Beneficial Owner

FATCA

Rules for determining payee and beneficial owner [§1.1472-1(d)]
2-1(d)(1) In general [§1.1472-1(d)(1)]
[Reserved]. For further guidance, see §1.1472-1T(d)(1).
For purposes of this section, except in the case of a payee that is a QI, WP, or WT, a withholding agent may treat a withholdable payment as beneficially owned by the payee as determined under §1.1471-3. Thus, a withholding agent may treat a withholdable payment as beneficially owned by an excepted NFFE (other than a QI, WP, or WT) if the withholding agent can reliably associate the payment with valid documentation to determine the payee’s status as an excepted NFFE under the rules of §1.1471-3(d).
2-1(d)(2) Payments made to an NFFE that is a WP or WT [§1.1472-1(d)(2)]
[Reserved]. For further guidance, see §1.1472-1T(d)(2).
A withholding agent may treat the payee of a withholdable payment as a NFFE that is a QI, WP, or WT if the withholding agent can reliably associate the payment with valid documentation to determine the payee’s status as such under the rules of §1.1471-3(b)(3) and (d).
2-1(d)(3) Payments made to a partner or beneficiary of an NFFE that is an NWP or NWT [§1.1472-1(d)(3)]
A withholding agent may treat a partner or beneficiary of an NFFE that is an NWP or NWT, respectively, as the payee of a withholdable payment under this section if the withholding agent can reliably associate the payment with a valid Form W-8 or written notification that the NFFE is a flow-through entity as described in §1.1471-3(c)(2), including valid documentation sufficient to establish the chapter 4 status of each payee of the payment that is a partner or beneficiary, respectively, by applying the rules described in §1.1471-3(d).
2-1(d)(4) Payments made to a beneficial owner that is an NFFE [§1.1472-1(d)(4)]
A withholding agent may treat the beneficial owner of a withholdable payment as an NFFE that does not have any substantial U.S. owners or that has identified all of its substantial U.S. owners if it can reliably associate the payment with valid documentation identifying the beneficial owner as an NFFE that does not have any substantial U.S. owners or that has identified all of its substantial U.S. owners by applying the rules described in §1.1471-3(d).
2-1(d)(5) Absence of valid documentation [§1.1472-1(d)(5)]
A withholding agent that cannot reliably associate the payment with documentation as described in any of paragraphs (d)(2) through (4) of this section must treat the payment as made to a payee in accordance with the presumption rules under §1.1471-3(f).
Income on certain collateral [§1.1471-6(d)(4)]
[Reserved]. For further guidance, see §1.1471-6T(d)(4).
Solely for purposes of determining whether an entity is an exempt beneficial owner of a payment under this paragraph (d), a foreign central bank of issue is a beneficial owner with respect to income earned on cash and securities, including cash and securities held as collateral or securities held in connection with a securities lending transaction, held by the foreign central bank of issue in the ordinary course of its operations as a central bank of issue.
Certain retirement funds [§1.1471-6(f)]
A fund is described in this paragraph (f) if it is described in paragraphs (f)(1) through (6) of this section. In addition, if a withholding agent may treat a withholdable payment as made to a payee that is a retirement fund in accordance with §1.1471-3, then the withholding agent may also treat such retirement fund as the beneficial owner of the payment. See §1.1471-3(d)(9)(ii).
1-6(f)(1) Treaty-qualified retirement fund [§1.1471-6(f)(1)]
A fund established in a country with which the United States has an income tax treaty in force, provided that the fund is entitled to benefits under such treaty on income that it derives from sources within the United States (or would be entitled to such benefits if it derived any such income) as a resident of the other country that satisfies any applicable limitation on benefits requirement, and is operated principally to administer or provide pension or retirement benefits;
1-6(f)(2) Broad participation retirement fund [§1.1471-6(f)(2)]
A fund established to provide retirement, disability, or death benefits, or any combination thereof, to beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered, provided that the fund-
(2)(i) Does not have a single beneficiary with a right to more than five percent of the fund’s assets; [§1.1471-6(f)(2)(i)]
(2)(ii) Is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which the fund is established or operates; and [§1.1471-6(f)(2)(ii)]
(2)(iii) Satisfies one or more of the following requirements-[§1.1471-6(f)(2)(iii)]
(iii)(A) The fund is generally exempt from tax on investment income under the laws of the country in which it is established or operates due to its status as a retirement or pension plan; [§1.1471-6(f)(2)(iii)(A)]
(iii)(B) [Reserved]. For further guidance, see §1.1471-6T(f)(2)(iii)(B). [§1.1471-6(f)(2)(iii)(B)]
The fund receives at least 50 percent of its total contributions (other than transfers of assets from accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), from retirement and pension accounts described in an applicable Model 1 or Model 2 IGA, or from other retirement funds described in this paragraph (f) or in an applicable Model 1 or Model 2 IGA) from the sponsoring employers; iii)(C) [Reserved]. For further guidance, see §1.1471-6T(f)(2)(iii)(C). [§1.1471-6(f)(2)(iii)(C)]
Distributions or withdrawals from the fund are allowed only upon the occurrence of specified events related to retirement, disability, or death (except rollover distributions to accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), to retirement and pension accounts described in an applicable Model 1 or Model 2 IGA, or to other retirement funds described in this paragraph (f) or in an applicable Model 1 or Model 2 IGA), or penalties apply to distributions or withdrawals made before such specified events;
(iii)(D) Contributions (other than certain permitted make-up contributions) by employees to the fund are limited by reference to earned income of the employee or may not exceed $50,000 annually. [§1.1471-6(f)(2)(iii)(D)]
1-6(f)(3) Narrow participation retirement funds [§1.1471-6(f)(3)]
A fund established to provide retirement, disability, or death benefits to beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for prior services rendered, provided that-
(3)(i) The fund has fewer than 50 participants; [§1.1471-6(f)(3)(i)]
(3)(ii) [Reserved]. For further guidance, see §1.1471-6T(f)(3)(ii).[§1.1471-6(f)(3)(ii)]
The fund is sponsored by one or more employers and each of these employers are not investment entities or passive NFFEs;
(3)(iii) [Reserved]. For further guidance, see §1.1471-6T(f)(3)(iii).[§1.1471-6(f)(3)(iii)]
Employee and employer contributions to the fund (other than transfers of assets from other retirement plans described in paragraph (f)(1) of this section, from accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), or retirement and pension accounts described in an applicable Model 1 or Model 2 IGA) are limited by reference to earned income and compensation of the employee, respectively;
(3)(iv) Participants that are not residents of the country in which the fund is established or operated are not entitled to more than 20 percent of the fund’s assets; and [§1.1471-6(f)(3)(iv)]
(3)(v) The fund is subject to government regulation and provides annual information reporting about its beneficiaries to the relevant tax authorities in the country in which the fund is established or operates. [§1.1471-6(f)(3)(v)]
1-6(f)(4) Fund formed pursuant to a plan similar to a section 401(a) plan [§1.1471-6(f)(4)]
A fund formed pursuant to a pension plan that would meet the requirements of section 401(a), other than the requirement that the plan be funded by a trust created or organized in the United States.
1-6(f)(5) Investment vehicles exclusively for retirement funds [§1.1471-6(f)(5)]
[Reserved]. For further guidance, see §1.1471-6T(f)(5).
A fund established exclusively to earn income for the benefit of one or more retirement funds described in paragraphs (f)(1) through (5) of this section or in an applicable Model 1 or Model 2 IGA, accounts described in §1.1471-5(b)(2)(i)(A) (referring to retirement and pension accounts), or retirement and pension accounts described in an applicable Model 1 or Model 2 IGA.
1-6(f)(6) [Reserved]. For further guidance, see §1.1471-6T(f)(5). Pension fund of an exempt beneficial owner [§1.1471-6(f)(6)]
[Reserved]. For further guidance, see §1.1471-6T(f)(6). A fund established and sponsored by an exempt beneficial owner described in paragraph (b), (c), (d), or (e) of this section or an exempt beneficial owner (other than a fund that qualifies as an exempt beneficial owner) described in an applicable Model 1 or Model 2 IGA to provide retirement, disability, or death benefits to beneficiaries or participants that are current or former employees of the exempt beneficial owner (or persons designated by such employees), or that are not current or former employees, but the benefits provided to such beneficiaries or participants are in consideration of personal services performed for the exempt beneficial owner.
1-6(f)(7) [Reserved]. For further guidance, see §1.1471-6T(f)(6). Example [§1.1471-6(f)(7)]
FP, a foreign pension fund established in Country X, is generally exempt from income taxation in Country X, and is operated principally to provide retirement benefits in such country. The U.S.-Country X income tax treaty is identical in all material respects to the 2006 U.S. model income tax convention. FP is a resident of Country X under Article 4(2)(a) and a qualified person under Article 22(2)(d) of the U.S.-Country X income tax treaty. Therefore, FP is a pension fund described in paragraph (f)(1) of this section.
Beneficial owner [§1.1441-1(c)(6)]
(6)(i) General rule [§1.1441-1(c)(6)(i)]
This paragraph (c)(6) defines the term beneficial owner for payments of income other than a payment for which a reduced rate of withholding is claimed under an income tax treaty. The term beneficial owner means the person who is the owner of the income for tax purposes and who beneficially owns that income. A person shall be treated as the owner of the income to the extent that it is required under U.S. tax principles to include the amount paid in gross income under section 61 (determined without regard to an exclusion or exemption from gross income under the Internal Revenue Code). Beneficial ownership of income is determined under the provisions of section 7701(l) and the regulations under that section and any other applicable general U.S. tax principles, including principles governing the determination of whether a transaction is a conduit transaction. Thus, a person receiving income in a capacity as a nominee, agent, or custodian for another person is not the beneficial owner of the income. In the case of a scholarship, the student receiving the scholarship is the beneficial owner of that scholarship. In the case of a payment of an amount that is not income, the beneficial owner determination shall be made under this paragraph (c)(6) as if the amount were income. (6)(ii) Special rules [§1.1441-1(c)(6)(ii)]
(ii)(A) General rule [§1.1441-1(c)(6)(ii)(A)]
The beneficial owners of income paid to an entity described in this paragraph (c)(6)(ii) are those persons described in paragraphs (c)(6)(ii)(B) through (D) of this section.
(ii)(B) Foreign partnerships [§1.1441-1(c)(6)(ii)(B)]
The beneficial owners of income paid to a foreign partnership (whether a non-withholding or a withholding foreign partnership) are the partners in the partnership, unless they themselves are not the beneficial owners of the income under this paragraph (c)(6). For example, a partnership (first tier) that is a partner in another partnership (second tier) is not the beneficial owner of income paid to the second tier partnership since the first tier partnership is not the owner of the income under U.S. tax principles. Rather, the partners of the first tier partnership are the beneficial owners (to the extent they are not themselves persons that are not beneficial owners under this paragraph (c)(6)). See §1.1441-5(b)[1] for applicable withholding procedures for payments to a domestic partnership. See also §1.1441-5(c)(3)(ii) for applicable withholding procedures for payments to a foreign partnership where one of the partners (at any level in the chain of tiers) is a domestic partnership.
(ii)(C) Foreign simple trusts and foreign grantor trusts [§1.1441-1(c)(6)(ii)(C)]
The beneficial owners of income paid to a foreign simple trust, as described in paragraph (c)(23) of this section, are the beneficiaries of the trust, unless they themselves are not the beneficial owners of the income under this paragraph (c)(6). The beneficial owners of income paid to a foreign grantor trust, as described in paragraph (c)(26) of this section, are the persons treated as the owners of the trust, unless they themselves are not the beneficial owners of the income under this paragraph (c)(6).
(ii)(D) Other foreign trusts and foreign estates [§1.1441-1(c)(6)(ii)(D)]
The beneficial owner of income paid to a foreign complex trust as defined in paragraph (c)(25) of this section or to a foreign estate is the foreign complex trust or estate itself

[1] http://www.law.cornell.edu/cfr/text/26/1.1441-5#b

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