• The treaty article addressing the income.

• The article number (or location) in the tax treaty that 

contains the saving clause and its exceptions.

• The type and amount of income that qualifies for the 

exemption from tax.

• Sufficient facts to justify the exemption from tax under 

the terms of the treaty article.

Example. Article 20 of the U.S.–China income tax 

treaty allows an exemption from tax for scholarship income received by a Chinese student temporarily present 

in the United States. Under the Internal Revenue Code, a 

student may become a resident alien for tax purposes if 

their stay in the United States exceeds 5 calendar years. 

However, the treaty allows the provisions of Article 20 to 

continue to apply even after the Chinese student becomes 

a resident alien of the United States.

Other Grants, Prizes, and Awards Subject to 

Chapter 3 Withholding

Other grants, prizes, and awards made by grantors that reside in the United States are treated as income from sources within the United States. Those made for activities 

conducted outside the United States by a foreign person 

or by grantors that reside outside the United States are 

treated as income from foreign sources. These provisions 

do not apply to salaries or other pay for services.

Grant. The purpose of a grant must be to achieve a specific objective, produce a report or other similar product, or 

improve or enhance a literary, artistic, musical, scientific, 

teaching, or other similar capacity, skill, or talent of the 

grantee. A grant must also be an amount which does not 

qualify as a scholarship or fellowship. The grantor must 

not intend the amount to be given to the grantee for the 

purpose of aiding the grantee to perform study, training, or 

research.

Prizes and awards. Prizes and awards are amounts received primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, 

or are received as the result of entering a contest. A prize 

or award is taxable to the recipient unless all of the following conditions are met.

• The recipient was selected without any action on their 

part to enter the contest or proceeding.

• The recipient is not required to render substantial future services as a condition to receive the prize or 

award.

• The prize or award is transferred by the payer to a governmental unit or tax-exempt charitable organization 

as designated by the recipient.

Targeted grants and achievement awards. Targeted 

grants and achievement awards received by nonresident 

aliens for activities conducted outside the United States 

are treated as income from foreign sources. Targeted 

grants and achievement awards are issued by exempt organizations or by the United States (or one of its instruments or agencies), a state (or a political subdivision of a 

state), or the District of Columbia for an activity (or past 

activity in the case of an achievement award) undertaken 

in the public interest.

Pay for Personal Services Performed

This section explains the rules for withholding tax from pay 

for personal services. You must generally withhold tax at 

the 30% rate on compensation you pay to a nonresident 

alien individual for labor or personal services performed in 

the United States, unless that pay is specifically exempted 

from withholding or subject to graduated withholding. This 

rule applies regardless of your place of residence, the 

place where the contract for service was made, or the 

place of payment.

Payments for personal services are not withholdable 

payments under chapter 4 when they are nonfinancial 

payments. See Regulations section 1.1473-1(a)(4)(iii) for 

a description of these payments and their exclusion as 

withholdable payments.

Illegal aliens. Foreign workers who are illegal aliens are 

subject to U.S. taxes in spite of their illegal status. U.S. 

employers or payers who hire illegal aliens may be subject 

to various fines, penalties, and sanctions imposed by U.S. 

Immigration and Customs Enforcement. If such employers 

or payers choose to hire illegal aliens, the payments made 

to those aliens are subject to the same tax withholding 

50 Publication 515 (2024)
and reporting obligations that apply to other classes of aliens. Illegal aliens who are nonresident aliens and who receive income from performing independent personal services are subject to 30% withholding unless exempt under 

some provision of law or a tax treaty. Illegal aliens who are 

resident aliens and who receive income from performing 

dependent personal services are subject to the same reporting and withholding obligations that apply to U.S. citizens who receive the same kind of income.

Form 8233. This form is used by a nonresident alien individual to claim a tax treaty exemption from withholding on 

some or all compensation paid for:

• Independent personal services (self-employment),

• Dependent personal services, or

• Personal services income and noncompensatory 

scholarship or fellowship income from the same withholding agent.

A withholding agent that receives Form 8233 from a 

nonresident alien individual claiming a tax treaty exemption must review the form, sign to indicate its acceptance, 

and forward the form to the IRS within 5 days of its acceptance.

COVID-19 medical condition travel exception. For tax 

years after December 31, 2021, individuals cannot claim 

the COVID-19 medical condition travel exception to exclude any days of presence in the United States for the 

purpose of the “substantial presence test.” This was 

solely available for the 2020 tax year. However, days of 

presence in the United States in 2020 that were excluded 

for tax year 2020 may impact the application of the “substantial presence test” for tax year 2021. For more information, including guidance for withholding agents, see the 

Instructions for Form 8233.

Form W-4. This form is used by a person providing dependent personal services to claim withholding allowances, but not a tax treaty exemption. Nonresident alien individuals are subject to special instructions for completing 

the Form W-4. See the discussion under Wages Paid to 

Employees—Graduated Withholding, later.

Pay for independent personal services (Income Code 

17). Independent personal services (a term commonly 

used in tax treaties) are personal services performed by 

an independent nonresident alien contractor as contrasted with those performed by an employee. This category 

of pay includes payments for professional services, such 

as fees of an attorney, physician, or accountant made directly to the person performing the services. It also includes honoraria paid by colleges and universities to visiting teachers, lecturers, and researchers.

Pay for independent personal services is subject to 

chapter 3 withholding and reporting as follows.

30% rate. You must withhold at the statutory rate of 

30% on all payments unless the alien enters into a withholding agreement or receives a final payment exemption 

(discussed later).

Withholding agreements. Pay for personal services 

of a nonresident alien who is engaged during the tax year 

in the conduct of a U.S. trade or business may be wholly 

or partially exempted from withholding at the statutory rate 

if an agreement has been reached between the Commissioner or his delegate and the alien as to the amount of 

withholding required. This agreement will be effective for 

payments covered by the agreement that are made after 

the agreement is executed by all parties. The alien must 

agree to timely file an income tax return for the current tax 

year.

Final payment exemption. The final payment of compensation for independent personal services may be 

wholly or partially exempt from withholding at the statutory 

rate. This exemption applies to the last payment of compensation, other than wages, for personal services rendered in the United States that the alien expects to receive 

from any withholding agent during the tax year.

To obtain the final payment exemption, the alien, or the 

alien's agent, must file the forms and provide the information required by the Commissioner or his delegate. This information includes, but is not limited to, the following 

items.

• A statement by each withholding agent from whom 

amounts of gross income effectively connected with 

the conduct of a U.S. trade or business have been received by the alien during the tax year. It must show 

the amount of income paid and the amount of tax withheld. The withholding agent must sign the statement 

and include a declaration that it is made under penalties of perjury.

• A statement by the withholding agent from whom the 

final payment of compensation for personal services 

will be received showing the amount of final payment 

and the amount that would be withheld if a final payment exemption is not granted. The withholding agent 

must sign the statement and include a declaration that 

it is made under penalties of perjury.

• A statement by the alien that they do not intend to receive any other amounts of gross income effectively 

connected with the conduct of a U.S. trade or business during the current tax year.

• The amount of tax that has been withheld (or paid) under any other provision of the Internal Revenue Code 

or regulations for any income effectively connected 

with the conduct of a U.S. trade or business during the 

current tax year.

• The amount of any outstanding tax liabilities, including 

any interest and penalties, from the current tax year or 

prior tax periods.

• The provision of any income tax treaty under which a 

partial or complete exemption from withholding may 

be claimed, the country of the alien's residence, and a 

statement of sufficient facts to justify an exemption under that treaty.

The alien must give a statement, signed and verified by 

a declaration that it is made under penalties of perjury, 

Publication 515 (2024) 51
that all the information provided is true, and that to their 

knowledge no relevant information has been omitted.

If satisfied with the information provided, the Commissioner or his delegate will determine the amount of the alien's tentative income tax for the tax year on gross income 

effectively connected with the conduct of a U.S. trade or 

business. Ordinary and necessary business expenses 

may be taken into account if proved to the satisfaction of 

the Commissioner or his delegate.

The Commissioner or his delegate will provide the alien 

with a letter to you, the withholding agent, stating the 

amount of the final payment of compensation for personal 

services that is exempt from withholding, and the amount 

that would otherwise be withheld that may be paid to the 

alien due to the exemption. The amount of pay exempt 

from withholding cannot be more than $5,000. The alien 

must give two copies of the letter to you and must also attach a copy of the letter to their income tax return for the 

tax year for which the exemption is effective.

Travel expenses. If you pay or reimburse the travel expenses of a nonresident alien, the payments are not reportable to the IRS and are not subject to chapter 3 withholding if the payments are made under an accountable 

plan, as described in Regulations section 1.62-2. This 

treatment applies only to that part of a payment that represents the payment of travel and lodging expenses and not 

to that part that represents compensation for independent 

personal services.

Tax treaties. Under some tax treaties, pay for independent personal services performed in the United States 

is treated as business income and taxed according to the 

treaty provisions for business profits.

Under other tax treaties, pay for independent personal 

services performed in the United States is exempt from 

U.S. income tax only if the independent nonresident alien 

contractor performs the services during a period of temporary presence in the United States (usually not more than 

183 days) and is a resident of the treaty country.

Independent nonresident alien contractors use Form 

8233 to claim an exemption from withholding under a tax 

treaty. For more information, see Form 8233, earlier.

Form 8233 should be used to claim a treaty benefit based on a business profits provision or an independent personal services provision.

Often, you must withhold under the statutory rules on 

payments made to a treaty country resident contractor for 

services performed in the United States. This is because 

the factors on which the treaty exemption is based may 

not be determinable until after the close of the tax year. 

The contractor must then file a U.S. income tax return 

(Form 1040-NR) to recover any overwithheld tax by providing the IRS with proof that they are entitled to a treaty 

exemption.

Wages Paid to Employees—Graduated 

Withholding

Salaries, wages, bonuses, or any other pay for personal 

services (referred to collectively as wages) paid to 

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nonresident alien employees are subject to graduated 

withholding in the same way as for U.S. citizens and residents if the wages are effectively connected with the conduct of a U.S. trade or business.

Note. Any wages paid to a nonresident alien for personal services performed as an employee for an employer 

are generally not subject to the 30% withholding if the wages are subject to graduated withholding.

Also, the 30% withholding does not apply to pay for 

personal services performed as an employee for an employer if it is effectively connected with the conduct of a 

U.S. trade or business and is specifically exempted from 

the definition of wages. Chapter 4 withholding does not 

apply to these payments. See Pay that is not wages, later.

Special rule for certain agricultural workers. The 30% 

withholding does not apply to pay for personal services 

performed by a foreign agricultural worker in the United 

States on an H-2A visa. However, if the total wages are 

$600 or more and the worker does not give you a TIN, you 

may need to backup withhold. You may withhold at graduated rates if the employee asks you to by giving you a 

completed Form W-4.

Pay for personal services that is not subject to withholding is not subject to reporting on Form 1042-S. If the compensation is more than $600, report it on Form W-2 (if the 

employee gave you a TIN) or on Form 1099-NEC, Nonemployee Compensation (if the employee did not give you a 

TIN). See the Instructions for Forms 1099-MISC and 

1099-NEC for more information.

For more information on withholding on foreign agricultural workers, go to IRS.gov and enter “agricultural workers” in the search box.

Employer–employee relationship. For pay for personal 

services to qualify as wages, there must be an employer–

employee relationship.

Under the common law rules, every individual who performs services subject to the will and control of an employer, both as to what shall be done and how it shall be 

done, is an employee. It does not matter that the employer 

allows the employee considerable discretion and freedom 

of action, as long as the employer has the legal right to 

control both the method and the result of the services.

If an employer–employee relationship exists, it does not 

matter what the parties call the relationship. It does not 

matter if the employee is called a partner, coadventurer, 

agent, or independent contractor. It does not matter how 

the pay is measured, how the individual is paid, or what 

the payments are called. Nor does it matter whether the 

individual works full time or part time.

The existence of the employer–employee relationship 

under the usual common law rules will be determined, in 

doubtful cases, by an examination of the facts of each 

case.

Employee. An employee generally includes any individual who performs services if the relationship between 

the individual and the person for whom the services are 

performed is the legal relationship of employer and employee. This includes an individual who receives a 

52 Publication 515 (2024)
supplemental unemployment pay benefit that is treated as 

wages.

No distinction is made between classes of employees. Superintendents, managers, and other supervisory 

personnel are employees. In most cases, an officer of a 

corporation is an employee, but a director acting in this capacity is not. An officer who does not perform any services, or only minor services, and neither receives nor is 

entitled to receive any pay is not considered an employee.

Employer. An employer is any person or organization 

for whom an individual performs or has performed any 

service, of whatever nature, as an employee. The term 

“employer” includes not only individuals and organizations 

in a trade or business, but organizations exempt from income tax, such as religious and charitable organizations, 

educational institutions, clubs, social organizations, and 

societies. It also includes the governments of the United 

States, the States, Puerto Rico, and the District of Columbia, as well as their agencies, instrumentalities, and political subdivisions.

Two special definitions of employer that may have considerable application to nonresident aliens are:

• An employer includes any person paying wages for a 

nonresident alien individual, foreign partnership, or 

foreign corporation not engaged in trade or business 

in the United States (including Puerto Rico as if a part 

of the United States), and

• An employer includes any person who has control of 

the payment of wages for services that are performed 

for another person who does not have that control.

For example, if a trust pays wages, such as certain 

types of pensions, supplemental unemployment pay, or 

retired pay, and the person for whom the services were 

performed has no legal control over the payment of the 

wages, the trust is the employer.

These special definitions have no effect upon the relationship between an alien employee and the actual employer when determining whether the pay received is considered to be wages.

If an employer–employee relationship exists, the employer ordinarily must withhold the income tax from wage 

payments by using the percentage method or wage 

bracket tables as shown in Pub. 15-T.

Pay that is not wages. Employment for which the pay is 

not considered wages (for graduated income tax withholding) includes, but is not limited to, the following items.

• Agricultural labor if the total cash wages paid to an individual worker during the year is less than $150 and 

the total paid to all workers during the year is less than 

$2,500. But even if the total amount paid to all workers 

is $2,500 or more, wages of less than $150 per year 

paid to a worker are not subject to income tax withholding if certain conditions are met. For these conditions, see Pub. 51 (Circular A).

• Services of a household nature performed in or about 

the private home of an employer, or in or about the 

clubrooms or house of a local college club, fraternity, 

or sorority. A local college club, fraternity, or sorority 

does not include an alumni club or chapter and may 

not be operated primarily as a business enterprise. 

Examples of these services include those performed 

as a cook, janitor, housekeeper, governess, gardener, 

or houseparent.

• Certain services performed outside the course of the 

employer's trade or business for which cash payment 

is less than $50 for the calendar quarter.

• Services performed as an employee of a foreign government, without regard to citizenship, residence, or 

where services are performed. These include services 

performed by ambassadors, other diplomatic and consular officers and employees, and nondiplomatic representatives. They do not include services for a U.S. 

or Puerto Rican corporation owned by a foreign government.

• Services performed within or outside the United 

States by an employee or officer (regardless of citizenship or residence) of an international organization designated under the International Organizations Immunities Act.

• Services performed by a duly ordained, commissioned, or licensed minister of a church, but only if 

performed in the exercise of the ministry and not as an 

employee of the United States, a U.S. territory, or a 

foreign government, or any of their political subdivisions. These also include services performed by a 

member of a religious order in carrying out duties required by that order.

• Tips paid to an employee if they are paid in any medium other than cash or, if in cash, they amount to less 

than $20 in any calendar month in the course of employment.

Services performed outside the United States. 

Compensation paid to a nonresident alien (other than a 

resident of Puerto Rico, discussed later) for services performed outside the United States is not considered wages 

and is not subject to withholding.

Special instructions for Form W-4. A nonresident 

alien subject to wage withholding must give the employer 

a completed Form W-4 to enable the employer to figure 

how much income tax to withhold.

A nonresident alien cannot claim exemption from 

withholding on Form W-4. Use Form 8233 to 

claim a tax treaty exemption from withholding. 

See Form 8233, earlier.

In completing Form W-4, nonresident aliens should use 

the following instructions instead of the instructions on 

Form W-4.

1. Check “Single or Married filing separately” on Step 

1(c) (regardless of actual marital status).

2. Write “Nonresident Alien” or “NRA” in the space below 

Step 4(c).

For more information, see Notice 1392.

CAUTION

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Publication 515 (2024) 53
Nonresident alien employees are not required to 

request an additional withholding amount, but 

they can choose to have an additional amount 

withheld.

Determining amount to withhold. Employers are required to add an amount to the wages of a nonresident 

alien employee solely for the purpose of calculating income tax withholding. The specific amounts depend on 

the payroll period. These amounts can be found in Withholding Adjustment for Nonresident Alien Employees in 

the Introduction of Pub. 15-T. This adjustment does not 

apply to students and business apprentices from India.

Do not include the additional amount on the employee's Form W-2, Wage and Tax Statement.

Reporting requirements for wages and withheld 

taxes paid to nonresident aliens. The employer must 

report the amount of wages and deposits of withheld income and social security and Medicare taxes by filing 

Form 941. Household employers should see Pub. 926, for 

information on reporting and paying employment taxes on 

wages paid to household employees.

Form W-2. The employer must also report on Form 

W-2 the wages subject to chapter 3 withholding and the 

withheld taxes. You must give copies of this form to the 

employee. If the employee submits Form 8233 to claim exemption from withholding under a tax treaty, the wages are 

reported on Form 1042-S and not in box 1 of Form W-2. 

Wages exempt under a tax treaty may still be reported in 

the state and local wages boxes of Form W-2 if such wages are subject to state and local taxation. For more information, see the instructions for these forms.

Trust fund recovery penalty. If you are a person responsible for withholding, accounting for, or depositing or 

paying employment taxes, and willfully fail to do so, you 

can be held liable for a penalty equal to the full amount of 

the unpaid trust fund tax, plus interest. A responsible person for this purpose can be an officer of a corporation, a 

partner, a sole proprietor, or an employee of any form of 

business. A trustee or agent with authority over the funds 

of the business can also be held responsible for the penalty.

“Willfully” in this case means voluntarily, consciously, 

and intentionally. You are acting willfully if you pay other 

expenses of the business instead of the withholding taxes.

Social security and Medicare tax. In most cases, the 

employer must also withhold Federal Insurance Contributions Act (FICA) tax and file Form 941. In certain cases, 

wages paid to students and railroad and agricultural workers are exempt from FICA tax. Wages paid to nonresident 

alien students, teachers, researchers, trainees, and other 

nonresident aliens in “F-1,” “J-1,”“ M-1,” or “Q” nonimmigrant status are not subject to FICA. See Pub. 15-T for the 

rules on withholding.

In addition to withholding Medicare tax at 1.45%, you 

must withhold a 0.9% Additional Medicare Tax from 

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CAUTION

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wages you pay in excess of $200,000 in a calendar year. 

See Pub.15 for more information.

Federal unemployment tax (FUTA). The employer must 

pay FUTA tax and file Form 940. Only the employer pays 

this tax; it is not deducted from the employee's wages. In 

certain cases, wages paid to students and railroad and 

agricultural workers are exempt from FUTA tax. For more 

information, see the Instructions for Form 940.

Wages paid to nonresident alien students, teachers, researchers, trainees, and other nonresident aliens in “F-1,” 

“J-1,” “M-1,” or “Q” nonimmigrant status are not subject to 

FUTA tax.

Pay for dependent personal services (Income Code 

18). Dependent personal services are personal services 

performed in the United States by a nonresident alien individual as an employee rather than as an independent contractor.

Pay for dependent personal services is subject to chapter 3 withholding and reporting as follows.

Graduated rates. Ordinarily, you must withhold on pay 

(wages) for dependent personal services using graduated 

rates. The nonresident alien must complete Form W-4, as 

discussed earlier under Special instructions for Form W-4, 

and you must report wages and income tax withheld on 

Form W-2. However, you do not have to withhold if any of 

the following four exceptions applies.

Exception 1. Compensation paid for labor or personal 

services performed in the United States is deemed not to 

be income from sources within the United States and is 

exempt from U.S. income tax if:

1. The labor or services are performed by a nonresident 

alien temporarily present in the United States for a period or periods not exceeding a total of 90 days during 

the tax year;

2. The total pay does not exceed $3,000; and

3. The pay is for labor or services performed as an employee of, or under a contract with:

a. A nonresident alien individual, foreign partnership, 

or foreign corporation that is not engaged in a 

trade or business in the United States; or

b. A U.S. citizen or resident alien individual, a domestic partnership, or a domestic corporation, if 

the labor or services are performed for an office or 

place of business maintained in a foreign country 

or in a territory of the United States by this individual, partnership, or corporation.

If the total pay is more than $3,000, the entire amount is 

income from sources in the United States and is subject to 

U.S. tax.

Also, compensation paid for labor or services performed in the United States by a nonresident alien in connection with the individual's temporary presence in the 

United States as a regular member of the crew of a foreign 

vessel engaged in transportation between the United 

54 Publication 515 (2024)
States and a foreign country or a U.S. territory is not income from sources within the United States.

Exception 2. Compensation paid by a foreign employer to a nonresident alien for the period the alien is 

temporarily present in the United States on an “F,” “J,” or 

“Q” visa is exempt from U.S. income tax. For this purpose, 

a foreign employer means:

• A nonresident alien individual, foreign partnership, or 

foreign corporation; or

• An office or place of business maintained in a foreign 

country or in a U.S. territory by a domestic corporation, a domestic partnership, or an individual U.S. citizen or resident.

You can exempt the payment from withholding if you 

can reliably associate the payment with a Form W-8BEN 

containing the TIN of the payee.

Exception 3. Compensation paid to certain residents 

of Canada or Mexico who enter or leave the United States 

at frequent intervals is not subject to withholding. These 

aliens must either:

• Perform duties in transportation services (such as a 

railroad, bus, truck, ferry, steamboat, aircraft, or other 

type) between the United States and Canada or Mexico; or

• Perform duties connected with an international 

project, relating to the construction, maintenance, or 

operation of a waterway, viaduct, dam, or bridge 

crossed by, or crossing, the boundary between the 

United States and Canada or the boundary between 

the United States and Mexico.

To qualify for the exemption from withholding during a 

tax year, a Canadian or Mexican resident must give the 

employer a statement with the employee's name, address, 

and identification number, and certifying that the resident:

• Is not a U.S. citizen or resident;

• Is a resident of Canada or Mexico, whichever applies; 

and

• Expects to perform the described duties during the tax 

year in question.

The statement can be in any form, but it must be dated 

and signed by the employee and must include a written 

declaration that it is made under penalties of perjury.

Canadian and Mexican residents employed entirely within the United States. Neither the transportation service exception nor the international projects exception applies to the pay of a resident of Canada or Mexico 

who is employed entirely within the United States and who 

commutes from a home in Canada or Mexico to work in 

the United States. If an individual works at a fixed point or 

points in the United States (such as a factory, store, office, 

or designated area or areas), the wages for services performed as an employee for an employer are subject to 

graduated withholding.

Exception 4. Compensation paid for services performed in Puerto Rico by a nonresident alien who is a resident of Puerto Rico for an employer (other than the United 

States or one of its agencies) is not subject to withholding.

Compensation paid for either of the following types of 

services is not subject to withholding if the alien does not 

expect to be a resident of Puerto Rico during the entire tax 

year.

• Services performed outside the United States but not 

in Puerto Rico by a nonresident alien who is a resident 

of Puerto Rico for an employer other than the United 

States or one of its agencies.

• Services performed outside the United States by a 

nonresident alien who is a resident of Puerto Rico, as 

an employee of the United States or any of its agencies.

To qualify for the exemption from withholding for any tax 

year, the employee must give the employer a statement 

showing the employee's name and address and certifying 

that the employee:

• Is not a citizen or resident of the United States, and

• Is a resident of Puerto Rico who does not expect to be 

a resident for that entire tax year.

The statement must be signed and dated by the employee and contain a written declaration that it is made under penalties of perjury.

Tax treaties. Pay for dependent personal services under some tax treaties is exempt from U.S. income tax only 

if both the employer and the employee are treaty country 

residents and the nonresident alien employee performs 

the services while temporarily living in the United States 

(usually for not more than 183 days). Other treaties provide for exemption from U.S. tax on pay for dependent 

personal services if the employer is any foreign resident 

and the employee is a treaty country resident and the nonresident alien employee performs the services while temporarily in the United States. See Tax Treaties, later, for information about treaty benefits.

Pay for teaching (Income Code 19). This category is 

given a separate income code number because some tax 

treaties exempt a teacher from tax for a limited number of 

years. Pay for teaching means payments to a nonresident 

alien professor, teacher, or researcher by a U.S. university 

or other accredited educational institution for teaching or 

research work at the institution.

Graduated rates. Graduated withholding of income 

tax usually applies to all wages, salaries, and other pay for 

teaching and research paid by a U.S. educational institution during the period the nonresident alien is teaching or 

performing research at the institution.

Social security and Medicare tax. A nonresident 

alien temporarily in the United States on an “F-1,” “J-1,” 

“M-1,” or “Q-1” visa is not subject to social security and 

Medicare taxes on pay for services performed to carry out 

the purpose for which the alien was admitted to the United 

Publication 515 (2024) 55
States. Social security and Medicare taxes should not be 

withheld or paid on this amount.

Example. A nonresident alien is issued a visa to teach 

for a university. While in the United States, they take a 

part-time job working for a chemical company. The wages 

earned while teaching at the university are exempt from 

social security and Medicare taxes. The wages earned at 

the chemical company are subject to social security and 

Medicare taxes.

If an alien is considered a resident alien, as discussed 

earlier, that pay is subject to social security and Medicare 

taxes even though the alien is still in one of the nonimmigrant statuses mentioned above. This rule also applies to 

FUTA (unemployment) taxes paid by the employer. Teachers, researchers, and other employees temporarily 

present in the United States on other nonimmigrant visas 

or in refugee or asylee immigration status are fully liable 

for social security and Medicare taxes unless an exemption applies from one of the totalization agreements in 

force between the United States and several other nations.

The Social Security Administration (SSA) publishes the complete texts and explanatory pamphlets of the totalization agreements, which are 

available by calling 410-965-7306 or by going to SSA.gov/

international/totalization_agreements.html.

Tax treaties. Under most tax treaties, pay for teaching 

or research is exempt from U.S. income tax and from withholding for a specified period of time when paid to a professor, teacher, or researcher who was a resident of the 

treaty country immediately prior to entry into the United 

States and who is not a citizen of the United States. The 

U.S. educational institution paying the compensation must 

report the amount of compensation paid each year that is 

exempt from tax under a tax treaty on Form 1042-S. See 

Tax Treaties, later, for information about treaty benefits. 

The employer should also report the compensation in the 

state and local wages boxes of Form W-2 if the wages are 

subject to state and local taxes, or in the social security 

and Medicare wages boxes of Form W-2 if the wages are 

subject to social security and Medicare taxes.

Claimants must give you either Form W-8BEN or Form 

8233, as applicable, to obtain these treaty benefits.

Pay during studying and training (Income Code 20). 

This category refers to pay (as contrasted with remittances, allowances, or other forms of scholarships or fellowship grants—see Scholarships and Fellowship Grants 

Subject to Chapter 3 Withholding, earlier) for personal 

services performed while a nonresident alien is temporarily in the United States as a student, trainee, or apprentice, or while acquiring technical, professional, or business 

experience.

Graduated rates. Wages, salaries, or other compensation paid to a nonresident alien student, trainee, or apprentice for labor or personal services performed in the 

United States are subject to graduated withholding.

Social security and Medicare tax. A nonresident 

alien temporarily in the United States on an “F-1,” “J-1,” 

“M-1,” or “Q-1” visa is not subject to social security and 

Medicare taxes on pay for services performed to carry out 

the purpose for which the alien was admitted to the United 

States. Social security and Medicare taxes should not be 

withheld or paid on this amount. This exemption from social security and Medicare taxes also applies to employment performed under Curricular Practical Training and 

Optional Practical Training, on or off campus, by foreign 

students in “F-1,” “J-1,” “M-1,” or “Q” status as long as the 

employment is authorized by the U.S. Citizenship and Immigration Services.

Example. A nonresident alien is admitted to the United States to study surveying. As part of the course, they 

apprentice to a surveyor. The nonresident also works 

part-time at a restaurant to supplement their income. The 

wages earned as an apprentice are not subject to social 

security and Medicare taxes. The wages and tips earned 

at the restaurant are subject to social security and Medicare taxes.

If an alien is considered a resident alien, as discussed 

earlier, that pay is subject to social security and Medicare 

taxes even though the alien is still in one of the nonimmigrant statuses mentioned above. This rule also applies to 

FUTA (unemployment) taxes paid by the employer.

Any student who is enrolled and regularly attending 

classes at a school may be exempt from social security, 

Medicare, and FUTA taxes on pay for services performed 

for that school. See Pub.15.

Tax treaties. Certain tax treaties provide a limited exemption from U.S. income tax and from withholding on 

compensation paid to nonresident alien students or trainees during training in the United States for a limited period. In addition, some treaties provide an exemption from 

tax and withholding for compensation paid by the U.S. 

Government or its contractor to a nonresident alien student or trainee who is temporarily present in the United 

States as a participant in a program sponsored by the U.S. 

Government. See Tax Treaties, later, for information about 

treaty benefits. However, a withholding agent who is a 

U.S. resident, a U.S. Government agency, or its contractor 

must report the amount of pay on Form 1042-S.

Claimants must give you either Form W-8BEN or Form 

8233, as applicable, to obtain these treaty benefits.

Artists and Athletes(Income Codes 42 

and 43)

Because many tax treaties contain a provision for pay to 

artists and athletes, a separate category is assigned these 

payments for chapter 3 withholding purposes. This category includes payments made for performances by public 

entertainers (such as theater, motion picture, radio, or television artists, or musicians) or athletes.

Use Income Code 42 to report payments to nonresident 

alien athletes and entertainers (NRAAEs) who have not 

signed a central withholding agreement (CWA), discussed 

56 Publication 515 (2024)
later. Use Income Code 43 to report payments to artists 

and athletes who have signed a CWA.

Income Code 42. You must withhold tax at a 30% rate on 

payments to artists and athletes for services performed as 

independent contractors. See Pay for independent personal services, earlier, for more information. You must 

withhold tax at graduated rates on payments to artists and 

athletes for services performed as employees. See Pay for 

dependent personal services, earlier, for more information. However, in any situation where the nature of the relationship between the payer of the income and the artist 

or athlete is not ascertainable, you should withhold at a 

rate of 30%.

Income Code 43. NRAAEs who perform or participate 

in events in the United States can request a CWA for a 

lower rate of withholding. A CWA is an agreement entered 

into by the athlete or entertainer, a designated withholding 

agent, and the IRS. Under no circumstances will a CWA 

reduce taxes withheld to less than the anticipated amount 

of income tax liability.

We’ve temporarily waived the income requirement for 

which form to use when applying for a CWA. Form 

13930-A is currently unavailable. While the waiver is in effect, individuals with income below $10,000 can apply for 

a CWA using Form 13930, Instructions on How to Apply 

for a Central Withholding Agreement PDF. For more information on how to apply for a CWA, see Form 13930.

For more information on the CWA program, go to 

IRS.gov/Individuals/International-Taxpayers/CentralWithholding-Agreements.

Tax treaties. Under many tax treaties, compensation 

paid to public entertainers or athletes for services performed in the United States is exempt from U.S. income 

tax if the artist or athlete derives receipts for the tax year 

concerned, including expenses reimbursed to them or 

borne on their behalf, not in excess of $10,000, or in more 

recent treaties, $20,000. See Tax Treaties, later, for information about treaty benefits.

Employees and independent contractors may claim an 

exemption from withholding under a tax treaty by filing 

Form 8233. Often, however, you will have to withhold at 

the statutory rates on the total payments to the entertainer 

or athlete. This is because the exemption may be based 

upon factors that cannot be determined until after the end 

of the year.

Other Income

For the discussion of Income Codes 24, 25, and 26, see 

U.S. Real Property Interest, later. For the discussion of Income Code 27, see Publicly Traded Partnerships, later.

Gambling winnings (Income Code 28). In general, 

nonresident aliens are subject to chapter 3 withholding at 

30% on the gross proceeds from gambling won in the United States if that income is not effectively connected with 

a U.S. trade or business and is not exempted by treaty. 

The tax withheld and winnings are reportable on Forms 

1042 and 1042-S. Chapter 4 withholding does not apply to 

these proceeds.

No tax is imposed on nonbusiness gambling income a 

nonresident alien wins playing blackjack, baccarat, craps, 

roulette, or big-6 wheel in the United States. A Form 

W-8BEN is not required to obtain the exemption from withholding, but a Form W-8BEN may be required for purposes of Form 1099 reporting and backup withholding. Gambling income that is not subject to chapter 3 withholding is 

not subject to reporting on Form 1042-S.

Nonresident aliens are taxed at graduated rates on net 

gambling income won in the United States that is effectively connected with a U.S. trade or business.

Tax treaties. Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Belgium, Bulgaria, 

Czech Republic, Denmark, Finland, France, Germany, 

Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, 

Luxembourg, Netherlands, Russia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom.

Gambling income of residents of Malta is taxed at 10%.

Claimants must give you a Form W-8BEN (with a U.S. 

or foreign TIN) to claim treaty benefits on gambling income that is not effectively connected with a U.S. trade or 

business. See U.S. or Foreign TINs, later, for when you 

can accept a Form W-8BEN without a TIN.

Transportation income. U.S. source gross transportation income (USSGTI), as defined in section 887, is not 

subject to 30% gross withholding tax, and chapter 4 withholding does not apply to this income. Transportation income is income from the use of a vessel or aircraft, 

whether owned, hired, or leased, or from the performance 

of services directly related to the use of a vessel or aircraft. U.S. source gross transportation income includes 

50% of all transportation income from transportation that 

either begins or ends in the United States. USSGTI does 

not include transportation income of a foreign corporation 

taxable in a U.S. territory. The recipient of USSGTI must 

pay tax on it annually at the rate of 4% on Section I of 

Form 1120-F, unless the income is effectively connected 

with the conduct of a U.S. trade or business and is reportable on Section II of Form 1120-F. Special rules apply to 

determine if a foreign corporation's USSGTI is effectively 

connected with a U.S. trade or business.

Canadian truck and rail income. Under Article VIII 

(Transportation) of the U.S.–Canada treaty, any U.S. 

source income derived by a Canadian company engaged 

in the operation of trucks or a railway as a common carrier 

or contract carrier, and attributable to the transportation of 

property between Canada and the United States, is exempt from tax in the United States, provided the company 

is otherwise eligible for treaty benefits. Payments for the 

use of trucks (including trailers) or railway rolling stock, or 

from the use, maintenance, or rental of containers (including trailers and related equipment for the transport of containers) used to transport property between Canada and 

the United States are also exempt from U.S. tax, provided 

the company is otherwise eligible for treaty benefits. 

Publication 515 (2024) 57
Canadian companies must file Form 1120-F and Form 

8833 to claim an exemption from tax for profits from their 

operating income. Canadian corporations are subject to 

chapter 3 withholding on rental payments for the use of 

such equipment in the United States and may claim an exemption on Form W8-BEN-E.

Foreign freight charges or rental of equipment 

used outside the United States. Payments for transportation of property, whether by ship, air, or truck, solely between points outside the United States or rental of tangible property in connection with transportation solely for 

use between points outside the United States is not U.S. 

source income and not subject to chapter 3 withholding.

Payments to certain expatriates. Certain payments to 

nonresident aliens who are covered expatriates under 

section 877A(g)(1) are subject to withholding at 30%. In 

general, nonresident aliens are covered expatriates if they 

were U.S. citizens or long-term residents who renounced 

their citizenship or ceased to be long-term residents for 

U.S. tax purposes after June 16, 2008, and satisfied other 

tests for average annual net income tax or net worth. For 

more information on the definition of covered expatriates, 

see the Instructions for Form 8854.

A covered expatriate should have provided you with 

Form W-8CE notifying you of their covered expatriate status and the fact that they may be subject to special tax 

rules with respect to certain items. For more information, 

see the Instructions for Form W-8CE.

Eligible deferred compensation items (Income 

Code 38). In general, you must withhold tax at a 30% 

rate on any payment of an eligible deferred compensation 

item paid to a covered expatriate. The amount subject to 

tax is the amount of the payment that would have been included in the nonresident alien's U.S. gross income if they 

had continued to be taxed as a U.S. citizen or resident.

Distributions from a nongrantor trust (Income 

Code 39). In general, you must withhold tax at a 30% 

rate on any direct or indirect distribution from a nongrantor 

trust. The amount subject to tax is the part of the distribution that would have been included in the nonresident alien's U.S. gross income if they had continued to be taxed 

as a U.S. citizen or resident. If the nonresident alien was 

not a beneficiary of the nongrantor trust on the day before 

they gave up their U.S. citizenship or long-term residence, 

you do not have to withhold tax. See section 7 of Notice 

2009-85, 2009-45 I.R.B. 598, available at IRS.gov/irb/

2009-45_IRB#NOT-2009-85.

Guarantee of indebtedness (Income Code 41). An 

amount paid to a foreign payee for the provision of a guarantee of indebtedness issued after September 27, 2010, 

may be subject to chapter 3 withholding. The amounts 

must be paid by one of the following.

1. A noncorporate U.S. resident.

2. A domestic corporation.

3. Any foreign person if the amount paid is connected 

with income that is effectively connected, or treated 

as effectively connected, with a U.S. trade or business.

An indirect payment includes a payment by a foreign 

bank to a foreign corporation for the foreign corporation's 

guarantee of indebtedness owed to the foreign bank by 

the foreign corporation's domestic subsidiary, where the 

cost of the guarantee fee is passed on to the domestic 

subsidiary through additional interest charged on the indebtedness.

The amounts described above for a guarantee of indebtedness are withholdable payments, such that chapter 4 withholding may apply absent an exclusion from withholding under chapter 4.

Other income (Income Code 23). Use this category to 

report U.S. source FDAP income that is not reportable under any of the other income categories. Examples of income that may be reportable under this category are commissions, insurance proceeds, patronage distributions, 

prizes, and racing purses.

As discussed earlier under Amounts Subject to Chapter 3 Withholding, every kind of FDAP income from U.S. 

sources that is not effectively connected with a U.S. trade 

or business is subject to chapter 3 withholding unless the 

income is specifically exempt under the Internal Revenue 

Code or a tax treaty. You must generally withhold at the 

30% rate on this income. As a payment of U.S. source 

FDAP is generally a withholdable payment, you should review Regulations section 1.1473-1(a) (definition of withholdable payment) to determine if the payment is excluded from the definition of a withholdable payment.

Foreign Governments and 

Certain Other Foreign 

Organizations

Investment income earned by a foreign government is not 

included in the gross income of the foreign government 

and is not subject to chapter 3 withholding. The term foreign government means an integral part of a foreign government or an entity that is controlled by a foreign government. See Temporary Regulations section 1.892-2T. 

Investment income means income from investments in the 

United States in stocks, bonds, or other domestic securities, financial instruments held in the execution of governmental financial or monetary policy, and interest on money 

deposited by a foreign government in banks in the United 

States. A foreign government must provide a Form 

W-8EXP or, in the case of a payment made outside the 

United States to an offshore account, documentary evidence to obtain this exemption. Investment income paid to 

a foreign government is subject to reporting on Form 

1042-S.

The following types of income received by a foreign 

government are subject to chapter 3 withholding.

58 Publication 515 (2024)
1. Income (including investment income) received from 

the conduct of a commercial activity or from sources 

other than those stated above.

2. Income received from a controlled commercial entity 

(including gain from the disposition of any interest in a 

controlled commercial entity) and income received by 

a controlled commercial entity.

If the foreign government is a partner in a partnership carrying on a trade or business in the United 

States, the ECTI allocable to the foreign government 

is considered derived from a controlled commercial 

activity and is subject to withholding under section 

1446.

3. Gain derived from the disposition of a USRPI. Withholding on these gains is discussed later under U.S. 

Real Property Interest.

For chapter 4 purposes, payments to a foreign government (other than earnings inuring to the benefit of a private person) are not payments to which chapter 4 withholding applies unless the payment is made to a 

controlled entity of the foreign government that is engaged 

in a commercial financial activity. See Regulations section 

1.1471-6(h) for a description of a commercial financial activity. See Regulations section 1.1471-3(d)(9) for the documentation required to establish an entity’s chapter 4 status as a foreign government. Similar rules apply for 

chapter 4 purposes to a payment to a foreign central bank 

of issue.

A government of a U.S. territory is exempt from U.S. tax 

on all U.S. source income. This income is not subject to 

chapter 3 withholding, and chapter 4 withholding does not 

apply to income paid to a government of a U.S. territory. 

See Regulations section 1.1471-3(d)(9) for the documentation required to establish an entity’s chapter 4 status as 

a government of a U.S. territory. These governments 

should use Form W-8EXP to claim this exemption for both 

chapters 3 and 4 purposes (as required).

International organizations. International organizations 

are exempt from U.S. tax on all U.S. source income. Income paid to an international organization (within the 

meaning of section 7701(a)(18)) is not subject to chapter 3 withholding. International organizations are not required to provide a Form W-8 or documentary evidence to 

receive the exemption if the name of the payee is one that 

is designated as an international organization by executive 

order.

Payments made to an international organization, as defined for chapter 4 purposes, are not payments to which 

chapter 4 withholding applies. An international organization for purposes of chapter 4 means any entity described 

in section 7701(a)(18). The term also includes any intergovernmental or supranational organization that is comprised primarily of foreign governments, that is recognized 

as an intergovernmental or supranational organization under certain foreign laws, or that has in effect a headquarters agreement with a foreign government, and whose income does not inure to the benefit of private persons. See 

Regulations section 1.1471-3(d)(9) for the documentation 

required to establish an entity’s chapter 4 status as an international organization.

Foreign tax-exempt organizations. A foreign organization that is a tax-exempt organization under section 501(c) 

is not subject to a withholding tax on amounts that are not 

income includible under section 512 as unrelated business taxable income. In addition, withholdable payments 

made to a tax-exempt organization under section 501(c) 

are not payments to which chapter 4 withholding applies.

However, if a foreign organization is a foreign private 

foundation, it is subject to a 4% withholding tax on all U.S. 

source investment income. For a foreign tax-exempt organization to claim an exemption from withholding under 

chapter 3 or 4 because of its tax-exempt status under section 501(c), or to claim withholding at a 4% rate, it must 

provide you with a Form W-8EXP. However, if a foreign organization is claiming an exemption from withholding under an income tax treaty, or the income is unrelated business taxable income, the organization must provide a 

Form W-8BEN-E or W-8ECI. Income paid to foreign 

tax-exempt organizations is subject to reporting on Form 

1042-S. If the organization is a partner in a partnership 

carrying on a trade or business in the United States, the 

ECI allocable to the organization is subject to withholding 

under section 1446.

Foreign financial institutions. For payments made to a 

reporting Model 1 FFI or reporting Model 2 FFI, see the 

applicable IGA for definitions of entities described under 

this heading. You may generally rely on documentation 

provided by such an FFI to treat an entity as described under this heading (included under the class of a nonreporting IGA FFI). See the Instructions for Form W-8BEN-E.

U.S. or Foreign TINs

As the withholding agent, in many cases you must request 

that the payee provide you with its U.S. TIN. You must in 

such a case include the payee's TIN on forms, statements, 

and other tax documents. The payee's TIN may be any of 

the following.

• An individual may have a social security number 

(SSN). If the individual does not have and is eligible 

for an SSN, go to SSA.gov/ssnumber/ for more information. The SSA will tell the individual if they are eligible to get an SSN.

• An individual may have an IRS individual taxpayer 

identification number (ITIN). If the individual does not 

have and is not eligible for an SSN, they must apply 

for an ITIN by using Form W-7.

• Any person other than an individual, and any individual who is an employer or who is engaged in a U.S. 

trade or business as a sole proprietor, must have an 

employer identification number (EIN). Use Form SS-4 

to get an EIN.

Publication 515 (2024) 59
Under certain circumstances, a financial institution may be required to get a GIIN for purposes of 

chapter 4. See Global Intermediary Identification 

Numbers, later. See the Instructions for Form 8957 for information on whether a GIIN is needed.

A U.S. or foreign TIN (as applicable) must generally be 

on a withholding certificate if the beneficial owner is claiming any of the following.

• Tax treaty benefits (see Exceptions to TIN requirement, later).

• Income is effectively connected with a U.S. trade or 

business.

• Exemption for certain annuities (see Pensions, Annuities, and Alimony, earlier).

• Exemption based on exempt organization or private 

foundation status.

A foreign TIN may also be required for certain account 

holders (see Foreign TIN requirement for account holders, 

later). In addition, a U.S. TIN must be on a withholding 

certificate from a person claiming to be any of the following.

• QI.

• QSL.

• Withholding foreign partnership.

• Withholding foreign trust.

• An organization claiming an exemption or reduced 

rate of withholding based solely on a claim of tax-exempt status under section 501(c) or private foundation 

status (unless only the 4-percent tax under section 

4948(a) applies to the private foundation).

• U.S. branch of a foreign person treated as a U.S. person (see Regulations section 1.1441-1(b)(2)(iv)), and 

a U.S. branch of an FFI acting as an intermediary that 

is not treated as a U.S person.

• U.S. person.

Exceptions to U.S. TIN requirement. A foreign person 

does not have to provide a U.S. TIN to claim a reduced 

rate of withholding under a tax treaty if the requirements 

for the following exceptions are met. Instead of requesting 

a U.S. TIN from a foreign payee, you may request a foreign TIN issued by the payee’s country of residence except when the payee is a nonresident alien individual 

claiming an exemption from withholding on Form 8233.

• Income from marketable securities (discussed earlier 

under Beneficial Owners).

• Unexpected payment to an individual in the case of a 

payment made by a U.S. financial institution to an account maintained at a U.S. office (discussed next).

Unexpected payment. A Form W-8BEN or a Form 

8233 provided by a nonresident alien to get treaty benefits 

does not need a U.S. TIN if you, the withholding agent, 

meet all the following requirements.

• You are an acceptance agent.

CAUTION

! • You can request an ITIN for a payee on an expedited 

basis.

• You are required to make an unexpected payment to 

the nonresident alien.

• You cannot get the ITIN because the IRS is not issuing 

ITINs at the time you make the payment or at any earlier time after you know you have to make the payment.

• You cannot reasonably delay making the unexpected 

payment.

• You submit a completed Form W-7 for the payee, with 

a certification that you have reviewed the required 

documentation and have no actual knowledge or reason to know that the documentation is not complete or 

accurate, to the IRS during the first business day after 

you made the payment.

An acceptance agent is a person who, under a written 

agreement with the IRS, is authorized to help alien individuals and other foreign persons get ITINs or EINs. For information on the application procedures for becoming an 

acceptance agent, go to IRS.gov/Individuals/New-ITINAcceptance-Agent-Program-Changes.

Note. All acceptance agents will be required to adhere 

to new quality standards established and monitored by the 

IRS.

A payment is unexpected if you or the beneficial owner 

could not have reasonably anticipated the payment during 

a time when an ITIN could be obtained. This could be due 

to the nature of the payment or the circumstances in which 

the payment is made. A payment is not considered unexpected solely because the amount of the payment is not 

fixed.

Example. Mary, a citizen and resident of Ireland, visits 

the United States and wins $5,000 playing a slot machine 

in a casino. Under the treaty with Ireland, the winnings are 

not subject to U.S. tax. Mary claims the treaty benefits by 

providing a Form W-8BEN to the casino upon winning at 

the slot machine. However, she does not have an ITIN or 

foreign TIN. The casino is an acceptance agent that can 

request an ITIN on an expedited basis.

Situation 1. Assume that Mary won the money on Sunday. Since the IRS does not issue ITINs on Sunday, the 

casino can pay $5,000 to Mary without withholding U.S. 

tax. The casino must, on the following Monday, fax a completed Form W-7 for Mary, including the required certification, to the IRS for an expedited ITIN.

Situation 2. Assume that Mary won the money on Monday. To pay the winnings without withholding U.S. tax, the 

casino must apply for and get an ITIN for Mary because 

an expedited ITIN is available from the IRS at the time of 

the payment.

Foreign TIN requirement for 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 account holder (as defined 

in Regulations section 1.1471-5(a)(3)) of an account that 

60 Publication 515 (2024)
is a financial account (as defined in Regulations section 

1.1471-5(b)), you must obtain the account holder’s TIN for 

its jurisdiction of tax residence (foreign TIN) on a Form 

W-8 that is a beneficial owner withholding certificate in order for the form to not be invalid for a payment of U.S. 

source income reportable on Form 1042-S, unless:

• The account holder is a resident of a jurisdiction that is 

not listed in section 3 of Revenue Procedure 2021-32, 

2021-42 I.R.B. 465, available at IRS.gov/irb/

2021-42_IRB#REV-PROC-2021-32, which may be 

further updated in future published guidance;

• The account holder is a resident in a jurisdiction that 

has been identified by the IRS on a list of jurisdictions 

that do not issue foreign TINs. See IRS.gov/

businesses/corporations/list-of-jurisdictions-that-donot-issue-foreign-tins;

• The account holder is a government, international organization, foreign central bank of issue, or resident of 

a U.S. territory; or

• The account holder obtains a reasonable explanation 

for why the account holder has not been issued a foreign TIN, including by checking the applicable box on 

the applicable Form W-8 indicating that the account 

holder is not legally required to obtain an FTIN from 

the account holder’s jurisdiction of residence (including if the jurisdiction does not issue TINs).

A reasonable explanation that an account holder does 

not have a foreign TIN must address why the account 

holder was not issued a foreign TIN to the extent provided 

in the instructions for the applicable Form W-8. If an account holder provides an explanation other than the one 

described in the instructions for the applicable Form W-8, 

you must determine whether the explanation is reasonable.

Global Intermediary Identification 

Numbers (GIINs)

If you make a withholdable payment to an entity claiming 

certain chapter 4 statuses, you may be required to obtain 

and verify the entity’s GIIN against the published IRS FFI 

list within 90 days to rely on such a claim. See GIIN Verification under Standards of Knowledge for Purposes of 

Chapter 4, earlier, for which chapter 4 statuses require a 

GIIN.

Depositing Withheld Taxes

This section discusses the rules for depositing income tax 

withheld on FDAP income, including tax withheld pursuant 

to chapter 4. The deposit rules discussed here do not apply to the following items.

• Taxes on pay subject to graduated withholding, as discussed earlier. (See Form 941 for the deposit rules.)

• Tax withheld on pensions and annuities subject to 

graduated withholding or the 10% tax on nonperiodic 

distributions. (See Form 945 for the deposit rules.)

• Tax withheld on a foreign partner's allocable share of 

ECTI of a partnership, other than a publicly traded 

partnership. See Partnership Withholding on ECTI, 

later.

• Tax withheld on dispositions of USRPI by foreign persons. See U.S. Real Property Interest, later.

• Taxes on household employees. See Schedule H 

(Form 1040) to report social security and Medicare 

taxes, and any income tax withheld, on wages paid to 

a nonresident alien household employee.

When Deposits Are Required

A deposit required for any period occurring in 1 calendar 

year must be made separately from a deposit for any period occurring in another calendar year. A deposit of this 

tax must be made separately from a deposit of any other 

type of tax, but you need not identify whether the deposit 

is of tax withheld under chapter 3 or 4.

The amount of tax you are required to withhold determines the frequency of your deposits. For more information, see Deposit Requirements in the Instructions for 

Form 1042.

Escrow in lieu of deposit. Under certain circumstances, 

a withholding agent may be permitted to set aside a withheld amount in escrow rather than depositing the tax. A 

participating FFI that withholds tax on a withholdable payment not otherwise subject to chapter 3 withholding or 

backup withholding under section 3406 made to a recalcitrant account holder of a dormant account may, in lieu of 

depositing the tax withheld, set aside the amount withheld 

in escrow until the date that the account ceases to be a 

dormant account. In such case, the tax withheld becomes 

due 90 days following the date that the account ceases to 

be a dormant account if the account holder does not provide the required documentation, or becomes refundable 

to the account holder if the account holder provides documentation establishing that withholding does not apply.

A withholding agent that withholds tax under chapter 3 

on certain payments that include an undetermined amount 

of income may retain 30% of the payment to hold in escrow in accordance with Regulations section 1.1441-3(d). 

Similarly, if a withholding agent is unable to determine 

whether the payment is a withholdable payment because 

the source or character of the payment is unknown, the 

withholding agent may retain 30% of the payment to hold 

in escrow for chapter 4 purposes in accordance with Regulations section 1.1471-2(a)(5).

Electronic deposit requirement. You must deposit all 

withheld taxes under chapter 3 or 4 by electronic funds 

transfer. In most cases, electronic funds transfers are 

made using the Electronic Federal Tax Payment System 

(EFTPS). If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, or 

other trusted third party to make deposits on your behalf. 

You may also arrange for your financial institution to initiate a same-day wire payment on your behalf. EFTPS is a 

free service provided by the Department of Treasury. 

Publication 515 (2024) 61
Services provided by your tax professional, financial institution, or other third party may have a fee. For more information about EFTPS or to enroll in EFTPS, visit 

EFTPS.gov or call 800-555-4477. Additional information 

about EFTPS is also available in Pub. 966.

Qualified business taxpayers that request an EIN 

will automatically be enrolled in EFTPS. They will 

receive information on how to activate their account.

Note. All payments should be stated in U.S. dollars 

and should be made in U.S. dollars.

Penalty for failure to make deposits on time. If you fail 

to make a required deposit within the time prescribed, a 

penalty is imposed on the underpayment (the excess of 

the required deposit over any actual timely deposit for a 

period). You can avoid the penalty if you can show that the 

failure to deposit was for reasonable cause and not because of willful neglect. Also, the IRS may waive the penalty if certain requirements are met.

Depositing on time. For deposits made by EFTPS to 

be on time, you must initiate the deposit by 8 p.m. Eastern 

time the day before the date the deposit is due. If you use 

a third party to make deposits on your behalf, they may 

have different cutoff times.

Penalty rate. If the deposit is:

• 1 to 5 days late, the penalty is 2% of the underpayment;

• 6 to 15 days late, the penalty is 5%; or

• 16 or more days late, the penalty is 10%.

However, if the deposit is not made within 10 days after 

the IRS issues the first notice demanding payment, the 

penalty is 15%.

If you owe a penalty for failing to deposit tax for more 

than one deposit period, and you make a deposit, your deposit is applied to the most recent period to which the deposit relates unless you designate the deposit period or 

periods to which your deposit is to be applied. You can 

make this designation only during a 90-day period that begins on the date of the penalty notice. The notice contains 

instructions on how to make this designation.

Adjustment for Overwithholding

What to do if you overwithheld tax depends on when you 

discover the overwithholding.

Overwithholding discovered by March 15 of the following calendar year. If you discover that you overwithheld tax under chapter 3 or 4 by March 15 of the following 

calendar year, you may use the undeposited amount of 

tax to make any necessary adjustments between you and 

the recipient of the income. However, if the undeposited 

amount is not enough to make any adjustments, or if you 

discover the overwithholding after the entire amount of tax 

has been deposited, you can use either the reimburseTIP

ment procedure or the set-off procedure to adjust the 

overwithholding.

If March 15 is a Saturday, Sunday, or legal holiday, 

the next business day is the final date for these 

actions.

For more information on the reimbursement procedure 

and set-off procedure, and what to do if you discover the 

overwithholding after March 15 of the following calendar 

year, see Adjustment for Overwithholding in the Instructions for Form 1042.

Returns Required

Every withholding agent, whether U.S. or foreign, must file 

Forms 1042 and 1042-S to report:

• Amounts subject to chapter 3 withholding paid to foreign persons (including persons presumed to be foreign), even if no amount is deducted and withheld 

from the payment under chapter 3, and

• Payments to which chapter 4 withholding is applied or 

which are allocated on an applicable withholding 

statement provided by a participating FFI or registered 

deemed-compliant FFI to a chapter 4 withholding rate 

pool of U.S. payees (chapter 4 reportable amounts).

Do not use Forms 1042 and 1042-S to report tax withheld on the following.

• Wages, salaries, or other compensation reported on 

Form W-2 (see Wages Paid to Employees—Graduated Withholding, earlier, under Pay for Personal Services Performed).

• Any part of a U.S. or foreign partnership's (other than 

a publicly traded partnership) ECTI allocable to a foreign partner (see Partnership Withholding on ECTI, 

later).

• Dispositions of USRPIs by foreign persons (see U.S. 

Real Property Interest, later).

• Pensions, annuities, and certain other deferred income reported on Form 1099.

• Income, social security, and Medicare taxes on wages 

paid to a household employee reported on Schedule H (Form 1040).

• Amounts subject to backup withholding under section 

3406, including withholdable payments that are reportable payments and that are paid to a recalcitrant 

account holder of a participating FFI or registered 

deemed-compliant FFI that has elected on its withholding statement for withholding under section 3406 

to apply instead of withholding under chapter 4.

Forms 1042 and 1042-S must be filed by March 

15 of the year following the calendar year in which 

the income subject to reporting was paid. If March 

15 falls on a Saturday, Sunday, or legal holiday, the due 

date is the next business day.

TIPDUE

62 Publication 515 (2024)
Form 1042. Every U.S. and foreign withholding agent 

that is required to file a Form 1042-S must also file an annual return on Form 1042. You must file Form 1042 even if 

you were not required to withhold any income tax under 

chapter 3 on the payment, or if the payment is a chapter 4 

reportable amount.

Form 1042 is now available for e-filing, which is required beginning for the 2023 year for a withholding agent 

that is a financial institution, a partnership with more than 

100 partners, or for withholding agents that are filing 10 or 

more information returns for the calendar year. For general 

information about e-filing, see Pub. 4163 and the Instructions for Form 1042.

You are encouraged to e-file Form 1042. However, you 

may file a paper Form 1042 with the:

Ogden Service Center

P.O. Box 409101

Ogden, UT 84409

Form 1042-S. Every U.S. and foreign withholding agent 

must file a Form 1042-S for amounts subject to chapter 3 

withholding and chapter 4 reportable amounts unless an 

exception applies. You may be required to e-file Form 

1042–S. Go to IRS.gov/InfoReturn for e-file options.

A separate Form 1042-S is required for each recipient 

of income to whom you made payments during the preceding calendar year regardless of whether you withheld 

or were required to withhold tax. However, if you make a 

withholdable payment to an NQI or a flow-through entity 

that is allocable to a chapter 4 withholding rate pool, as indicated on a withholding statement upon which you may 

rely with respect to the payment allocable to such a pool, 

you should complete a separate Form 1042-S for each 

chapter 4 withholding rate pool (that is, pool of recalcitrant 

account holders, pool of nonparticipating FFIs, pool of 

payees that are U.S. persons), treating the intermediary or 

flow-through entity as the recipient (and the applicable 

pool as the chapter 4 status of the recipient). You need not 

issue a Form 1042-S to each recipient included in such 

pool. You must use a separate Form 1042-S for each type 

of income that you paid to the same recipient. See Statements to recipients, later.

You must furnish a Form 1042-S for each recipient even 

if you did not withhold tax because you repaid the tax withheld to the recipient or because the income payment was 

exempt from tax under the Internal Revenue Code or under a U.S. income tax treaty (except for a withholdable 

payment that is not a chapter 4 reportable amount).

You can use a substitute Form 1042-S if it meets the requirements listed in Pub. 1179. Paper substitutes that totally conform to the format and size of the official form may 

be used without prior approval from the IRS. See Pub. 

1179 for more information.

If you are reporting amounts withheld by another withholding agent, Form 1042-S requests the name and EIN 

of the withholding agent that withheld the tax to the extent 

required in the Instructions for Form 1042-S.

If you file a substitute for Copy A with the IRS that 

does not conform to the specifications in Pub. 

1179, you may be subject to a penalty for failing to 

file a correct return. See Penalties, later.

Joint owners. If there are joint owners of the withholdable payment, see Payments directly to beneficial 

owners under Payments to Recipients in the Instructions 

for Form 1042-S.

E-filing. For information about Form 1042-S e-filing requirements for withholding agents or their agents, and 

partnerships with a Form 1042-S filing requirement, including the threshold return limits, see Electronic Reporting in the Instructions for Form 1042-S.

For additional information and instructions on e-filing 

Forms 1042-S, get Pub. 1187 or go to IRS.gov/InfoReturn 

for e-file options.

Form 1042-T. If you are not required to e-file and Form 

1042-S is filed on paper, it must be filed with Form 1042-T. 

You may need to file more than one Form 1042-T. See the 

instructions for Form 1042-T for more information.

Deposit interest paid to certain nonresident alien individuals. Interest earned by residents of certain foreign 

countries is subject to information reporting. Deposit interest of $10 or more paid to any nonresident alien individual 

who is a resident of a foreign country with which the United States has agreed to exchange tax information pursuant to an income tax treaty or other convention or bilateral agreement, must be reported on Form 1042-S.

Revenue Procedure 2021-32 identifies those countries 

for which reporting of deposit interest is required with respect to a resident of any such country.

Note. You may elect to report interest paid to any nonresident alien.

Statements to recipients. You must furnish a statement 

to each recipient for whom you are filing a Form 1042-S by 

the due date for filing Forms 1042 and 1042-S with the 

IRS. You may use a copy of the official Form 1042-S for 

this purpose. Any substitute forms must comply with the 

rules set out in Pub. 1179. You must furnish a separate 

substitute Form 1042-S for each type of income or payment. The withholding agent must ensure that any substitute Form 1042-S copies B, C, and D, which are furnished 

to the recipient, conforms in format and size to the official 

Form 1042-S and contains the exact same information as 

the copy filed with the IRS or e-filed. However, the size of 

a substitute Form 1042-S, copies B, C, and D, may be adjusted if the substitute form is presented on a landscape-oriented page instead of portrait. Only one Form 

1042-S may be submitted per page, regardless of orientation.

Form 8966

A withholding agent that makes a withholdable payment to 

a passive NFFE with one or more substantial U.S. owners 

(or, in the case of a reporting Model 2 FFI, controlling 

CAUTION

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Publication 515 (2024) 63
persons of such an entity) or an owner-documented FFI 

with a specified U.S. person owning certain equity or debt 

interests in the FFI must report the payment and each 

such substantial U.S. owner (or controlling person, as applicable) or specified U.S. person owner of the passive 

NFFE or owner-documented FFI, respectively, on Form 

8966 (in addition to reporting the payment and tax (if any) 

on Forms 1042 and 1042-S when the payment is an 

amount subject to chapter 3 withholding). An exception to 

the requirement to report on Form 8966 applies when the 

payment is made to an account reported by an FFI as a 

U.S. account under the FFI’s applicable chapter 4 requirements or the requirements of an applicable IGA.

Form 8966 must be filed by March 31 of the year following the calendar year in which the payment is made. An 

automatic 90-day extension of time to file Form 8966 may 

be requested. To request an automatic 90-day extension 

of time to file Form 8966, file Form 8809-I. See the Instructions for Form 8809-I for where to file that form. You should 

request an extension as soon as you are aware that an extension is necessary, but no later than the due date for filing Form 8966. Under certain hardship conditions, the IRS 

may grant an additional 90-day extension to file Form 

8966. To request an additional 90-day extension of time to 

file Form 8966, file a second Form 8809-I before the end 

of the initial extended due date.

E-filing requirement for Form 8966. For information 

about the Form 8966 e-filing requirements, including the 

threshold return limits, for financial institutions and all 

other entities with a Form 8966 filing requirement, see 

Electronic filing requirement and How to file electronically 

in the Instructions for Form 8966.

Extensions of Time To File

You can request extensions of time to file Forms 1042 and 

1042-S with the IRS and additional extensions to furnish 

Forms 1042-S to recipients.

Extension to file Form 1042. You can get an automatic 

6-month extension of time to file Form 1042 by filing Form 

7004. File Form 7004 on or before the due date of Form 

1042. Form 7004 does not extend the time for payment of 

tax.

Form 7004 extends only the due date for filing the 

returns with the IRS. It does not extend the due 

date for furnishing statements to recipients.

Extension to file Form 1042-S with the IRS. You can 

get an automatic 30-day extension of time to file Form 

1042-S by filing Form 8809. You should request an extension as soon as you are aware that an extension is necessary, but no later than the due date for filing Form 1042-S.

You may request one additional extension of 30 days by 

submitting a second Form 8809 before the end of the first 

extension period. Requests for an additional extension are 

not automatically granted. When requesting the additional 

extension, include a copy of the filed Form 8809. The IRS 

will send you a letter of explanation approving or denying 

CAUTION

!

your request for an additional extension. See the instructions for Form 8809 for more information.

Note: If you have questions about Form 8809, call the 

Technical Operations (TSO) toll free at 866-455-7438 or 

304-263-8700 (not toll free). Persons with a hearing or 

speech disability with access to TTY/TDD equipment can 

call 304-579-4827 (not toll free).

If you are requesting extensions of time to file for 

more than one withholding agent or payer, you 

must submit the extension request electronically.

Extension to furnish statements to recipients. You 

may request an extension of time to furnish the statements 

to recipients by faxing a letter to:

Internal Revenue Service Technical Services 

Operation

Attn: Extension of Time Coordinator

Fax: 866-477-0572

(International: 304-589-4151)

The letter must include the following:

• Payer name,

• Payer TIN,

• Payer address,

• Type of return (for example, Form 1042-S),

• A statement that your extension request is for providing statements to recipients,

• Reason for delay, and

• The signature of the payer or authorized agent.

Your request must be received no later than the date on 

which the statements are due to the recipients. If your request for an extension is approved, you will generally be 

granted a maximum of 30 extra days (15 days for Forms 

W-2) to furnish the recipient statements.

Penalties

If you do not file a correct and complete Form 1042 or 

Form 1042-S with the IRS on time or if you do not provide 

a correct and complete Form 1042-S to the recipient on 

time, you may be subject to a penalty.

Failure to file Form 1042. The penalty for not filing Form 

1042 when due (including extensions) is usually 5% of the 

unpaid tax for each month or part of a month the return is 

late, but not more than 25% of the unpaid tax.

Failure to file correct Form 1042-S. A penalty may be 

imposed for failure to file a complete and correct Form 

1042-S when due (including extensions).

For more information on the penalty for failure to timely 

file a correct Form 1042-S with the IRS, see Penalties in 

the 2024 Instructions for Form 1042-S .

Failure to furnish Form 1042-S to recipient. For more 

information on the penalty for failure to timely furnish Form 

CAUTION

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64 Publication 515 (2024)
1042-S to a recipient, see Penalties in the 2024 Instructions for Form 1042-S.

Penalty for intentional disregard of requirements to 

file or furnish returns. If you intentionally disregard the 

requirement to file Form 1042-S when due, to furnish 

Form 1042-S to the recipient when due, or to report correct information, the penalty is the greater of $630 or 10% 

of the total amount of the items that must be reported, with 

no maximum penalty.

Failure to e-file. If you are required to e-file Form 

1042-S but you fail to do so, and you do not have an approved waiver, penalties may apply unless you establish 

reasonable cause for your failure.

For more information on failure to e-file, see Penalties in 

the 2024 Instructions for Form 1042-S.

Partnership Withholding on 

ECTI

Under section 1446(a), a partnership (foreign or domestic) 

that has income effectively connected with a U.S. trade or 

business (or income treated as effectively connected) 

must pay a withholding tax on the ECTI that is allocable to 

its foreign partners. A publicly traded partnership or nominee for a publicly traded partnership distribution must 

withhold tax on actual distributions of ECI. See Publicly 

Traded Partnership Distributions (PTP Distributions), later. 

Chapter 4 withholding does not apply to this income.

This withholding tax does not apply to income that is 

not effectively connected with the partnership's U.S. trade 

or business. That income may be subject to Chapter 3 

withholding tax, as discussed earlier in this publication.

Who Must Withhold

The partnership, or a withholding agent for the partnership, must pay the withholding tax. A partnership that must 

pay the withholding tax but fails to do so may be liable for 

the payment of the tax and any penalties and interest.

The partnership must determine whether a partner is a 

foreign partner. A foreign partner can be a nonresident 

alien individual, foreign corporation, foreign partnership, 

foreign estate or trust, foreign tax-exempt organization, or 

foreign government.

U.S. partner. A partner that is a U.S. person should provide Form W-9 to the partnership.

A partnership may rely on a partner's certification of 

nonforeign status and assume that a partner is not a foreign partner unless the form:

• Does not give the partner's name, U.S. TIN, and address; or

• Is not signed under penalties of perjury and dated.

The partnership must keep the certification for as long 

as it may be relevant to the partnership's liability for tax 

under section 1446.

The partnership may not rely on the certification if it has 

actual knowledge or has reason to know that any information on the form is incorrect or unreliable.

If a partnership does not receive a Form W-9 (or similar 

documentation), the partnership must presume that the 

partner is a foreign person.

Foreign Partner

A partner that is a foreign person should provide the appropriate Form W-8 (as shown in Chart D) to the partnership.

Partners who have otherwise provided Form W-8 to a 

partnership for purposes of section 1441 or 1442, as discussed earlier, can use the same form for purposes of 

section 1446(a) if they meet the requirements discussed 

earlier under Documentation. However, a foreign simple 

trust that has provided documentation for its beneficiaries 

for purposes of section 1441 must provide a Form W-8 on 

its own behalf for purposes of section 1446.

The partnership may not rely on the certification if it has 

actual knowledge or has reason to know that any information on the form is incorrect or unreliable.

The partnership must keep the certification for as long 

as it may be relevant to the partnership's liability for section 1446 tax.

Chart D. Documentation for Foreign 

Partners*

IF you are a...

THEN provide to the 

partnership Form...

nonresident alien W-8BEN.

foreign corporation W-8BEN-E.

foreign partnership W-8IMY.

foreign government W-8EXP.

foreign grantor trust** W-8IMY.

certain foreign trust or foreign 

estate W-8BEN.

foreign tax-exempt organization 

(including a private foundation) W-8EXP.

nominee W-8 used by beneficial owner.

* A partnership may substitute its own form for the official version of Form W-8 

to ascertain the identity of its partners.

** A domestic grantor trust must provide a statement as shown in Regulations 

section 1.1446-1(c)(2)(ii)(E), and documentation for its grantor.

Amount of Withholding Tax

The amount a partnership must withhold is based on its 

effectively connected taxable income that is allocable to 

its foreign partners for the partnership's tax year. However, 

see Publicly Traded Partnerships, later.

Publication 515 (2024) 65
Reduction of withholding. The foreign partner's share 

of the partnership's gross ECI is reduced by the following.

• The partner's share of partnership deductions connected to that income for the year.

• The partner's tax treaty benefits related to that income 

(see Chart D. Documentation for Foreign Partners for 

documentation).

The partnership may reduce the foreign partner's share 

of partnership gross ECI by the following.

1. State and local income taxes the partnership withholds and pays on behalf of the partner on current-year effectively connected taxable income allocated to the partner.

2. The foreign partner's partner-level deductions and 

losses that the partner certifies to the partnership as:

a. Carried forward from a prior year,

b. Properly allocated to gross ECI of the partner's 

trade or business in the United States, and

c. Reasonably expected to be available and claimed 

on the partner's U.S. income tax return.

To certify the deductions and losses, a partner must 

submit to the partnership Form 8804-C.

If the partner's investment in the partnership is the only 

activity producing ECI and the section 1446 tax is less 

than $1,000, no withholding is required. The partner must 

provide Form 8804-C to the partnership to receive the exemption from withholding.

A foreign partner may submit a Form 8804-C to a partnership at any time during the partnership's year and prior 

to the partnership's filing of its Form 8804. An updated 

certificate is required when the facts or representations 

made in the original certificate have changed or a status 

report is required.

For more information, see the Instructions for Form 

8804-C.

Tax rate. The withholding tax rate on a partner's share of 

ECTI is 37% for noncorporate partners and 21% for corporate partners. However, the partnership may withhold at 

the highest rate applicable to a particular type of income 

allocated to a partner provided the partnership received 

the appropriate documentation. See Regulations section 

1.1446-3(a)(2)(ii).

Installment payments. A partnership must make installment payments of withholding tax on its foreign partners' 

share of effectively connected taxable income whether or 

not distributions are made during the partnership's tax 

year. The amount of a partnership's installment payment is 

the sum of the installment payments for each of its foreign 

partners. The amount of each installment payment can be 

figured by using Form 8804-W.

Date payments are due. Payments of withholding tax must be made during the partnership's tax 

year in which the ECTI is derived. A partnership 

must pay the IRS a part of the annual withholding tax for 

its foreign partners by the 15th day of the 4th, 6th, 9th, and 

DUE

12th months of its tax year for U.S. income tax purposes. 

Any additional amounts due are to be paid with Form 

8804, the annual partnership withholding tax return, discussed later.

A foreign partner's share of withholding tax paid by a 

partnership is treated as distributed to the partner on the 

earliest of:

• The day on which the tax was paid by the partnership,

• The last day of the partnership's tax year for which the 

tax was paid, or

• The last day on which the partner owned an interest in 

the partnership during that year.

The amount treated as distributed to the partner resulting from an installment payment is generally treated as an 

advance or draw under Regulations section 1.731-1(a)(1)

(ii) to the extent of the partner's share of income for the 

partnership year.

Notification to partners. In most cases, a partnership 

must notify each foreign partner of the tax withheld on its 

behalf within 10 days of the installment payment date. No 

particular form is required for this notification. For more information on the substance of the notification and exceptions, see Regulations section 1.1446-3(d)(1)(i).

Real property transfers. If a domestic partnership disposes of a USRPI, gain or loss from the sale allocable to a 

foreign partner is treated as effectively connected to the 

conduct of a U.S. trade or business and is included in 

ECTI. The partnership or withholding agent must withhold 

following the rules discussed here for section 1446(a) 

withholding. A domestic partnership's compliance with 

these rules satisfies the requirements for withholding on 

the disposition of U.S. real property interests (discussed 

later).

If a foreign partnership disposes of a U.S. property interest, the transferee must withhold under section 

1445(a), although gain or loss from the sale is also treated 

as effectively connected to the conduct of a U.S. trade or 

business and is included in ECTI. The foreign partnership 

may credit the amount withheld under section 1445(a) that 

is allocable to foreign partners against its tax liability under 

section 1446.

Transfers of interests in partnerships engaged in the 

conduct of a U.S. trade or bussines. If a domestic partnership transfers a direct or indirect interest in another 

partnership engaged in the conduct of a U.S. trade or 

business, gain or loss from the sale allocable to a foreign 

partner that is treated under section 864(c)(8) as effectively connected to the conduct of a U.S. trade or business 

is included in ECTI.

If a foreign partnership transfers an interest in another 

partnership for a gain and section 864(c)(8) treats any 

portion of that gain as effectively connected with the conduct of a trade or business in the United States, then the 

partnership will be withheld upon under section 1446(f)(1). 

The foreign partnership may credit the amount withheld 

66 Publication 515 (2024)
under section 1446(f)(1) that is allocable to foreign partners against its tax liability under section 1446(a).

Reporting and Paying the Tax

Three forms are required for reporting and paying over tax 

withheld on ECTI allocable to foreign partners. This does 

not apply to publicly traded partnerships, discussed later.

Form 8804. The withholding tax liability of the partnership for its tax year is reported on Form 8804. Form 8804 

is also a transmittal form for Forms 8805.

Any additional withholding tax owed for the partnership's tax year is paid (in U.S. currency) with Form 8804.

File Form 8804 by the 15th day of the 3rd month 

after the close of the partnership's tax year. If you 

need more time to file Form 8804, file Form 7004 

to request an extension of time to file. Form 7004 does not 

extend the time to pay the tax.

Form 8805. This form is used to show the amount of 

ECTI and any withholding tax payments allocable to a foreign partner for the partnership's tax year. At the end of 

the partnership's tax year, Form 8805 must be sent to 

each foreign partner on whose behalf tax under section 

1446 was withheld or whose Form 8804-C the partnership 

considered, whether or not any withholding tax is paid. It 

must be delivered to the foreign partner by the due date of 

the partnership return (including extensions). A copy of 

Form 8805 for each foreign partner must also be attached 

to Form 8804 when it is filed. Also attach the most recent 

Form 8804-C, discussed earlier, to the Form 8805 filed for 

the partnership's tax year in which the Form 8804-C was 

considered.

A copy of Form 8805 must be attached to the foreign 

partner's U.S. income tax return to take a credit on its 

Form 1040-NR or Form 1120-F.

Form 8813. This form is used to make payments of withheld tax to the U.S. Treasury. Payments must be made in 

U.S. currency by the payment dates (see Date payments 

are due, earlier). See the Instructions for Form 8804-C for 

when you must attach a copy of that form to Form 8813.

Penalties. A penalty may be imposed for failure to file 

Form 8804 when due (including extensions). It is generally 

the same as the penalty for not filing Form 1042, discussed earlier under Failure to file Form 1042.

A penalty may be imposed for failure to file Form 8805 

when due (including extensions) or for failure to provide 

complete and correct information. The amount of the penalty depends on when you file a correct Form 8805. The 

penalty for each Form 8805 is generally the same as the 

penalty for not filing Form 1042-S. For more information, 

see Penalties in the 2024 Instructions for Form 1042-S.

If you fail to provide a complete and correct Form 8805 

to each partner when due (including extensions), a penalty may be imposed. The amount of the penalty depends 

on when you provide the correct Form 8805. The penalty 

for each Form 8805 is generally the same as the penalty 

for not providing a correct and complete Form 1042-S. For 

DUE

more information, see Penalties in the 2024 Instructions 

for Form 1042-S.

Exception. No penalty is imposed if you meet certain 

requirements. The rules are the same as for Form 1042-S. 

However, if a filer intentionally disregards the requirement 

to file Form 8805 when due, to furnish Form 8805 to the 

recipient when due, or to report correct information, the 

penalty for each Form 8805 (or statement to recipient) 

may be higher.

For more information, see Penalties in the 2024 Instructions for Form 1042-S.

Identification numbers. A partnership that has not been 

assigned a U.S. EIN must obtain one. If a number has not 

been assigned by the due date of the first withholding tax 

payment, the partnership should enter the date the number was applied for on Form 8813 when making its payment. As soon as the partnership receives its EIN, it must 

immediately provide that number to the IRS.

To ensure proper crediting of the withholding tax when 

reporting to the IRS, the partnership must include each 

partner's U.S. TIN on Form 8805. If there are partners in 

the partnership without identification numbers, the partnership should inform them of the need to get a number. 

See U.S. or Foreign TINs, earlier.

Publicly Traded Partnership 

Distributions (PTP Distributions)

A PTP that has ECTI must pay withholding tax under section 1446(a) on any distributions of that income made to 

its foreign partners. A PTP must use Forms 1042 and 

1042-S (Income Code 27) to report withholding from PTP 

distributions. The rate of withholding is 37% for noncorporate partners and 21% for corporate partners under section 1446(a).

A publicly traded partnership (PTP) is any partnership 

an interest in which is regularly traded on an established 

securities market or is readily tradable on a secondary 

market. These rules do not apply to a PTP treated as a 

corporation under section 7704.

Foreign partner. The partnership determines whether a 

partner is a foreign partner using the rules discussed earlier under Foreign Partner.

Nominee. The withholding agent under section 1446(a) 

can be the PTP or a nominee. Starting in 2023, a nominee 

for section 1446(a) purposes is a person receiving a PTP 

distribution on behalf of a foreign person and that is a domestic person, a U.S. branch of a foreign corporation that 

is treated as a U.S. person, or a QI that assumes primary 

withholding responsibility for the distribution. See Regulations section 1.1446-4(b)(3) (describing nominees and 

their withholding requirements). For purposes of section 

1446(a) withholding, a nominee generally determines 

whether a partner is a foreign partner under the same requirements applicable to a PTP. See Foreign partner, directly above. A nominee for a PTP distribution must, in addition to withholding on the distribution to the extent 

Publication 515 (2024) 67
required under section 1446(a), withhold on amounts attributable to the distribution that are subject to withholding 

under chapters 3 and 4, in addition to withholding under 

section 1446(f) on an amount realized on the distribution. 

See Ordering rules and Section 1446(f): PTP Interests, 

later. A nominee determines each amount subject to withholding on a PTP distribution based on a qualified notice 

issued by the PTP making the distribution or, in the absence of a qualified notice (or when a qualified notice 

does not specify each amount attributable to the distribution), based on the withholding default rule in section 

1.1446-4(d).

A PTP or a nominee for a PTP distribution is not generally required to withhold on the distribution, however, when 

it pays the distribution to a nominee for the distribution. In 

such a case, the PTP or nominee is required to report the 

nominee to which it pays the distribution as the recipient 

for Form 1042-S reporting. If a PTP or nominee pays a 

PTP distribution to an NQI, however, the PTP or nominee 

must generally determine its withholding based on a withholding statement and partner documentation provided by 

the NQI with respect to the distribution. An NQI for this 

purpose includes a U.S. branch that is not acting a U.S. 

person for a PTP distribution. See the Instructions for 

Form W-8IMY for additional information on payments of 

PTP distributions made to NQIs. If a PTP or nominee for a 

PTP distribution pays the distribution to a QI not acting as 

a nominee for the distribution, the PTP or nominee can 

determine its withholding based on withholding rate pool 

information provided by the QI or partner information provided by a QI that acts as a disclosing QI. See Revenue 

Procedure 2022-43 for information on the withholding and 

other requirements of QIs acting as nominees or as disclosing QIs for PTP distributions (starting January 1, 

2023). See the Instructions for Form 1042-S for the reporting of a PTP distribution paid to an account holder of a 

disclosing QI and when a nominee for a PTP distribution is 

required to report information about the PTP making a distribution on a Form 1042-S.

Distributions subject to withholding. The partnership 

or nominee must withhold tax on any actual distributions 

of money or property to foreign partners. The amount of 

the distribution includes the amount of any tax under section 1446(a) required to be withheld. In the case of a partnership that receives a partnership distribution from another partnership (a tiered partnership), the distribution 

also includes the tax withheld from that distribution.

If the distribution is in property other than money, the 

partnership cannot release the property until it has enough 

funds to pay over the withholding tax.

A PTP or nominee that complies with these withholding 

requirements satisfies the requirements discussed later 

under U.S. Real Property Interest. Distributions subject to 

withholding include:

• Amounts subject to withholding under section 1445(e)

(1) on distributions pursuant to an election under Regulations section 1.1445-5(c)(3), and

• Amounts not subject to withholding under section 

1445 because the distributee is a partnership or is a 

foreign corporation that has made an election to be 

treated as a domestic corporation.

Ordering rules. Partnership distributions are considered to be paid out of the following types of income in the 

order listed.

1. Amounts attributable to income described in section 

1441 or 1442 that are not effectively connected with 

the conduct of a trade or business in the United 

States and are subject to withholding under Regulations section 1.1441-2(a).

2. Amounts attributable to income described in section 

1441 or 1442 that are not effectively connected with 

the conduct of a trade or business in the United 

States and are not subject to withholding under Regulations section 1.1441-2(a).

3. Amounts attributable to income effectively connected 

with the conduct of a trade or business in the United 

States and not subject to withholding under Regulations section 1.1446-1 through 1.1446-6.

4. Amounts subject to withholding under Regulations 

section 1.1446-1 through 1.1446-6.

5. Other amounts not listed above.

Depositing taxes a PTP withholds under section 

1446. The general rules for making payments of taxes 

withheld under section 1446(a) do not apply to PTP distributions. Instead, apply the rules discussed earlier, under 

Depositing Withheld Taxes.

Section 1446(f) Withholding

Section 13501 of the TCJA added section 1446(f) effective for transfers of partnership interests occurring on or 

after January 1, 2018. It generally requires that a transferee of an interest in a partnership withhold 10% of the 

amount realized on the disposition if any portion of the 

gain (if any) would be treated under section 864(c)(8) as 

effectively connected with the conduct of a trade or business within the United States. A transfer can occur when a 

partnership distribution results in gain under section 731. 

Under section 1446(f)(4), if the transferee fails to withhold 

any required amount, the partnership must deduct and 

withhold from distributions to the transferee the amount 

that the transferee failed to withhold (plus interest).

Notice 2018-08, 2018-07 I.R.B. 352, available at 

IRS.gov/irb/2018-07_IRB#NOT-2018-08, temporarily suspended the application of section 1446(f) to the disposition of certain PTP interests.

Notice 2018-29, 2018-16 I.R.B. 495, available at 

IRS.gov/irb/2018-16_IRB#NOT-2018-29, provides interim 

guidance regarding withholding of U.S. tax related to 

transfers of interests in partnerships, other than PTPs, under section 1446(f). It also temporarily suspended withholding under section 1446(f)(4).

On May 7, 2019, the Department of Treasury and the 

IRS issued proposed regulations under section 1446(f) 

68 Publication 515 (2024)
(84 FR 21198) for transfers of both non-PTP and PTP interests. During the period that Notice 2018-29 applies, instead of applying the rules described in the Notice, taxpayers and other affected persons may choose to apply 

Regulations sections 1.1446(f)-1, 1.1446(f)-2, and 

1.1446(f)-5 of the proposed regulations in their entirety to 

all transfers as if they were final regulations.

On November 30, 2020, the Department of Treasury 

and the IRS issued final regulations under section 1446(f) 

in T.D. 9926 (85 FR 76910) for transfers of both non-PTP 

and PTP interests. The final regulations require any transferee to withhold a tax equal to 10% of the amount realized on any transfer of a partnership interest (other than 

certain PTP interests) under section 1446(f)(1), unless an 

exception to withholding applies. These regulations generally apply to transfers that occur on or after January 29, 

2021. However, in accordance with Notice 2021-51, 

2021-36 I.R.B. 361, the rules related to withholding under 

section 1446(f)(4) and to transfers of PTP interests apply 

to transfers occurring on or after January 1, 2023. Additionally, the final regulations revised certain provisions in 

Regulations section 1.1446-4 for withholding under section 1446(a) on PTP distributions. Also in accordance with 

Notice 2021-51, these revisions apply to PTP distributions 

made on or after January 1, 2023. Notices 2018-8 and 

2018-29 apply to transfers that occur before the effective 

date of the final regulations or, as previously described, 

taxpayers may apply the proposed regulations to transfers 

of non-PTP interests during this time.

Section 1446(f): Non-PTP Interests

Exceptions to withholding on transfers of non-PTP 

interests. A transferee, including a partnership when the 

partner is a distributee, is not required to withhold on the 

transfer of a non-PTP interest if it properly relies on one of 

the following six certifications, the requirements of which 

are more fully described in the referenced regulations. A 

transferee may not rely on a certification if it has actual 

knowledge that the certification is incorrect or unreliable. 

A partnership that is a transferee because it makes a distribution may not rely on its books and records if it knows, 

or has reason to know, that the information is incorrect or 

unreliable. A certification must provide the name and address of the person providing it, be signed under penalties 

of perjury, and generally include the taxpayer identification 

number of the transferor. See Regulations sections 

1.1446(f)-1(c)(2)(i) and 1.1446(f)-2(b)(1). Also, separate 

rules apply if the transfer results from a partnership distribution. Only the certification in exception six must be submitted to the IRS.

The certifications in several of the exceptions are based 

on a determination date. The determination date must 

be one of the following: (a) the date of the transfer; (b) any 

date no more than 60 days before the date of the transfer; 

or (c) if the transferor is not a controlling partner, as defined in Regulations section 1.1446(f)-1(b)(2), the later of 

(i) the first day of the partnership’s taxable year in which 

the transfer occurs, or (ii) the date before the transfer of 

the partnership’s most recent capital account revaluation 

event. See Regulations section 1.1446(f)-1(c)(4).

1. Certification of non-foreign status.The transferor 

provides a certification of non-foreign status signed 

under penalties of perjury that states that the transferor is not a foreign person, and provides the transferor’s name, TIN, and address. A certificate of 

non-foreign status includes a Form W-9. See Regulations section 1.1446(f)-2(b)(2).

2. Certification of no realized gain. The transferor 

provides a certification that there was no realized gain 

on the transfer of the partnership interest (including no 

ordinary income arising from the application of section 

751 and Regulations section 1.751-1) as of the determination date. See Regulations section 1.1446(f)-2(b)

(3).

3. Certification of less than 10% effectively connected gain. The partnership provides a certification 

stating that:

a. On the deemed sale of the partnership assets in 

the manner described in Regulations section 

1.864(c)(8)-1(c) as of the determination date either: the partnership would have no effectively 

connected gain (or the net amount of its effectively 

connected gain would be less than 10% of the total net gain) on all its assets; or the transferor’s 

distributive share of net effectively connected gain 

resulting from the deemed sale would be less than 

10% of the transferor’s distributive share of the total net gain; or

b. The partnership was not engaged in a trade or 

business within the United States at any time during the taxable year of the partnership until the 

date of transfer. See Regulations section 

1.1446(f)-2(b)(4).

4. Certification of Less Than 10% effectively connected income. The transferor provides a certification that:

a. The transferor was a partner in the partnership for 

the transferor’s immediately prior tax year (for 

which it has already received a Schedule K-1) and 

the 2 preceding tax years (the look back period) 

and had a distributive share of gross income from 

the partnership in each of these years;

b. The transferor’s distributive share of gross ECI 

from the partnership, and any persons related to 

the transferor, as reported on a Schedule K-1 

(Form 1065) or other statement required by the 

partnership, was less than $1 million for each of 

the tax years during the look back period;

c. The transferor’s distributive share of partnership 

gross ECI, as reported on a Schedule K-1 or K-3 

(Form 1065) or other statement required by the 

partnership, for each year during the look-back period, was less than 10% of its total distributive 

share of partnership gross income; and

d. For each year during the look-back period, the 

transferor’s distributive share of partnership ECI or 

gain (or losses properly allocated and apportioned 

Publication 515 (2024) 69
to that income) has been timely reported on a federal income tax return of the transferor (or if the 

transferor was a partnership, its direct or indirect 

nonresident alien and foreign corporate partners) 

and any tax due with respect to such amounts 

have been timely paid, provided the return was required to be filed when the transferor furnishes the 

certification. See Regulations section 

1.1446(f)-2(b)(5).

5. Certification of nonrecognition. The transferor provides a certification that it is not required to recognize 

any gain or loss with respect to the transfer by reason 

of the operation of a nonrecognition provision of the 

Internal Revenue Code. The certification must briefly 

describe the transfer and provide the relevant law and 

facts relating to the certification. This exception does 

not apply if only a portion of the gain is not recognized. See Regulations section 1.1446(f)-2(b)(6).

6. Certification that an income tax treaty applies.The transferor provides a certification using 

Form W-8BEN or W-8BEN-E, as applicable, or applicable substitute form that meets the requirements under Regulations section 1.1446-1(c)(5) that the transferor is not subject to tax on any gain from the transfer 

pursuant to an income tax treaty. The transferor may 

not provide this certification if any portion of the gain 

is subject to tax. The form should contain the information necessary to support the claim for treaty benefits. 

Within 30 days after the date of the transfer, the transferee must mail certain information, plus a copy of the 

certificate, to the IRS, at the address in the Instructions for Form 8288. See Regulations section 

1.1446(f)-2(b)(7).

See the discussion, later, regarding certification of 

maximum tax lability if a nonrecognition provision 

applies to only a portion of the gain realized on 

the transfer or only a portion of the gain on the transfer is 

not subject to tax pursuant to an income tax treaty.

A non-PTP making a distribution to a partner may generally rely on any of the above exceptions, with certain additional considerations:

• In Exception 2, the no realized gain exception, a distributing partnership generally may rely on its books 

and records or on a certification from the distributee 

partner.

• In Exception 4, the less than 10% ECI exception, a 

distributing partnership may generally rely on its books 

and records but must also obtain a representation 

from the distributee partner stating that the distributee 

partner satisfies the reporting and tax payment requirements with respect to the partnership’s ECI for 

the look-back period.

Determining the amount to withhold. In general, the 

transferee must withhold 10% of the amount realized. The 

amount realized includes the cash paid, the fair market 

value of property transferred, plus the assumption of and 

relief from liabilities, and liabilities to which the partnership 

interest is subject. See Regulations section 1.1446(f)-2(c)

CAUTION

!

(2)(i). If certain requirements are met, the transferee may 

rely on a certification of the amount of the transferor's 

share of partnership liabilities reported on the most recent 

Schedule K-1 (Form 1065) issued by the partnership or a 

certification from a partnership that provides the amount 

of the transferor's share of partnership liabilities as of the 

determination date. See Regulations section 

1.1446(f)-2(c)(2)(ii) and (iii).

Modified amount realized. If a foreign partnership is 

the transferor, separate rules may apply to determine a 

modified amount realized. The modified amount realized 

is determined by multiplying the amount realized by the 

aggregate percentage computed as of the determination 

date. The aggregate percentage is the percentage of the 

gain (if any) arising from the transfer that would be allocated to any presumed foreign taxable persons. For this purpose, a presumed foreign taxable person is any person 

that has not provided a certificate of non-foreign status, as 

previously described in the Exception 1 to withholding, or 

a certification that pursuant to a tax treaty no portion of the 

foreign taxable person’s gain is subject to tax. The certification the transferor foreign partnership provides does not 

need to be submitted to the IRS. See Regulations section 

1.1446(f)-2(c)(2)(iv).

Lack of money or property or lack of knowledge 

regarding liabilities. Under certain circumstances, the 

amount the transferee must withhold equals the entire 

amount realized, rather than 10% of the amount realized, 

but the amount realized is determined without regard to 

any decrease in the transferor’s share of partnership liabilities. These circumstances are if:

1. The amount otherwise required to be withheld would 

exceed the amount realized determined without regard to the decrease in the transferor’s share of partnership liabilities; or

2. The transferee is unable to determine the amount realized because it does not have actual knowledge of 

the transferor’s share of partnership liabilities (and has 

not received or cannot rely on a certification of the 

transferor’s share of partnership liabilities received 

from the transferor (including the most recent Schedule K-1) or a certification of the transferor’s share of liabilities received from the partnership). See Regulations section 1.1446(f)-2(c)(3)(ii).

Certification of maximum tax liability. A transferor 

that meets certain requirements can certify its maximum 

tax liability to the transferee. The maximum tax liability is 

the amount of the transferor’s effectively connected gain 

multiplied by the applicable percentage under Regulations 

section 1.1446-3(a)(2). The applicable percentage for foreign corporations is the highest rate of tax under section 

11(b) and for non-corporations is the highest rate of tax 

under section 1. See Regulations section 1.1446(f)-2(c)(4) 

for further information. The certificate does not need to 

and should not be submitted to the IRS for approval.

Effect of withholding on transferor. A transferee’s 

withholding of tax under section 1446(f)(1) does not relieve a foreign person from filing a U.S. tax return with 

70 Publication 515 (2024)
respect to the transfer. Further, it does not relieve a nonresident alien individual or foreign corporation subject to 

tax on gain by reason of section 864(c)(8) from paying 

with the return any tax due that has not been fully satisfied 

through withholding.

Transfers of partnership interests subject to withholding under sections 1445(e)(5) and 1446(f)(1). 

The transfer of a partnership interest may be subject to 

withholding under section 1445(e)(5) or Regulations section 1.1445-11T(d)(1) if 50% or more of the value of the 

partnership’s gross assets consist of USRPI, and 90% or 

more of the value of its gross assets consist of USRPI plus 

any cash or cash equivalents. The transfer of a partnership interest may also be subject to withholding under 

section 1446(f)(1) and Regulations section 1.1446(f)-2 if 

the partnership also holds other property used in the conduct of a trade or business within the United States. If both 

sections 1445(e)(5) and 1446(f)(1) could apply to the 

same transfer, generally the transfer is subject to the payment and reporting requirements of section 1445 only, and 

not section 1446(f)(1). However, if the transferor has applied for a withholding certificate under the last sentence 

of Regulations section 1.1445-11T(d)(1), the transferee 

must withhold the greater of the amounts required under 

section 1445(e)(5) or 1446(f)(1). A transferee that has 

complied with the withholding requirements under either 

section 1445(e)(5) or 1446(f)(1), as described under this 

paragraph, will be deemed to satisfy its withholding requirement.

Forms for paying and reporting section 1446(f)(1) 

withholding. To meet the withholding, payment, and reporting requirements under section 1446(f)(1) for transfers 

of interests in partnerships other than PTPs, taxpayers 

must use Forms 8288 and 8288-A and follow the instructions for those forms.

The time for filing Forms 8288 and 8288-A to report 

section 1446(f)(1) withholding is the same as for section 

1445 withholding. The same rules for filing Forms 8288 

and 8288-A by transferees withholding tax under section 

1445 apply to transferees withholding tax under section 

1446(f)(1). The same rules for claiming a credit for withholding of tax under section 1445 apply to transferors receiving Form 8288-A claiming credit for withholding under 

section 1446(f)(1). The rules relating to Forms 8288 and 

8288-A discussed in this paragraph are described, later, 

under U.S. Real Property Interest, Reporting and Paying 

the Tax and in the Instructions for Form 8288.

Transferee reporting to partnership. No later than 10 

days after the transfer, a transferee (other than a partnership that is a transferee because it made a distribution) 

must certify to the partnership the extent to which it has 

satisfied its withholding obligation. See Regulations section 1.1446(f)-2(d)(2) for the documentation required for 

making this certification.

Partnership’s requirement to withhold under section 

1446(f)(4) on distributions to transferee. Section 

1446(f)(4) requires a partnership to withhold on distributions to a transferee on any amount that the transferee 

failed to properly withhold under section 1446(f)(1), plus 

any interest on this amount. See Regulations section 

1.1446(f)-3. These rules apply to transfers occurring on or 

after January 1, 2023. See Notice 2021-51, 2021-36 

I.R.B. 361, available at IRS.gov/irb/

2021-36_IRB#NOT-2021-51.

Requirement to withhold. If a transferee fails to withhold any amount required by Regulations section 

1.1446(f)-2 in connection with the transfer of a partnership 

interest, the partnership must withhold from the distributions it makes to the transferee. Generally, a partnership 

may rely on the certification described in Regulations section 1.1446(f)-2(d)(2) that it receives from the transferee to 

determine whether a transferee has withheld the amount 

required by Regulations section 1.1446(f)-2, unless it 

knows, or has reason to know, that the certification is incorrect or unreliable. See Regulations section 

1.1446(f)-3(a)(1).

If the partnership receives, within 10 days from the 

transfer, a certification from the transferee stating that an 

exception to withholding applies or establishing that the 

transferee has withheld the amount required to be withheld under Regulations section 1.1446(f)-2, then the partnership generally is not required to withhold under Regulations section 1.1446(f)-3(a)(1). See Regulations section 

1.1446(f)-3(b)(1). However, a partnership is required to 

withhold under section 1446(f)(4) if it receives notification 

from the IRS that the transferee has provided incorrect information on the certification. This may occur when the 

IRS determines that the transferee has provided incorrect 

information on the certification regarding the amount realized or the amount withheld, or that the transferee failed to 

pay the amounts reported as withheld to the IRS. See 

Regulations section 1.1446(f)-3(a)(2).

A partnership that is a transferee because it makes a 

distribution subject to section 1446(f)(1) is not required to 

withhold under section 1446(f)(4). However, the partnership remains liable for its failure to withhold in its capacity 

as a transferee. A publicly traded partnership is not required to withhold on distributions made to a transferee 

under section 1446(f)(4). See Regulations sections 

1.1446(f)-3(b)(2) and (3).

Withholding rules. A partnership that does not receive, 

or cannot rely on, a timely certification from a transferee 

stating that an exception to withholding applies or that the 

proper amount has been withheld must begin withholding 

on distributions made to the transferee on the later of the 

date that is 30 days after the transfer or the date that is 15 

days after the partnership acquires actual knowledge of 

the transfer. See Regulations section 1.1446(f)-3(c)(1)(i).

The partnership must withhold on the entire amount of 

each distribution made to the transferee until it may rely on 

a certification from the transferee that states that an exception to withholding applies or that provides the information necessary to determine the amount required to be 

withheld. See Regulations section 1.1446(f)-3(c)(1)(ii). 

The partnership may rely on this certification to determine 

its withholding obligation regardless of whether it is provided within the time prescribed in Regulations section 

1.1446(f)-2(d)(2). Once the partnership receives a 

Publication 515 (2024) 71
certification from the transferee, the partnership must withhold 10% of the amount realized on the transfer, reduced 

by any amount already withheld by the transferee, plus 

any computed interest. See Regulations section 

1.1446(f)-3(c)(2)(i).

A partnership that is required to withhold under Regulations section 1.1446(f)-3(a)(1) may not take into account 

any adjustment procedures that would otherwise affect 

the amount required to be withheld under Regulations 

section 1.1446(f)-2(c)(2)(i). See Regulations section 

1.1446(f)-3(c)(2)(i)(A). Thus, for example, a partnership 

may not reduce the amount that it is required to withhold 

under the procedures described in Regulations section 

1.1446(f)-2(c)(4) (adjusting the amount subject to withholding based on a transferor’s maximum tax liability). For 

example, if a partnership is required to withhold $30 under 

section 1441 on a $100 distribution, the maximum amount 

required to be withheld on that distribution under section 

1446(f)(4) is $70.

A partnership that does not receive or cannot rely on a 

certification from the transferee must withhold the full 

amount of each distribution made to the transferee until 

the partnership receives a certification that it can rely on. 

However, any amount required to be withheld on a distribution under any other withholding provision in the Code 

is not required to be withheld under section 1446(f)(4). 

See Regulations section 1.1446(f)-3(c)(3). Nevertheless, 

the partnership may stop withholding if the transferee disposes of all of its interest in the partnership, unless the 

partnership has actual knowledge that any successor to 

the transferee is related to the transferee or the transferor 

from which the transferee acquired the interest.

Computation of interest. The amount of interest required to be withheld is the amount of interest that would 

be required to be paid under section 6601 and Regulations section 301.6601-1 if the amount that should have 

been withheld by the transferee was considered an underpayment of tax. Interest is payable between the date that 

is 20 days after the date of the transfer and the date on 

which the transferee’s withholding tax liability due under 

section 1446(f)(1) is satisfied. See Regulations section 

1.1446(f)-3(c)(2)(ii).

Forms and filing dates. A partnership required to withhold under section 1446(f)(4) must report and pay the tax 

withheld using Forms 8288 and 8288-C. See Regulations 

section 1.1446(f)-3(d). The time for filing Forms 8288 and 

8288-C to report section 1446(f)(4) withholding is the 

same as for section 1445 withholding.

Buyer/transferee claiming refund of section 1446(f)

(4) withholding. A transferee may claim a refund for an 

excess amount if it has been overwithheld upon under 

section 1446(f)(4). An excess amount is the amount of tax 

and interest withheld that exceeds the transferee's withholding tax liability plus any interest owed by the transferee with respect to such liability. See Regulations section 1.1446(f)-3(e). The transferee may also be liable for 

any applicable penalties or additions to tax. A transferee 

must complete Part V of Form 8288 and attach Form(s) 

8288-C it received from the partnership when making a 

claim for refund of section 1446(f)(4) withholding. If a 

transferee that has not yet completed and filed Part III of 

Form 8288 with respect to a transfer and is now claiming a 

refund for amounts withheld under section 1446(f)(4), the 

transferee must complete Part III when filing Part V of 

Form 8288.

Section 1446(f): PTP Interests

For purposes of section 1446(f), a broker is generally required to withhold on an amount realized from the transfer 

of a PTP interest that it effects for the transferor of the interest. A broker is generally required to withhold at a 10% 

rate on an amount realized paid to the transferor. However, certain exceptions to withholding may apply under 

Regulations section 1.1446(f)-4(b), which include exceptions for a transferor providing a certification of non-foreign 

status, a certification from a transferor claiming an exemption from tax on any gain from the transfer under an income tax treaty, or a certification of the transferor’s status 

as a dealer in securities stating that any gain from the 

transfer is effectively connected with a trade or business in 

the U.S. without regard to section 864(c)(8). Additionally, 

for an amount realized paid to a transferor that is a foreign 

partnership, a broker may rely on a claim for a modified 

amount realized made by the partnership on a valid Form 

W-8IMY and determine its withholding taking into account 

a certification of non-foreign status or claim for treaty benefits provided for a partner in the partnership that meets 

the requirements of Regulations section 1.1446(f)-4(b)(2) 

or (5). See Regulations section 1.1446(f)-4(c)(2)(ii) for further information on a modified amount realized. For an 

amount realized paid to a transferor that is a grantor trust, 

a broker may similarly determine its withholding taking into 

account any withholding exception applicable to a grantor 

or owner in the trust.

A broker is also required to withhold under section 

1446(f) an amount realized from the transfer of a PTP interest that it pays to a broker that is an NQI, a QI (other 

than a QI assuming primary withholding responsibility for 

the amount realized), or U.S. branch or territory financial 

institution that is not treated as a U.S. person for the 

amount realized. In the case of an amount realized paid to 

an NQI (including a U.S. branch or territory financial institution not treated as a U.S. person), a broker is required to 

withhold at the 10% percent rate under section 1446(f). 

See the Instructions for Form W-8IMY for additional information on amount realized paid to NQIs. In the case of an 

amount realized paid to a QI not assuming primary withholding responsibility for the amount, a broker may withhold based on either withholding rate pool information provided by the QI or information on the transferors of the 

PTP interest when the QI acts as a disclosing QI.

Regardless of whether an amount realized is paid to a 

transferor of a PTP interest through a broker, a broker is 

not required to withhold under section 1446(f) when it may 

rely on a qualified notice from the PTP that states the applicability of the “10% exception” to withholding. See Regulations section 1.1446(f)-4(b)(3) for further information on 

this exception, which applies to a PTP with less than 10% 

72 Publication 515 (2024)
effectively connected gain (or that is otherwise not engaged in a trade or business in the United States).

An amount realized from the sale of a PTP interest is 

the amount of gross proceeds paid or credited from the 

sale. In the case of a PTP distribution, an amount realized 

on the distribution is limited to an amount described in 

Regulations section 1.1446(f)-4(c)(2)(iii).

For when an amount realized is reportable on Form 

1042-S and other requirements for reporting amounts realized on Form 1042-S, see Regulation section 

1.1461-1(c)(2)(i) and the Instructions for Form 1042-S. 

Also see the instructions for Form 1042-S for the reporting 

of an amount realized paid to an NQI, or to a QI (including 

when the QI acts as a disclosing QI for the amount realized). See Revenue Procedure 2022-43 for the withholding and reporting requirements of QIs with respect to 

amounts realized paid to their account holders (including 

QIs acting as disclosing QIs), effective starting January 1, 

2023.

U.S. Real Property Interest

The disposition of a USRPI by a foreign person (the transferor) is subject to income tax withholding under section 

1445. If you are the transferee, you must find out if the 

transferor is a foreign person. If the transferor is a foreign 

person and you fail to withhold, you may be held liable for 

the tax.

Foreign person. A foreign person is a nonresident alien 

individual, or a foreign corporation that has not made an 

election under section 897(i) to be treated as a domestic 

corporation, foreign partnership, foreign trust, or foreign 

estate. It does not include a resident alien individual or, in 

certain cases, a qualified foreign pension fund. See Retirement and pension funds, later.

Transferor. A transferor is any foreign person that disposes of a USRPI by sale, exchange, gift, or any other transfer. A transfer includes distributions to shareholders of a 

corporation and beneficiaries of a trust or estate.

The owner of a disregarded entity, not the entity, is treated as the transferor of the property transferred by the disregarded entity.

Transferee. A transferee is any person, foreign or domestic, that acquires a USRPI by purchase, exchange, gift, or 

any other transfer.

USRPI defined. A USRPI is an interest, other than as a 

creditor, in real property (including an interest in a mine, 

well, or other natural deposit) located in the United States 

or the USVI, as well as certain personal property that is 

associated with the use of real property (such as farming 

machinery). It also means any interest, other than as a 

creditor, in any domestic corporation unless it is established that the corporation was at no time a U.S. real property holding corporation during the shorter of the period 

during which the interest was held, or the 5-year period 

ending on the date of disposition (applicable periods).

An interest in a corporation is not a USRPI if:

1. Such corporation did not hold any USRPI on the date 

of disposition,

2. All the USRPI held by such corporation at any time 

during the shorter of the applicable periods were disposed of in transactions in which the full amount of 

any gain was recognized, and

3. Such corporation and any predecessor of such corporation was not a RIC or a REIT during the shorter of 

the applicable periods during which the interest was 

held.

Exception for publicly traded stock. If, at any time 

during the calendar year, any class of stock of a domestic 

corporation is regularly traded on an established securities market, an interest in such corporation will not be treated as a USRPI if the beneficial owner did not own more 

than 5% of the total fair market value of that class of interests, or 10% of the total fair market value of that class of 

interests in the case of a REIT, at any time during the 

shorter of the applicable periods. Certain constructive 

ownership rules apply for purposes of determining 

whether any person meets the above ownership threshold 

of any class of stock. See section 897(c)(6)(C) for more 

information on the constructive ownership rules.

Amount to withhold. The transferee must deduct and 

withhold a tax on the total amount realized by the foreign 

person on the disposition. The rate of withholding is generally 15%.

The amount realized is the sum of:

• The cash paid, or to be paid (principal only);

• The fair market value of other property transferred, or 

to be transferred; and

• The amount of any liability assumed by the transferee 

or to which the property is subject immediately before 

and after the transfer.

If the property transferred was owned jointly by U.S. 

and foreign persons, the amount realized is allocated between the transferors based on the capital contribution of 

each transferor.

Residences. This rule applies when the property disposed of is acquired by the transferee for use by the transferee as a residence. If the amount realized on such disposition does not exceed $300,000, no withholding is 

required. Otherwise, the transferee must generally withhold 10% of the amount realized by a foreign person. The 

rate of withholding is 15% when the amount realized is in 

excess of $1,000,000.

Foreign corporations. A foreign corporation that distributes a USRPI must withhold a tax equal to 21% of the 

gain it recognizes on the distribution to its shareholders.

Domestic corporations. A domestic corporation must 

withhold tax on the fair market value of the property distributed to a foreign shareholder if:

• The shareholder's interest in the corporation is a 

USRPI, and

Publication 515 (2024) 73
• The property distributed is either in redemption of 

stock or in liquidation of the corporation.

The corporation must generally withhold 15% of the 

amount realized by a foreign person.

U.S. real property holding corporations. A distribution from a domestic corporation that is a U.S. real property holding corporation (USRPHC) is generally subject to 

chapter 3 withholding and withholding under the USRPI 

provisions. This also applies to a corporation that was a 

USRPHC at any time during the shorter of the period during which the USRPI was held, or the 5-year period ending 

on the date of disposition. A USRPHC can satisfy both 

withholding provisions if it withholds under one of the following procedures.

• Apply chapter 3 withholding on the full amount of the 

distribution, whether or not any part of the distribution 

represents a return of basis or capital gain. If a reduced tax rate applies under an income tax treaty, see 

Regulations section 1.1441-3T(c)(4)(i)(A) for the minimum withholding rate that may be applicable.

• Apply chapter 3 withholding to the part of the distribution that the USRPHC estimates is a dividend. Then, 

withhold 15% on the remainder of the distribution (or 

on a smaller amount if a withholding certificate is obtained and the amount of the distribution that is a return of capital is established).

The same procedure must be used for all distributions 

made during the year. A different procedure may be used 

each year.

Partnerships. If a domestic or foreign partnership with 

any foreign partners disposes of a USRPI at a gain, the 

gain is treated as ECI and is generally subject to the rules 

explained earlier under Partnership Withholding on ECTI. 

A foreign partnership that disposes of a USRPI may credit 

the taxes withheld by the transferee against the tax liability 

determined under the partnership withholding on ECTI 

rules.

If a foreign person disposes of an interest in a partnership in which 50% or more of the value of the gross assets 

consist of USRPI and 90% or more of the value of the 

gross assets consist of USRPI plus any cash or cash 

equivalents, the transferee of the partnership interest must 

deduct and withhold 15% of the amount realized on the 

disposition.

Trusts and estates. You are a withholding agent if you 

are a trustee, fiduciary, or executor of a trust or estate having one or more foreign beneficiaries. You must establish a 

USRPI account. You enter in the account all gains and losses realized during the tax year of the trust or estate from 

dispositions of USRPI. You must withhold 21% on any distribution to a foreign beneficiary that is attributable to the 

balance in the real property interest account on the day of 

the distribution. A distribution from a trust or estate to a 

beneficiary (foreign or domestic) will be treated as attributable first to any balance in the USRPI account and then to 

other amounts.

A trust with more than 100 beneficiaries may elect to 

withhold from each distribution 21% of the amount 

attributable to the foreign beneficiary's proportionate 

share of the current balance of the trust's real property interest account. This election does not apply to publicly traded trusts or REITs. For more information about this election, see Regulations section 1.1445-5(c).

Publicly traded partnership and trust interests. If any 

class of interest in a partnership or a trust is regularly traded on an established securities market, any interest in 

such a partnership or trust will be treated as an interest in 

a publicly traded corporation and will be subject to the 

rules applicable to those interests.

Qualified investment entities (QIEs). Special rules apply to QIEs. A QIE is:

1. A REIT, or

2. A RIC that is a U.S. real property holding corporation.

Look-through rule for QIEs. In most cases, any distribution from a QIE to a nonresident alien, foreign corporation, or other QIE that is attributable to the QIE's gain 

from the sale or exchange of a USRPI is treated as gain 

recognized by the nonresident alien, foreign corporation, 

or other QIE from the sale or exchange of a USRPI.

A distribution by a QIE to a nonresident alien or foreign 

corporation that is treated as gain from the sale or exchange of a USRPI by the shareholder is subject to withholding at 21%.

Certain exceptions apply to the look-through rule for 

distributions by QIEs. Any distribution by a QIE with respect to stock regularly traded on an established securities market in the United States is not treated as gain from 

the sale or exchange of a USRPI if the shareholder did not 

own more than 5% of that stock (or more than 10% of that 

stock in the case of REITs) at any time during the 1-year 

period ending on the date of the distribution. A distribution 

by a REIT generally is not treated as gain from the sale or 

exchange of a USRPI if the shareholder is a qualified 

shareholder (as described in section 897(k)(3)). These 

distributions may be included in the shareholder's gross 

income as a dividend from the QIE, not as long-term capital gain.

Disposition of REIT stock. Disposition of stock in a 

REIT that is held directly (or indirectly through one or more 

partnerships) by a qualified shareholder may not be subject to withholding. See section 897(k)(2) for more information.

Domestically controlled QIE. The sale of an interest 

in a domestically controlled QIE is not the sale of a 

USRPI. The entity is domestically controlled if at all times 

during the testing period less than 50% in value of its 

stock was held, directly or indirectly, by foreign persons. 

The testing period is the shorter of (a) the 5-year period 

ending on the date of disposition, or (b) the period during 

which the entity was in existence.

For the purpose of determining whether a QIE is domestically controlled, the following rules apply.

1. A person holding less than 5% of any class of stock of 

a QIE which is regularly traded on an established 

74 Publication 515 (2024)
securities market in the United States at all times during the testing period will be treated as a U.S. person 

unless the QIE has actual knowledge that such person is not a U.S. person.

2. Any stock in a QIE that is held by another QIE will be 

treated as held by a foreign person if:

a. Any class of stock of such other QIE is regularly 

traded on an established securities market, or

b. Such other QIE is a RIC that issues certain redeemable securities.

Notwithstanding the above, the stock of the QIE will 

be treated as held by a U.S. person if such other QIE 

is domestically controlled.

3. Stock in a QIE that is held by any other QIE not described above will be treated as held by a U.S. person 

in proportion to the stock ownership of such other QIE 

which is (or is treated as) held by a U.S. person.

If a foreign shareholder in a domestically controlled QIE 

disposes of an interest in the QIE in an applicable wash 

sale transaction, special rules apply. See section 897 for 

more information.

Retirement and pension funds. A qualified foreign pension fund or any entity wholly owned by such qualified foreign pension fund will not be treated as a foreign person 

for dispositions of USRPI or distributions received from a 

REIT or certain RICs described in section 897(h)(4)(A)(ii). 

Qualified foreign pension funds are described in section 

897(l)(2).

Additional information. For additional information on 

the withholding rules that apply to corporations, trusts, estates, and qualified investment entities, see section 1445 

and the related regulations. For additional information on 

the withholding rules that apply to partnerships, see the 

previous discussion.

Exceptions. You do not have to withhold if any of the following apply.

1. You (the transferee) acquire the property for use as a 

residence and the amount realized (sales price) is not 

more than $300,000. You or a member of your family 

must have definite plans to reside at the property for 

at least 50% of the number of days the property is 

used by any person during each of the first two 

12-month periods following the date of transfer. When 

counting the number of days the property is used, do 

not count the days the property will be vacant. For this 

exception, the transferee must be an individual.

2. The property disposed of is an interest in a domestic 

corporation and any class of stock of the corporation 

is regularly traded on an established securities market. However, this exception does not apply to certain 

dispositions of substantial amounts of non-publicly 

traded interests in publicly traded corporations.

3. The disposition is of an interest in a domestic corporation and that corporation furnishes you a certification 

stating, under penalties of perjury, that the interest is 

not a USRPI. In most cases, the corporation can 

make this certification only if either of the following is 

true.

• During the previous 5 years (or, if shorter, the period the interest was held by its present owner), 

the corporation was not a USRPHC.

• As of the date of disposition, the interest in the 

corporation is not a USRPI by reason of section 

897(c)(1)(B). The certification must be dated not 

more than 30 days before the date of transfer.

4. The transferor gives you a certification stating, under 

penalties of perjury, that the transferor is not a foreign 

person and containing the transferor's name, U.S. 

TIN, and home address (or office address, in the case 

of an entity). A certificate of non-foreign status includes a Form W-9 and for qualified foreign pension 

funds, or entities wholly owned by qualified foreign 

pension funds, Form W-8 EXP.

The transferor can give the certification to a qualified substitute. The qualified substitute gives you a 

statement, under penalties of perjury, that the certification is in the possession of the qualified substitute. 

For this purpose, a qualified substitute is (a) the person (including any attorney or title company) responsible for closing the transaction, other than the transferor's agent, and (b) the transferee's agent.

5. You receive a withholding certificate from the IRS that 

excuses withholding. See Withholding Certificates, 

later.

6. The transferor gives you written notice that no recognition of any gain or loss on the transfer is required 

because of a nonrecognition provision in the Internal 

Revenue Code or a provision in a U.S. tax treaty. You 

must file a copy of the notice by the 20th day after the 

date of transfer with:

Ogden Service Center

P.O. Box 409101

Ogden, UT 84409

7. The amount the transferor realizes on the transfer of a 

USRPI is zero.

8. The property is acquired by the United States, a U.S. 

state or territory, a political subdivision, or the District 

of Columbia.

9. The grantor realizes an amount on the grant or lapse 

of an option to acquire a USRPI. However, you must 

withhold on the sale, exchange, or exercise of that option.

10. The disposition is of an interest in a publicly traded 

partnership or trust. However, this exception does not 

apply to certain dispositions of substantial amounts of 

non-publicly traded interests in publicly traded partnerships or trusts.

Late filing of certifications or notices. If you become aware that you have failed to timely file certain 

certifications or notices, you still may be able to file them. 

Publication 515 (2024) 75
See Revenue Procedure 2008-27, 2008-21 I.R.B. 1014 

available at IRS.gov/irb/2008-21_IRB#RP-2008-27.

Complete the required certification or notice and file it 

with the appropriate person or the IRS. Also include the 

following.

• A statement at the top of the document(s) that it is 

“FILED PURSUANT TO Revenue Procedure 2008-27.”

• An explanation describing why the failure was due to 

reasonable cause. Within the explanation, provide that 

you filed with, or obtained from, an appropriate person 

the required certification or notice.

The completed certification or notice attached to 

the explanation must be sent to:

Ogden Service Center

P.O. Box 409101

Ogden, UT 84409.

Certifications. The certifications in items (3) and (4) 

are not effective if you (or the qualified substitute) have actual knowledge, or receive a notice from an agent (or substitute), that they are false. This also applies to the qualified substitute's statement under item (4).

If you (or the substitute) are required by regulations to 

furnish a copy of the certification (or statement) to the IRS 

and you (or the substitute) fail to do so in the time and 

manner prescribed, the certification (or statement) is not 

effective.

Liability of agent or qualified substitute. If you (or 

the substitute) receive a certification discussed in item (3) 

or (4) or a statement in item (4), and the agent, or substitute, has actual knowledge that the certification (or statement) is false, or in the case of (3), that the corporation is 

a foreign corporation, the agent (or substitute) must notify 

you, or the agent (or substitute) will be held liable for the 

tax. The agent's (or substitute's) liability is limited to the 

compensation the agent (or substitute) gets from the 

transaction.

An agent is any person who represents the transferor or 

transferee in any negotiation with another person (or another person's agent) relating to the transaction, or in settling the transaction. A person is not treated as an agent if 

the person only performs one or more of the following acts 

related to the transaction.

• Receipt and disbursement of any part of the consideration.

• Recording of any document.

• Typing, copying, and other clerical tasks.

• Obtaining title insurance reports and reports concerning the condition of the property.

• Transmitting documents between the parties.

Reporting and Paying the Tax

Transferees must use Forms 8288 and 8288-A to report 

and pay over any tax withheld on the acquisition of USRPI. 

These forms must also be used by corporations, estates, 

and QIEs that must withhold tax on distributions and other 

transactions involving USRPI. You must include the U.S. 

TIN of both the transferor and the transferee on the forms.

For partnerships disposing of USRPI, the manner of reporting and paying over the tax withheld is the same as 

discussed earlier under Partnership Withholding on ECTI.

Publicly traded trusts must use Forms 1042 and 

1042-S to report and pay over tax withheld on distributions 

from dispositions of USRPI.

QIEs must use Forms 1042 and 1042-S for a distribution to a nonresident alien or foreign corporation that is 

treated as a dividend, as discussed earlier under Qualified 

investment entities (QIEs).

Form 8288. The tax withheld on the acquisition of a 

USRPI from a foreign person is reported and paid over using Form 8288. Form 8288 also serves as the transmittal 

form for copies A and B of Form 8288-A.

In most cases, you must file Form 8288 by the 

20th day after the date of the transfer.

If an application for a withholding certificate (discussed 

later) is submitted to the IRS before or on the date of a 

transfer and the application is still pending with the IRS on 

the date of transfer, the correct withholding tax must be 

withheld, but does not have to be reported and paid over 

immediately. The amount withheld (or lesser amount, as 

determined by the IRS) must be reported and paid over 

within 20 days following the day on which a copy of the 

withholding certificate or notice of denial is mailed by the 

IRS.

If the principal purpose of applying for a withholding 

certificate is to delay paying over the withheld tax, the 

transferee will be subject to interest and penalties. The interest and penalties will be assessed for the period beginning on the 21st day after the date of transfer and ending 

on the day the payment is made.

Form 8288-A. The withholding agent must prepare a 

Form 8288-A for each person from whom tax has been 

withheld. Attach copies A and B of Form 8288-A to Form 

8288. Keep copy C for your records.

The IRS will stamp copy B and send it to the person 

subject to withholding. That person must file a U.S. income tax return and attach the stamped Form 8288-A to 

receive credit for any tax withheld.

A stamped copy of Form 8288-A will not be provided to the transferor if the transferor's TIN is not 

included on that form. The IRS will send a letter to 

the transferor requesting the TIN and providing instructions for how to get a TIN. When the transferor provides 

the IRS with a TIN, the IRS will provide the transferor with 

a stamped copy B of Form 8288-A.

Form 1099-S. In most cases, the real estate broker or 

other person responsible for closing the transaction must 

report the sale of the property to the IRS using Form 

DUE

CAUTION

!

76 Publication 515 (2024)
1099-S. For more information about Form 1099-S, see the 

Instructions for Form 1099-S and the General Instructions 

for Certain Information Returns.

Withholding Certificates

The amount that must be withheld from the disposition of 

a USRPI can be adjusted by a withholding certificate issued by the IRS. The transferee, the transferee's agent, or 

the transferor may request a withholding certificate. The 

IRS will generally act on these requests within 90 days after receipt of a complete application including the TINs of 

all the parties to the transaction. A transferor that applies 

for a withholding certificate must notify the transferee, in 

writing, that the certificate has been applied for on the day 

of or the day before the transfer.

A withholding certificate may be issued due to:

1. A determination by the IRS that reduced withholding 

is appropriate because either:

a. The amount that must be withheld would be more 

than the transferor's maximum tax liability, or

b. Withholding of the reduced amount would not 

jeopardize collection of the tax;

2. The exemption from U.S. tax of all gain realized by the 

transferor; or

3. An agreement for the payment of tax providing security for the tax liability, entered into by the transferee or 

transferor.

Applications for withholding certificates are divided into 

six basic categories. This categorizing provides for specific information that is needed to process the applications. The six categories are:

1. Applications based on a claim that the transferor is 

entitled to nonrecognition treatment or is exempt from 

tax,

2. Applications based solely on a calculation of the 

transferor's maximum tax liability,

3. Applications under special installment sales rules,

4. Applications based on an agreement for the payment 

of tax with conforming security,

5. Applications for blanket withholding certificates, and

6. Applications on any other basis.

The applicant must make available to the IRS, 

within the time prescribed, all information required 

to verify that representations relied upon in accepting the agreement are accurate, and that the obligations assumed by the applicant will be performed pursuant 

to the agreement. Failure to provide requested information 

promptly will usually result in rejection of the application, 

unless the IRS grants an extension of the target date.

Categories (1), (2), and (3). Use Form 8288-B to apply 

for a withholding certificate. Follow the instructions for the 

form.

RECORDS

Categories (4), (5), and (6). Do not use Form 8288-B 

for applications under categories (4), (5), and (6). For 

these categories, follow the instructions given here and 

under the specific category.

All applications for withholding certificates must use the 

following format. The information must be provided in 

paragraphs labeled to correspond with the numbers and 

letters set forth below. If the information requested does 

not apply, place “N/A” in the relevant space.

1. Information on the application category:

a. State which category (4, 5, or 6) describes the application,

b. If a category (4) application:

i. State whether the proposed agreement secures (A) the transferor's maximum tax liability, 

or (B) the amount that would otherwise have to 

be withheld; and

ii. State whether the proposed agreement and 

security instrument conform to the standard 

formats.

2. Information on the transferee or transferor:

a. State the name, address, and TIN of the person 

applying for the withholding certificate (if this person does not have a TIN and is eligible for an ITIN, 

they can apply for the ITIN by attaching the application to a completed Form W-7 and forwarding 

the package to the address given in the Form W-7 

instructions);

b. State whether that person is the transferee or 

transferor; and

c. State the name, address, and TIN of all other 

transferees and transferors of the USRPI for which 

the withholding certificate is sought.

3. Information on the USRPI for which the withholding 

certificate is sought. State the:

a. Type of interest (such as interest in real property, 

in associated personal property, or in a domestic 

U.S. real property holding corporation);

b. Contract price;

c. Date of transfer;

d. Location and general description (if an interest in 

real property);

e. Class or type and amount of the interest in a U.S. 

real property holding corporation; and

f. Whether in the 3 preceding tax years (1) U.S. income tax returns were filed relating to the USRPI 

and, if so, when and where those returns were 

filed and, if not, why returns were not filed, and (2) 

U.S. income taxes were paid relating to the USRPI 

and, if so, the amount of tax paid.

4. Provide full information concerning the basis for the 

issuance of the withholding certificate. Although the 

Publication 515 (2024) 77
information to be included in this section of the application will vary from case to case, the rules shown under the specific category provide general guidelines 

for the inclusion of appropriate information for that category.

The application must be signed by the individual, a responsible officer in the case of a corporation, a general 

partner in the case of a partnership, or a trustee, executor, 

or equivalent fiduciary in the case of a trust or estate, or a 

duly authorized agent (with a copy of the power of attorney, such as Form 2848, attached). The person signing 

the application must verify under penalties of perjury that 

all representations are true, correct, and complete to that 

person's knowledge and belief. If the application is based 

in whole or in part on information provided by another 

party to the transaction, that information must be supported by a written verification signed under penalties of perjury by that party and attached to the application.

Send applications to the:

Ogden Service Center

P.O. Box 409101

Ogden, UT 84409

Category (4) applications. If the application is based on 

an agreement for the payment of tax, the application must 

include:

• Information establishing the transferor's maximum tax 

liability, or the amount that otherwise has to be withheld;

• A signed copy of the agreement proposed by the applicant; and

• A copy of the security instrument proposed by the applicant.

Either the transferee or the transferor may enter into an 

agreement for the payment of tax. The agreement is a 

contract between the IRS and any other person and consists of two necessary elements. Those elements are:

• A detailed description of the rights and obligations of 

each, and

• A security instrument or other form of security acceptable to the Commissioner or his delegate.

For more information on the agreement for the payment 

of tax, including a sample agreement, see section 5 of 

Revenue Procedure 2000-35, 2000-35 I.R.B. 211, available at IRS.gov/pub/irs-irbs/irb00-35.pdf.

There are four major types of security acceptable to the 

IRS. They are:

• Bond with surety or guarantor,

• Bond with collateral,

• Letter of credit, and

• Guarantee (corporate transferors).

The IRS may, in unusual circumstances and at its discretion, accept any additional form of security that it finds 

to be adequate.

For more information on acceptable security instruments, including sample forms of these instruments, see 

section 6 of Revenue Procedure 2000-35.

Category (5) applications. A blanket withholding certificate may be issued if the transferor holding the USRPI 

provides an irrevocable letter of credit or a guarantee and 

enters into a tax payment and security agreement with the 

IRS. A blanket withholding certificate excuses withholding 

concerning multiple dispositions of those property interests by the transferor or the transferor's legal representative during a period of no more than 12 months.

For more information, see section 9 of Revenue Procedure 2000-35.

Category (6) applications. These are nonstandard applications and may be of the following types.

Agreement for payment of tax with nonconforming 

security. An applicant seeking to enter into an agreement 

for the payment of tax but wanting to provide a nonconforming type of security must include the following in the 

application.

1. The information required for category (4) applications, 

discussed earlier.

2. A description of the nonconforming security proposed 

by the applicant.

3. A memorandum of law and facts establishing that the 

proposed security is valid and enforceable and that it 

adequately protects the government's interest.

Other nonstandard applications. An application for 

a withholding certificate not previously described must explain in detail the proposed basis for the issuance of the 

certificate and set forth the reasons justifying the issuance 

of a certificate on that basis.

Amendments to Applications

An applicant for a withholding certificate may amend an 

otherwise complete application by sending an amending 

statement to the address shown earlier in Withholding 

Certificates. There is no particular form required, but the 

amending statement must provide the following information.

• The name, address, and TIN of the person providing 

the amending statement specifying whether that person is the transferee or transferor.

• The date of the original application for a withholding 

certificate that is being amended.

• A brief description of the real property interest for 

which the original application for a withholding certificate was provided.

• The basis for the amendment including any change in 

the facts supporting the original application for a withholding certificate and any change in the terms of the 

withholding certificate.

The statement must be signed and accompanied by a 

penalties of perjury statement.

78 Publication 515 (2024)
If an amending statement is provided, the time in which 

the IRS must act upon the application is extended by 30 

days. If the amending statement substantially changes the 

original application, the time for acting upon the application is extended by 60 days. If an amending statement is 

received after the withholding certificate has been signed, 

but before it has been mailed to the applicant, the IRS will 

have a 90-day extension of time in which to act.

Definitions

Chapter 4 withholding rate pool. A “chapter 4 withholding rate pool” means a pool of payees that are nonparticipating FFIs provided on a chapter 4 withholding 

statement (as described in Regulations section 

1.1471-3(c)(3)(iii)(B)(3)) to which a withholdable payment 

is allocated. The term also means a pool of payees provided on an FFI withholding statement (as described in 

Regulations section 1.1471-3(c)(iii)(B)(2)) to which a withholdable payment is allocated to (a) a pool of payees consisting of each class of recalcitrant account holders described in Regulations section 1.1471-4(d)(6) (or with 

respect to an FFI that is a QI, a single pool of recalcitrant 

account holders), including a separate pool of account 

holders to which the escrow procedures for dormant accounts apply; or (b) a pool of payees that are U.S. persons 

as described in Regulations section 1.1471-3(c)(3)(iii)(B)

(2) (including such a pool allocated to a reportable amount 

on a withholding statement provided solely for chapter 3 

purposes).

Deemed-compliant FFI. A “deemed-compliant FFI” 

means an FFI that is treated, pursuant to section 1471(b)

(2) and Regulations section 1.1471-5(f), as meeting the 

requirements of section 1471(b). The term “deemed-compliant FFI” includes a nonreporting IGA FFI (as defined in 

Regulations section 1.1471-1(b)(83)).

Dividend equivalents. Generally, a “dividend equivalent” 

is any payment that references the payment of a dividend 

from an underlying security pursuant to a securities lending or sale-repurchase transaction, SNPC, or specified 

ELI. This applies without regard to whether there is an actual distribution of cash or property.

Exempt beneficial owner. An “exempt beneficial owner” 

is any person described in Regulations sections 

1.1471-6(b) through (g) and includes any person treated 

as an exempt beneficial owner under an applicable Model 

1 IGA or Model 2 IGA.

Financial institution (FI). A “financial institution” (FI) is 

any institution that is a depository institution, custodial institution, investment entity, insurance company (or holding 

company of an insurance company) that issues cash 

value insurance or annuity contracts, or a holding company or treasury center that is part of an expanded affiliated group of certain FFIs, and includes a financial institution, as defined under an applicable Model 1 IGA or Model 

2 IGA. See Regulations section 1.1471-5(e)(1).

Foreign financial institution (FFI). Except as otherwise 

provided for certain foreign branches of a U.S. financial institution or territory financial institutions, a “foreign financial institution” (FFI) means a financial institution that is a 

foreign entity. The term “FFI” also includes a foreign 

branch of a U.S. financial institution with a QI agreement in 

effect.

Model 1 IGA. A “Model 1 IGA” means an agreement between the United States or the Treasury Department and a 

foreign government or one or more foreign agencies to implement FATCA through reporting by financial institutions 

to such foreign government or agency thereof, followed by 

automatic exchange of the reported information with the 

IRS. For a list of jurisdictions treated as having an IGA in 

effect, go to Treasury.gov/Resource-Center/Tax-Policy/

Treaties/Pages/FATCA.aspx.

Model 2 IGA. A “Model 2 IGA” means an agreement or 

arrangement between the United States or the Treasury 

Department and a foreign government or one or more foreign agencies to implement FATCA through reporting by financial institutions directly to the IRS in accordance with 

the requirements of the FFI agreement, as modified by an 

applicable Model 2 IGA, supplemented by the exchange 

of information between such foreign government or 

agency thereof and the IRS. For a list of jurisdictions treated as having an IGA in effect, go to Treasury.gov/

Resource-Center/Tax-Policy/Treaties/Pages/FATCA.aspx.

Non-financial foreign entity (NFFE). A “non-financial 

foreign entity” (NFFE) is a foreign entity that is not a financial institution. An NFFE includes a territory NFFE, as defined in Regulations section 1.1471-1(b)(132), and a foreign entity treated as an NFFE pursuant to a Model 1 IGA 

or Model 2 IGA.

Nonparticipating FFI. A “nonparticipating FFI” is an FFI 

other than a participating FFI, a deemed-compliant FFI, or 

an exempt beneficial owner.

Participating FFI. A “participating FFI” is an FFI that has 

agreed to comply with the requirements of an FFI agreement with respect to all branches of the FFI, other than a 

branch that is a reporting Model 1 FFI or a U.S. branch. 

The term "participating FFI" also includes a reporting 

Model 2 FFI and a QI branch of a U.S. financial institution, 

unless such branch is a reporting Model 1 FFI.

Passive NFFE. A “passive NFFE” is an NFFE that is not 

an excepted NFFE. With respect to a reporting Model 2 

FFI filing a Form 8966 to report its accounts and payees, a 

passive NFFE is an NFFE that is not an active NFFE (as 

described in the applicable IGA).

Qualified derivatives dealer (QDD). A “qualified derivatives dealer” (QDD) is a QI that is an eligible entity (as defined in Regulations section 1.1441-1(e)(6)(ii)) that agrees 

to meet the requirements of Regulations section 

1.1441-1(e)(6)(i) and the QI agreement.

Recalcitrant account holder. A “recalcitrant account 

holder” is an account holder (other than an account holder 

Publication 515 (2024) 79
that is an FFI or is presumed to be an FFI) of a participating FFI or registered deemed-compliant FFI that has failed 

to provide the FFI maintaining its account with the information required under Regulations section 1.1471-5(g).

Registered deemed-compliant FFI. A “registered 

deemed-compliant FFI” is an FFI described in Regulations 

section 1.1471-5(f)(1) and includes a reporting Model 1 

FFI and a QI branch of a U.S. financial institution that is a 

reporting Model 1 FFI.

Reporting Model 1 FFI. A “reporting Model 1 FFI” is an 

FI, including a foreign branch of a U.S. financial institution, 

treated as a reporting financial institution under a Model 1 

IGA.

Reporting Model 2 FFI. A “reporting Model 2 FFI” is an 

FFI described in a Model 2 IGA that has agreed to comply 

with the requirements of an FFI agreement with respect to 

a branch.

Territory financial institution. A “territory financial institution” is a financial institution that is incorporated or organized under the laws of any U.S. territory, excluding a 

territory entity that is a financial institution only because it 

is an investment entity, as defined in Regulations section 

1.1471-5(e)(4).

Withholdable payment. A “withholdable payment” is a 

payment described in Regulations section 1.1473-1(a). 

See Income Subject to Withholding, earlier, for a discussion of which payments qualify as withholdable payments.

Tax Treaties

The United States has bilateral income tax treaties, also 

known as “conventions,” with a number of foreign countries under which residents (sometimes limited to citizens) 

of those countries are taxed at a reduced rate or are exempt from U.S. income taxes on certain income received 

from within the United States.

Withholding at source under the statutory rules discussed in this publication may not be required for income 

that is exempt under a tax treaty, so long as the taxpayer 

claiming such exemption satisfies all of the relevant requirements, including providing to its withholding agent 

any applicable withholding certificates (or documentary 

evidence, when permitted) supporting the treaty claim.

Obtaining treaty information. You can obtain the full 

text of these treaties, and accompanying technical explanations, at IRS.gov/Businesses/International-Businesses/

United-States-Income-Tax-Treaties-A-to-Z.

Detailed information about treaty provisions can be 

found at IRS.gov/Individuals/International-Taxpayers/TaxTreaties.

Tax treaty tables. The tax treaty tables previously contained in this publication have been updated and moved to 

IRS.gov/Individuals/International-Taxpayers/Tax-TreatyTables.

How To Get Tax Help

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, 

forms, or instructions, go to IRS.gov to find resources that 

can help you right away.

Preparing and filing your tax return. After receiving all 

your wage and earnings statements (Forms W-2, W-2G, 

1099-R, 1099-MISC, 1099-NEC, etc.); unemployment 

compensation statements (by mail or in a digital format) or 

other government payment statements (Form 1099-G); 

and interest, dividend, and retirement statements from 

banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you 

qualify for free tax preparation, or hire a tax professional to 

prepare your return.

Free options for tax preparation. Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

• Free File. This program lets you prepare and file your 

federal individual income tax return for free using software or Free File Fillable Forms. However, state tax 

preparation may not be available through Free File. Go 

to IRS.gov/FreeFile to see if you qualify for free online 

federal tax preparation, e-filing, and direct deposit or 

payment options.

• VITA. The Volunteer Income Tax Assistance (VITA) 

program offers free tax help to people with 

low-to-moderate incomes, persons with disabilities, 

and limited-English-speaking taxpayers who need 

help preparing their own tax returns. Go to IRS.gov/

VITA, download the free IRS2Go app, or call 

800-906-9887 for information on free tax return preparation.

• TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly 

those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. 

Go to IRS.gov/TCE or download the free IRS2Go app 

for information on free tax return preparation.

• MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military 

OneSource. For more information, go to 

MilitaryOneSource (MilitaryOneSource.mil/MilTax).

Also, the IRS offers Free Fillable Forms, which can 

be completed online and then e-filed regardless of income.

Using online tools to help prepare your return. Go to 

IRS.gov/Tools for the following.

• The Earned Income Tax Credit Assistant (IRS.gov/

EITCAssistant) determines if you’re eligible for the 

earned income credit (EIC).

80 Publication 515 (2024)
• The Online EIN Application (IRS.gov/EIN) helps you 

get an employer identification number (EIN) at no 

cost.

• The Tax Withholding Estimator (IRS.gov/W4App) 

makes it easier for you to estimate the federal income 

tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

• The First-Time Homebuyer Credit Account Look-up 

(IRS.gov/HomeBuyer) tool provides information on 

your repayments and account balance.

• The Sales Tax Deduction Calculator (IRS.gov/

SalesTax) figures the amount you can claim if you 

itemize deductions on Schedule A (Form 1040).

Getting answers to your tax questions. On 

IRS.gov, you can get up-to-date information on 

current events and changes in tax law.

• IRS.gov/Help: A variety of tools to help you get answers to some of the most common tax questions.

• IRS.gov/ITA: The Interactive Tax Assistant, a tool that 

will ask you questions and, based on your input, provide answers on a number of tax topics.

• IRS.gov/Forms: Find forms, instructions, and publications. You will find details on the most recent tax 

changes and interactive links to help you find answers 

to your questions.

• You may also be able to access tax information in your 

e-filing software.

Need someone to prepare your tax return? There are 

various types of tax return preparers, including enrolled 

agents, certified public accountants (CPAs), accountants, 

and many others who don’t have professional credentials. 

If you choose to have someone prepare your tax return, 

choose that preparer wisely. A paid tax preparer is:

• Primarily responsible for the overall substantive accuracy of your return,

• Required to sign the return, and

• Required to include their preparer tax identification 

number (PTIN).

Although the tax preparer always signs the return, 

you're ultimately responsible for providing all the 

information required for the preparer to accurately 

prepare your return and for the accuracy of every item reported on the return. Anyone paid to prepare tax returns 

for others should have a thorough understanding of tax 

matters. For more information on how to choose a tax preparer, go to Tips for Choosing a Tax Preparer on IRS.gov.

Employers can register to use Business Services Online. The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure 

W-2 filing options to CPAs, accountants, enrolled agents, 

and individuals who process Form W-2, Wage and Tax 

CAUTION

!

Statement, and Form W-2c, Corrected Wage and Tax 

Statement.

IRS social media. Go to IRS.gov/SocialMedia to see the 

various social media tools the IRS uses to share the latest 

information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our 

highest priority. We use these tools to share public information with you. Don’t post your social security number 

(SSN) or other confidential information on social media 

sites. Always protect your identity when using any social 

networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English, 

Spanish, and ASL.

• Youtube.com/irsvideos.

• Youtube.com/irsvideosmultilingua.

• Youtube.com/irsvideosASL.

Watching IRS videos. The IRS Video portal 

(IRSVideos.gov) contains video and audio presentations 

for individuals, small businesses, and tax professionals.

Online tax information in other languages. You can 

find information on IRS.gov/MyLanguage if English isn’t 

your native language.

Free Over-the-Phone Interpreter (OPI) Service. The 

IRS is committed to serving taxpayers with limited-English 

proficiency (LEP) by offering OPI services. The OPI Service is a federally funded program and is available at Taxpayer Assistance Centers (TACs), most IRS offices, and 

every VITA/TCE tax return site. The OPI Service is accessible in more than 350 languages.

Accessibility Helpline available for taxpayers with 

disabilities. Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and 

future accessibility products and services available in alternative media formats (for example, braille, large print, 

audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or 

account-related issues, go to IRS.gov/LetUsHelp.

Note. Form 9000, Alternative Media Preference, or 

Form 9000(SP) allows you to elect to receive certain types 

of written correspondence in the following formats.

• Standard Print.

• Large Print.

• Braille.

• Audio (MP3).

• Plain Text File (TXT).

• Braille Ready File (BRF).

Disasters. Go to IRS.gov/DisasterRelief to review the 

available disaster tax relief.

Publication 515 (2024) 81
Getting tax forms and publications. Go to IRS.gov/

Forms to view, download, or print all the forms, instructions, and publications you may need. Or, you can go to 

IRS.gov/OrderForms to place an order.

Getting tax publications and instructions in eBook 

format. Download and view most tax publications and instructions (including the Instructions for Form 1040) on 

mobile devices as eBooks at IRS.gov/eBooks.

IRS eBooks have been tested using Apple's iBooks for 

iPad. Our eBooks haven’t been tested on other dedicated 

eBook readers, and eBook functionality may not operate 

as intended.

Access your online account (individual taxpayers 

only). Go to IRS.gov/Account to securely access information about your federal tax account.

• View the amount you owe and a breakdown by tax 

year.

• See payment plan details or apply for a new payment 

plan.

• Make a payment or view 5 years of payment history 

and any pending or scheduled payments.

• Access your tax records, including key data from your 

most recent tax return, and transcripts.

• View digital copies of select notices from the IRS.

• Approve or reject authorization requests from tax professionals.

• View your address on file or manage your communication preferences.

Get a transcript of your return. With an online account, 

you can access a variety of information to help you during 

the filing season. You can get a transcript, review your 

most recently filed tax return, and get your adjusted gross 

income. Create or access your online account at IRS.gov/

Account.

Tax Pro Account. This tool lets your tax professional 

submit an authorization request to access your individual 

taxpayer IRS online account. For more information, go to 

IRS.gov/TaxProAccount.

Using direct deposit. The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, 

which securely and electronically transfers your refund directly into your financial account. Direct deposit also 

avoids the possibility that your check could be lost, stolen, 

destroyed, or returned undeliverable to the IRS. Eight in 

10 taxpayers use direct deposit to receive their refunds. If 

you don’t have a bank account, go to IRS.gov/

DirectDeposit for more information on where to find a bank 

or credit union that can open an account online.

Reporting and resolving your tax-related identity 

theft issues. 

• Tax-related identity theft happens when someone 

steals your personal information to commit tax fraud. 

Your taxes can be affected if your SSN is used to file a 

fraudulent return or to claim a refund or credit.

• The IRS doesn’t initiate contact with taxpayers by 

email, text messages (including shortened links), telephone calls, or social media channels to request or 

verify personal or financial information. This includes 

requests for personal identification numbers (PINs), 

passwords, or similar information for credit cards, 

banks, or other financial accounts.

• Go to IRS.gov/IdentityTheft, the IRS Identity Theft 

Central webpage, for information on identity theft and 

data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or 

stolen or you suspect you’re a victim of tax-related 

identity theft, you can learn what steps you should 

take.

• Get an Identity Protection PIN (IP PIN). IP PINs are 

six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it prevents someone else from filing a tax return with your 

SSN. To learn more, go to IRS.gov/IPPIN.

Ways to check on the status of your refund. 

• Go to IRS.gov/Refunds.

• Download the official IRS2Go app to your mobile device to check your refund status.

• Call the automated refund hotline at 800-829-1954.

The IRS can’t issue refunds before mid-February 

for returns that claimed the EIC or the additional 

child tax credit (ACTC). This applies to the entire 

refund, not just the portion associated with these credits.

Making a tax payment. Payments of U.S. tax must be 

remitted to the IRS in U.S. dollars. Digital assets are not 

accepted. Go to IRS.gov/Payments for information on how 

to make a payment using any of the following options.

• IRS Direct Pay: Pay your individual tax bill or estimated 

tax payment directly from your checking or savings account at no cost to you.

• Debit Card, Credit Card, or Digital Wallet: Choose an 

approved payment processor to pay online or by 

phone.

• Electronic Funds Withdrawal: Schedule a payment 

when filing your federal taxes using tax return preparation software or through a tax professional.

• Electronic Federal Tax Payment System: Best option 

for businesses. Enrollment is required.

• Check or Money Order: Mail your payment to the address listed on the notice or instructions.

• Cash: You may be able to pay your taxes with cash at 

a participating retail store.

• Same-Day Wire: You may be able to do same-day 

wire from your financial institution. Contact your financial institution for availability, cost, and time frames.

CAUTION

!

82 Publication 515 (2024)
Note. The IRS uses the latest encryption technology to 

ensure that the electronic payments you make online, by 

phone, or from a mobile device using the IRS2Go app are 

safe and secure. Paying electronically is quick, easy, and 

faster than mailing in a check or money order.

What if I can’t pay now? Go to IRS.gov/Payments for 

more information about your options.

• Apply for an online payment agreement (IRS.gov/

OPA) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once 

you complete the online process, you will receive immediate notification of whether your agreement has 

been approved.

• Use the Offer in Compromise Pre-Qualifier to see if 

you can settle your tax debt for less than the full 

amount you owe. For more information on the Offer in 

Compromise program, go to IRS.gov/OIC.

Filing an amended return. Go to IRS.gov/Form1040X 

for information and updates.

Checking the status of your amended return. Go to 

IRS.gov/WMAR to track the status of Form 1040-X amended returns.

It can take up to 3 weeks from the date you filed 

your amended return for it to show up in our system, and processing it can take up to 16 weeks.

Understanding an IRS notice or letter you’ve received. Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

Responding to an IRS notice or letter. You can now 

upload responses to all notices and letters using the 

Document Upload Tool. For notices that require additional 

action, taxpayers will be redirected appropriately on 

IRS.gov to take further action. To learn more about the 

tool, go to IRS.gov/Upload.

Note. You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may 

not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing 

translations in 2023. You will continue to receive communications, including notices and letters, in English until they 

are translated to your preferred language.

Contacting your local TAC. Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. 

Go to IRS.gov/LetUsHelp for the topics people ask about 

most. If you still need help, TACs provide tax help when a 

tax issue can’t be handled online or by phone. All TACs 

now provide service by appointment, so you’ll know in advance that you can get the service you need without long 

wait times. Before you visit, go to IRS.gov/TACLocator to 

find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, 

CAUTION

!

under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

The Taxpayer Advocate Service (TAS) 

Is Here To Help You

What Is TAS?

TAS is an independent organization within the IRS that 

helps taxpayers and protects taxpayer rights. TAS strives 

to ensure that every taxpayer is treated fairly and that you 

know and understand your rights under the Taxpayer Bill 

of Rights.

How Can You Learn About Your Taxpayer 

Rights?

The Taxpayer Bill of Rights describes 10 basic rights that 

all taxpayers have when dealing with the IRS. Go to 

TaxpayerAdvocate.IRS.gov to help you understand what 

these rights mean to you and how they apply. These are 

your rights. Know them. Use them.

What Can TAS Do for You?

TAS can help you resolve problems that you can’t resolve 

with the IRS. And their service is free. If you qualify for 

their assistance, you will be assigned to one advocate 

who will work with you throughout the process and will do 

everything possible to resolve your issue. TAS can help 

you if:

• Your problem is causing financial difficulty for you, 

your family, or your business;

• You face (or your business is facing) an immediate 

threat of adverse action; or

• You’ve tried repeatedly to contact the IRS but no one 

has responded, or the IRS hasn’t responded by the 

date promised.

How Can You Reach TAS?

TAS has offices in every state, the District of Columbia, 

and Puerto Rico. To find your advocate’s number:

• Go to TaxpayerAdvocate.IRS.gov/Contact-Us;

• Download Pub. 1546, The Taxpayer Advocate Service 

Is Your Voice at the IRS, available at IRS.gov/pub/irspdf/p1546.pdf;

• Call the IRS toll free at 800-TAX-FORM 

(800-829-3676) to order a copy of Pub. 1546;

• Check your local directory; or

• Call TAS toll free at 877-777-4778.

How Else Does TAS Help Taxpayers?

TAS works to resolve large-scale problems that affect 

many taxpayers. If you know of one of these broad issues, 

report it to TAS at IRS.gov/SAMS. Be sure to not include 

any personal taxpayer information.

Publication 515 (2024) 83
Low Income Taxpayer Clinics (LITCs)

LITCs are independent from the IRS and TAS. LITCs represent individuals whose income is below a certain level 

and who need to resolve tax problems with the IRS. LITCs 

can represent taxpayers in audits, appeals, and tax collection disputes before the IRS and in court. In addition, 

LITCs can provide information about taxpayer rights and 

responsibilities in different languages for individuals who 

speak English as a second language. Services are offered 

for free or a small fee. For more information or to find an 

LITC near you, go to the LITC page at 

TaxpayerAdvocate.IRS.gov/LITC or see IRS Pub. 4134, 

Low Income Taxpayer Clinic List, at IRS.gov/pub/irs-pdf/

4134.pdf.

84 Publication 515 (2024)
To help us develop a more useful index, please let us know if you have ideas for index entries.

Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

10% owners 42

501(c) organizations 58

80/20 company 44

A

Acceptance agent 60

Accounts, offshore 15

Alien:

Defined 12

Illegal 50

Nonresident alien 12

Resident alien 12

Alimony 47, 48

American Samoa 12

Amount to withhold 4

Amount to withhold Determining 

the 70

Annuities 47

Artists and athletes:

Earnings of 56

Special events and promotions 56

Assistance (See Tax help)

Awards 50

B

Backup withholding 5

Banks, interest received by 42

Beneficial owner 15

Beneficiary of foreign trust 25

Bonds sold between interest 

dates 44

Branch profits tax 45

C

Canada 55, 63

Capital gains 47

Central withholding agreements 57

Chapter 3 withholding 4-13

Income subject to 35

Payees 7

Persons subject to 6

Chapter 4 withholding 4-13

Payees 7

Persons subject to 6

Withholding rate pool 79

Withholding statement 18

Charitable organizations 13

Commonwealth of the Northern 

Mariana Islands (CNMI) 12

Consent dividends 45

Contingent interest 42

Controlled foreign corporations:

Interest paid to 42

Covenant not to compete 38

Crew members 36

D

Deemed-compliant FFI 79

Dependent personal services 54

Defined 54

Exempt from withholding 54

Depositing taxes:

How to 61

When to 61

Deposits 43

Determining the amount to 

withhold 70

Disregarded entities 6

Dividend equivalent payments 46

Dividend Equivalents 46

Dividends:

Direct dividend rate 45

Domestic corporation 44

Foreign corporations 45

In general 44

Documentary evidence 16, 29, 31

Documentation 13-34

For chapter 3 13

For chapter 4 13

From foreign beneficial owners and 

U.S. payees 13

From foreign intermediaries and 

foreign flow-through entities 17

Presumptions in the absence of 34

E

Effectively connected income:

Defined 38

Foreign partners 65

Partnerships 5

EFTPS 61

Electronic deposit rules 61

Employees 36, 52

Employer 53

Exceptions to withholding on 

transfers of non-PTP 

interests. 69

Exempt beneficial owner 79

F

FATCA report 5

Federal unemployment tax 54

Fellowship grants 48

Fellowships 36

Financial institution (FI) 79

Financial institutions 10

FIRPTA withholding 6, 73

Fiscally transparent entity 8

Fixed or determinable annual or 

periodic income 37

Flow-through entities 7

Foreign:

501(c) organizations 58

Bank 10, 39

Charitable organizations 13

Corporations 12

Governments 58

Insurance company 10, 39

Intermediary, payee 9

Organizations and associations 13

Partner 65

Partnerships, payee 7

Private foundation 13, 58

Status 28

Trusts, payee 8

Foreign financial institution 

(FFI) 79

Foreign person 12

Form:

1042 5, 23, 25, 63

1042-S 5, 23, 25, 63

1099 5

1099-S 76

4419 63

7004 64

8233 51

8288 76

8288-A 76

8288-B 77

8804 67

8805 67

8813 67

8833 15

8966 5

940 54

941 54

972 45

SS-4 59

SS-5 59

W-2 54

W-4 49, 51, 53

W-7 59

W-8 series 14

W-8BEN 15, 16

W-8BEN-E 16

W-8ECI 16, 17

W-8EXP 17

W-8IMY 17

W-9 14, 59

Forms for paying and reporting 

section 1446(f) withholding. 71

FUTA 54

G

Gambling winnings 57

Global intermediary identification 

number (GIIN) 31, 61

Graduated rates 56

Publication 515 (2024) 85
Graduated withholding 52

Grants 36, 48, 50

Green card test 12

Guam 12

I

Identification number, taxpayer 59, 

67

Important reminders 1

Income:

Fixed or determinable annual or 

periodical 37

Interest 39

Notional principal contract 39

Other than effectively connected 39

Pensions 37

Personal service 35

Source of 35

Transportation 57

Income code:

01 39

02 42

03 42

04 42

06 44

07 45

08 45

09 47

10 47

11 47

12 47

14 47

15 47

16 48

17 51

18 54

19 55

20 56

24 76

25 76

26 76

27 67

28 57

29 43

30 40

42 56

43 56

51 58

Independent personal services:

Defined 51

Exempt from withholding 51

Indirect account holders 31

Installment payment 38, 66

Insurance proceeds 38

Interest:

Contingent 42

Controlled foreign corporations 42

Deposits 43

Foreign business arrangements 43

Foreign corporations 42

Income 39

Portfolio 40, 42

Real property mortgages 42

Intermediary:

Foreign 9

Nonqualified 10

Qualified 9, 10, 18

International organizations 58

ITIN 59

K

Knowledge, standards of 27

L

Liability of withholding agent 4

M

Magnetic media reporting 63

Marketable securities 15

Mexico 55

Model 1 IGA 79

Model 2 IGA 79

Mortgages 42

Multi-level marketing 36

N

Non-financial foreign entity 

(NFFE) 79

Non-registered obligations 41

Nonparticipating FFI 79

Nonqualified intermediary:

Alternative withholding 

procedure 22

Chapter 4 withholding rate pool 22

Defined 10

For chapter 3 purposes 21

For chapter 4 purposes 21

For chapter 61 purposes 21

Pooled withholding 22

Withholding statement 21

Nonresident alien:

Defined 12

Married to U.S. citizen or 

resident 12

Who becomes a resident alien 50

Nonwage pay 53

Notional principal contract 

income 39

O

Obligations:

Not in registered form 41

Registered 41

Offshore accounts 15

Original issue discount 40

Overwithholding, adjustment for 62

P

Participating FFI 18, 79

Partner, foreign 65, 67

Partnerships:

Effectively connected income of 

foreign partners 65

Foreign payee 7

Publicly traded 67

Withholding foreign 11, 23

Passive NFFE 79

Pay for personal services:

Artists and athletes 56

Dependent personal services 54

Employees 52

Exempt from withholding 50

Independent personal services 51

Salaries and wages 52

Scholarship or fellowship 

recipient 49

Studying 56

Teaching 55

Training 56

Payee:

Charitable organizations 13

Fiscally transparent entity 8

Foreign flow-through entities 17

Foreign intermediaries 17

Foreign partnerships 7

Foreign trusts 8

Identifying 6

Nonqualified intermediary 10

Organizations and associations 13

Private foundations 13

Qualified intermediary 10

U.S branches of foreign persons 13

Penalties:

Deposit 62

Form 1042 64

Form 8804 67

Form 8805 67

Magnetic media 65

Trust fund recovery 54

Pensions 37, 47

Per diem 49

Personal service income 35

Pooled withholding information 22

Portfolio interest 40, 42

Presumption rules:

Corporation 34

Individual 34

Partnership 34

Trust 34

Private foundation, foreign 13

Prizes 50

Publications (See Tax help)

Puerto Rico 12, 55

Q

QI agreement 10

Qualified derivatives dealer 

(QDD) 79

Qualified intermediary:

Agency option 20

Collective refund procedures 21

86 Publication 515 (2024)
Defined 18

Joint account treatment 20

Payee 10

Reporting on Form 1042-S 21

Responsibilities and 

documentation 19

Qualified investment entity (QIE):

Distributions paid by 74

Dividends paid by 44

R

Racing purses 38

Real property interest:

Disposition of 73

Withholding certificates 77

Withholding obligation 6

Reason to know 27

Recalcitrant account holder 79

Registered deemed-compliant 

FFI 18, 80

Registered obligations 41

Reminders:

Central Withholding Agreement 

(CWA) simplified application 

process. 1

Reporting and paying the tax 67

Reporting Model 1 FFI 80

Reporting Model 2 FFI 80

Researchers 56

Resident alien, defined 12

Returns required 62

Royalties 47

Ryukyu Islands 44

S

Salaries 52

Saving clause 50

Scholarships 36, 48

Section 1446(f) Withholding 68

Section 1446(f) withholding.Forms 

for paying and reporting 71

Sections 1446(a) and (f) 

withholding 14

Securities 38

Securities, marketable 15

Services performed outside the 

U.S. 53

Short-term obligation 44

Social security 56

Source of income 35

Standards of knowledge:

For chapter 3 27

For chapter 4 31

Substantial presence test 12

T

Tax help 80

Tax treaties (See Treaties)

Tax-exempt entities 58

Taxpayer identification number 

(TIN) 59, 67

Exceptions 60

Teachers 55

Ten-percent owners 42

Territorial limits 36

Territory financial institution 80

Totalization agreements 56

Transfers of partnership interests 

subject to withholding under 

sections 1445(e)(5) and 

1446(f) . 71

Transportation income 57

Travel expenses 52

Treaties:

Claiming benefits for chapter 3 15

Dependent personal services 55

Entertainers and athletes 57

Gains 47

Independent personal services 52

Rate tables 80

Students 49, 56

Teaching 56

Trainees 56

Trust Territory of the Pacific 

Islands 44

Trusts:

Foreign payee 8

Withholding foreign 11, 25

U

U.S. agent of foreign person 6

U.S. branch:

Foreign bank 10, 39

Foreign insurance company 10, 39

Foreign person 13

U.S. real property interest (See Real 

property interest)

U.S. savings bonds 44

U.S. territorial limits 36

U.S. territory, resident of 12

U.S. Virgin Islands (USVI) 12

Unexpected payment 60

W

Wages:

Paid to employees 52

Pay that is not 53

What's New 1

What’s New:

Termination of 1979 Tax Convention 

with Hungary. 1

When to withhold 4

Withhold, amount to 4

Withhold, when to 4

Withholdable payment 4, 6, 80

Withholding:

Agreements 51, 57

Certificate 28, 31

Chapter 3 4

Chapter 4 4

In general 3

On specific income 38

Rate pool 22, 79

Real property 73

Reporting and paying 67

Withholding agent 4

Liability 4

Returns required 62

Tax deposit requirements 61

Withholding exemptions and 

reductions:

Dependent personal services 54

Exemption 38

Final payment exemption 51

Foreign governments 58

International organizations 58

Real property interest 77

Researchers 56

Scholarships and fellowship 

grants 49

Students 56

Withholding agreements 51, 57

Withholding foreign partnership 

(WP):

Agency option 24

Collective refund procedures 23

Joint account treatment 24

Not acting as WP 25

Withholding foreign trust (WT):

Agency option 26

Collective refund procedures 25

Joint account treatment 26

Not acting as WT 27

Reporting U.S. beneficiaries 25

Responsibilities of 25

Withholding on transfers of 

non-PTP interests. Exceptions 

to 69

Withholding under sections 

1445(e)(5) and 1446(f) .Transfers 

of partnership interests subject 

to 71

Publication 515 (2024) 87