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Instructions for Form 1042-S


Withholding agent.(p4)
A withholding agent is any person, U.S. or foreign, that has control, receipt, or custody of an amount subject to withholding under chapter 3, who can disburse or make payments of an amount subject to withholding, or who makes a withholdable payment under chapter 4. The withholding agent may be an individual, corporation, partnership, trust, association, or any other entity. The term withholding agent also includes, but is not limited to, a qualified intermediary (QI), a nonqualified intermediary (NQI), a withholding foreign partnership (WP), a withholding foreign trust (WT), a flow-through entity, a U.S. branch that is treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A), a territory FI, a nominee under section 1446, and an authorized agent. A person may be a withholding agent even if there is no requirement to withhold from a payment or if another person has already withheld the required amount from a payment.
In most cases, the U.S. person who pays (or causes to be paid) the item of U.S. source income to a foreign person (or to its agent) must withhold. However, other persons may be required to withhold. For example, if a payment is made by a QI (whether or not it assumes primary withholding responsibility) and the QI knows that withholding was not done by the person from which it received the payment, then that QI is required to do the appropriate withholding. In addition, withholding must be done by any QI that assumes primary withholding responsibility under chapters 3 and 4, a WP, a WT, a U.S. branch that agrees to be treated as a U.S. person under Regulations section 1.1441-1(b)(2)(iv)(A), or an authorized agent. Finally, if a payment is made by an NQI or a flow-through entity that knows, or has reason to know, that withholding was not done, that NQI or flow-through entity is required to withhold since it also falls within the definition of a withholding agent.
Account holder.(p4)
Generally, the account holder is the person that holds the account. See Regulations section 1.1471-5(a).
Authorized agent.(p4)
An agent is an authorized agent for purposes of filing Form 1042 or making tax deposits and payments on behalf of its principal (payer) only if all five of the following conditions apply.
  1. There is a written agreement between the payer and the person acting as agent.
  2. A Form 8655, Reporting Agent Authorization, is filed with the IRS.
  3. The books and records and relevant personnel of the agent are available to the payer.
  4. The payer remains fully liable for the acts of its agent and does not assert any of the defenses that otherwise may be available, and
  5. If the agent is making deposits and tax payments or filing Forms 1042-S on behalf of its payer, the authorized agent should be reported as the withholding agent in boxes 12a through 12i and information about the payer should be reported in boxes 16a through 16e.
A sponsoring entity is a reporting agent with respect to withholdable payments and must fulfill the above conditions to be an authorized agent.
For complete details on these conditions, see Regulations sections 1.1441-7(c) and 1.1474-1(a)(3)(ii).
Beneficial owner.(p4)
For payments other than those for which a reduced rate of withholding is claimed under an income tax treaty, the beneficial owner of income in most cases is the person who is required under U.S. tax principles to include the income in gross income on a tax return. A person is not a beneficial owner of income, however, to the extent that person is receiving the income as a nominee, agent, or custodian, or to the extent the person is a conduit whose participation in a transaction is disregarded. In the case of amounts paid that do not constitute income, beneficial ownership is determined as if the payment were income.
Foreign partnerships, foreign simple trusts, and foreign grantor trusts are not the beneficial owners of income paid to the partnership or trust. The beneficial owners of income paid to a foreign partnership in most cases are the partners in the partnership, provided that the partner is not itself a partnership, foreign simple or grantor trust, nominee, or other agent. The beneficial owner of income paid to a foreign simple trust (a foreign trust that is described in section 651(a)) in most cases is the beneficiary of the trust, if the beneficiary is not a foreign partnership, foreign simple or grantor trust, nominee, or other agent. The beneficial owner of a foreign grantor trust (a foreign trust to the extent that all or a part of the income of the trust is treated as owned by the grantor or another person under sections 671 through 679) is the person treated as the owner of the trust. The beneficial owner of income paid to a foreign complex trust (a foreign trust that is not a foreign simple trust or foreign grantor trust) is the trust itself.
The beneficial owner of income paid to a foreign estate is the estate itself.
A payment to a U.S. partnership, U.S. trust, or U.S. estate is not subject to withholding under chapter 3 or 4. A U.S. partnership, trust, or estate should provide the withholding agent with a Form W-9, Request for Taxpayer Identification Number and Certification. In most cases, these beneficial owner rules apply for purposes of section 1446; however, there are exceptions.
  1. Chapter 3 withholding rate pool. A payment of a single type of income, determined in accordance with the income codes used to file Form 1042-S, that is subject to a single rate of withholding and a single chapter 4 exemption code.
  2. Chapter 4 withholding rate pool. A pool of account holders or payees provided on an FFI withholding statement (or a chapter 4 withholding statement). See Regulations section 1.1471-1(b)(20).
Disregarded entity.(p5)
A business entity that has a single owner and is not a corporation under Regulations section 301.7701-2(b) is disregarded as an entity separate from its owner.
Dividend equivalent.(p5)
To the extent specified in section 871(m), and the regulations thereunder, a dividend equivalent is a payment 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, and
  2. A payment made under a specified notional principal contract, a specified equity-linked instrument, or any other contract or transaction described in the regulations under section 871(m).
Exempt recipient.(p5)
An exempt recipient is any payee that is exempt from the Form 1099 reporting requirements.
A person is considered an expatriate if he or she relinquishes U.S. citizenship or, in the case of a long-term resident of the United States, ceases to be a lawful permanent resident as defined in section 7701(b)(6).
Fiscally transparent entity.(p5)
An entity is treated as fiscally transparent with respect to an item of income for which treaty benefits are claimed to the extent that the interest holders in the entity must, on a current basis, take into account separately their shares of an item of income paid to the entity, whether or not distributed, and must determine the character of the items of income as if they were realized directly from the sources from which realized by the entity. For example, partnerships, common trust funds, and simple trusts or grantor trusts in most cases are considered to be fiscally transparent with respect to items of income received by them.
Flow-through entity.(p5)
A flow-through entity is a foreign partnership (other than a withholding foreign partnership), a foreign simple or grantor trust (other than a withholding foreign trust), or, for any payments for which a reduced rate of withholding under an income tax treaty is claimed, any entity to the extent the entity is considered to be fiscally transparent under section 894 with respect to the payment by an interest holder's jurisdiction.
Financial institution.(p5)
A financial institution (FI) is an entity described in Regulations section 1.1471-5(e).
Foreign financial institution (FFI).(p5)
A foreign financial institution (FFI) is an entity described in Regulations section 1.1471-5(d) or as a financial institution under an Intergovernmental Agreement (IGA).
Deemed-compliant FFI.

A deemed-compliant FFI is a foreign financial institution that is deemed to satisfy the requirements of section 1471(b) and is either a certified deemed-compliant FFI or registered deemed-compliant FFI (including a reporting Model 1 FFI). See Regulations sections 1.1471-1(b)(12), (105), and (107) for the definition of certified deemed-compliant FFI, registered deemed-compliant FFI, and reporting Model 1 FFI.
Nonparticipating FFI.

A nonparticipating FFI is a foreign financial institution that is not a participating FFI, deemed-compliant FFI, or exempt beneficial owner.
Participating FFI.

A participating FFI is a foreign financial institution that has agreed to satisfy the obligations of an FFI agreement under chapter 4, including an FFI described in a Model 2 IGA that has agreed to comply with the requirements of an FFI agreement (reporting Model 2 FFI). See Regulations section 1.1471-1(b)(73) for the definition of a Model 2 IGA.
Foreign person.(p5)
A foreign person includes a nonresident alien individual, a foreign corporation, a foreign partnership, a foreign trust, a foreign estate, and any other person that is not a U.S. person. The term also includes a foreign branch or office of a U.S. financial institution or U.S. clearing organization if the foreign branch is a QI. A payment to a U.S. branch of a foreign person is treated as a payment to a foreign person for purposes of Form 1042-S.
Global intermediary identification number. (p5)
The global intermediary identification number (GIIN) is the identification number that is assigned to a participating FFI (including a reporting Model 2 FFI), registered deemed-compliant FFI (including a reporting Model 1 FFI), or other entity for chapter 4 reporting purposes.
An intermediary is a person that acts as a custodian, broker, nominee, or otherwise as an agent for another person, regardless of whether that other person is the beneficial owner of the amount paid, a flow-through entity, or another intermediary.
Qualified intermediary (QI).

A QI is an intermediary that is a party to a withholding agreement with the IRS. A QI (other than a limited FFI) that is a financial institution must have a chapter 4 status described in Regulations section 1.1441-1(e)(5)(ii). An entity must indicate its status as a QI on a Form W-8IMY submitted to a withholding agent. For information on a QI withholding agreement, see Revenue Procedure 2014-39 (or any superseding revenue procedure) and
A branch of a financial institution may not act as a QI in a country that does not have approved know-your-customer (KYC) rules. Countries having approved KYC rules are listed on Branches that operate in non-KYC approved jurisdictions as intermediaries are required to act as nonqualified intermediaries.
Nonqualified intermediary (NQI).

An NQI is any intermediary that is not a U.S. person and that is not a QI.
Private arrangement intermediary (PAI).

A QI that is an FFI may enter into a contractual agreement with another intermediary under which the other intermediary generally agrees to perform all of the obligations of the QI with respect to the accounts maintained directly by the other intermediary. See the QI Agreement for the requirements of a PAI and a QI's agreement with a PAI.
Nonfinancial foreign entity.(p6)
A nonfinancial foreign entity (NFFE) is a foreign entity or an entity incorporated or organized under the laws of any U.S. territory that is not a financial institution.
Excepted nonfinancial foreign entity.

The term excepted NFFE means an NFFE that is described in Regulations section 1.1472-1(c)(1) and generally includes a publicly traded corporation, certain affiliated entities related to a publicly traded corporation, certain territory entities, active NFFEs, and entities excluded from the definition of foreign financial institution (excluded FFIs) described in Regulations section 1.1471-5(e)(5).
Non-exempt recipient.(p6)
A non-exempt recipient is any person who is not an exempt recipient under chapter 61 of the Code.
Nonresident alien individual.(p6)
Any individual who is not a citizen or resident of the United States is a nonresident alien individual. An alien individual meeting either the green card test or the substantial presence test for the calendar year is a resident alien. Any person not meeting either test is a nonresident alien individual. Additionally, an alien individual not otherwise a citizen of the U.S. who is a resident of a foreign country under the residence article of an income tax treaty, or an alien individual who is a bona fide resident of Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa, is a nonresident alien individual. See Pub. 519, U.S. Tax Guide for Aliens, for more information on resident and nonresident alien status.
Even though a nonresident alien individual married to a U.S. citizen or resident alien may choose to be treated as a resident alien for certain purposes (for example, filing a joint income tax return), such individual is still treated as a nonresident alien for withholding tax purposes.
Except as otherwise provided, the payee is the person to whom a payment is made, regardless of whether such person is the beneficial owner of the amount or treated as the recipient of the payment for purposes of reporting on Form 1042-S. See Regulations section 1.1471-3(a).
Presumption rules.(p6)
For withholdable payments and for amounts subject to withholding under chapter 3, the presumption rules are those rules that a withholding agent must follow to determine the status of a beneficial owner or payee (for example, as a U.S. person or a foreign person) when it cannot reliably associate a payment with valid documentation. See, for example, Regulations sections 1.1441-1(b)(3), 1.1441-4(a), 1.1441-5(d) and (e), 1.1441-9(b)(3), 1.1446-1(c)(3), and 1.6049-5(d). Also see Pub. 515. For a withholdable payment (defined in Regulations section 1.1473-1(a)), the withholding agent must also follow the presumption rules under Regulations sections 1.1471-3(f) and, for an FFI, 1.1471-4(c)(4)(i) to determine the chapter 4 status of the payee when it cannot reliably associate a payment with valid documentation.
Publicly traded partnership (PTP).(p6)
A PTP is any partnership in which interests are regularly traded on an established securities market or are readily tradable on a secondary market (regardless of the number of its partners). However, it does not include a PTP treated as a corporation under section 7704.
Qualified securities lender (QSL).(p6)
A QSL is a foreign financial institution that satisfies all of the following.
Recalcitrant account holder.(p6)
Generally, a recalcitrant account holder is an account holder of a participating or deemed-compliant FFI that failed to provide the documentation required under chapter 4 to determine the account holder's status or to report the account as a U.S. account. See Regulations section 1.1471-5(g).
For chapter 3 purposes, a recipient includes any of the following.
For chapter 3 purposes, a recipient does not include any of the following.
For chapter 4 purposes, a recipient also includes any of the following.
For chapter 4 purposes, a recipient is generally the same person that is a recipient for chapter 3 purposes.
Specified notional principal contract (SNPC).(p7)
An SNPC is any notional principal contract that satisfies one or more of the following.
Territory FI. (p7)
A territory FI is a financial institution that is incorporated or organized under the laws of any U.S. territory and is not an investment entity. See Regulations section 1.1471-5(e)(1)(iii) for the definition of investment entity.
U.S. branch treated as a U.S. person.(p7)
A U.S. branch may agree to be treated as a U.S. person if it meets the requirements described in the regulations under chapter 3. See Regulations section 1.1441-1(b)(2)(iv)(A). Additionally, a territory FI may agree to be treated as a U.S. person.
The U.S. branch or territory FI must provide a Form W-8IMY evidencing that it is agreeing to be treated as a U.S. person.
A U.S. branch that is treated as a U.S. person is treated as such solely for purposes of determining whether a payment is subject to withholding. The branch is, for purposes of information reporting, a foreign person, and payments to such a branch must be reported on Form 1042-S.
Withholdable payment.(p7)
A withholdable payment is a payment described in Regulations section 1.1473-1(a).
Withholding certificate.(p7)
The term withholding certificate refers to Form W-8 or Form W-9 in most cases. taxmap/instr2/i1042s-005.htm#TXMP72bc5452
Throughout these instructions, a reference to or mention of Form W-8 is a reference to Forms W-8BEN, W-8BEN-E, W-8ECI, W-8EXP, and/or W-8IMY.

Withholding foreign partnership (WP) or withholding foreign trust (WT).(p7)
A WP or WT is a foreign partnership or trust that has entered into a withholding agreement with the IRS in which it agrees to assume primary withholding responsibility for all payments that are made to it for its partners, beneficiaries, or owners under chapter 3 (except for sections 1445 and 1446) and under chapter 4. For information on these withholding agreements, see Revenue Procedure 2014-47 (and any superseding revenue procedure) and Regulations section 1.1441-5.
Nonwithholding foreign partnership (NWP) or nonwithholding foreign trust (NWT).

An NWP or NWT is any partnership or trust (other than a complex trust) that is not a U.S. person and that is not a WP or WT.