Payee

FATCA

1.1471-3

Identification of payee [§1.1471-3]

1-3(a) Payee defined [§1.1471-3(a)]

1-3(a)(1) In general [§1.1471-3(a)(1)]

Except as otherwise provided in this paragraph (a), for purposes of chapter 4 a payee is the person to whom a payment is made, regardless of whether such person is the beneficial owner of the amount.

1-3(a)(2) Payee with respect to a financial account [§1.1471-3(a)(2)]

For purposes of payments made to a financial account and except as otherwise provided in paragraph (a)(3) of this section, the payee is the holder of the financial account.

1-3(a)(3) Exceptions [§1.1471-3(a)(3)]

(3)(i) Certain foreign agents or intermediaries [§1.1471-3(a)(3)(i)]

(i)(A) Except as otherwise provided in paragraphs (a)(3)(iv) and (vi) of this section (applicable to territory financial institutions and certain U.S. branches), a foreign person that is acting as an agent or intermediary with respect to a payment in accordance with paragraph (b)(1) of this section is not the payee if such foreign person is- [§1.1471-3(a)(3)(i)(A)]

(1) An NFFE, unless the NFFE is a QI that has assumed primary withholding responsibility; or [§1.1471-3(a)(3)(i)(A)(1)]

(2) In the case of a payment of U.S. source FDAP income, a participating FFI, deemed-compliant FFI, or restricted distributor, unless the participating FFI, deemed-compliant FFI, or restricted distributor is a QI that has assumed primary withholding responsibility. [§1.1471-3(a)(3)(i)(A)(2)]

(i)(B) In the case of an agent or intermediary described in paragraph (a)(3)(i)(A) of this section, the payee is the person or persons for whom the agent or intermediary collects the payment. Thus, for example, the payee of a payment of U.S. source FDAP income that the withholding agent can reliably associate with a withholding certificate from a QI that does not assume primary withholding responsibility with respect to the payment under chapter 3, or a payment to a participating FFI that is an NQI, is the person or persons for whom the QI or NQI acts. [§1.1471-3(a)(3)(i)(B)]

(3)(ii) Foreign flow-through entity [§1.1471-3(a)(3)(ii)]

(ii)(A) A foreign entity that is a flow-through entity is a payee with respect to a payment only if the flow-through entity is- [§1.1471-3(a)(3)(ii)(A)]

(1) An FFI that is not a participating FFI or deemed-compliant FFI, or restricted distributor receiving a payment of U.S. source FDAP income; [§1.1471-3(a)(3)(ii)(A)(1)]

(2) An excepted NFFE that is not acting as an agent or intermediary with respect to the payment; [§1.1471-3(a)(3)(ii)(A)(2)]

(3) A WP or WT that is not acting as an agent or intermediary with respect to the payment; or [§1.1471-3(a)(3)(ii)(A)(3)]

(4) Receiving income that is (or is deemed to be) effectively connected with the conduct of a trade or business in the United States, or receiving a payment of gross proceeds from the sale of property that can produce income that is effectively connected with the conduct of a trade or business in the United States and that is excluded from the definition of a withholdable payment under §1.1473-1(a)(4). [§1.1471-3(a)(3)(ii)(A)(4)] (ii)(B) A withholding agent that makes a withholdable payment to a flow-through entity that is not described in paragraphs (a)(3)(ii)(A)(1) through (3) of this section will be required to treat the partner, beneficiary, or owner (as applicable) as the payee (looking through partners, beneficiaries, and owners that are themselves flow-through entities that are not described in paragraphs (a)(3)(ii)(A)(1) through (3)). [§1.1471-3(a)(3)(ii)(B)]

(3)(iii) U.S. intermediary or agent of a foreign person [§1.1471-3(a)(3)(iii)]

[Reserved]. For further guidance, see §1.1471-3T(a)(3)(iii).

A withholding agent that makes a withholdable payment to a U.S. person and has actual knowledge that the person receiving the payment is acting as an intermediary or agent of a foreign person with respect to the payment must treat such foreign person, and not the intermediary or agent, as the payee of such payment. Notwithstanding the previous sentence, a withholding agent that makes a withholdable payment to a U.S. financial institution or a U.S. insurance broker (to the extent such withholdable payment is a payment of premiums) that is acting as an intermediary or agent with respect to the payment on behalf of one or more foreign persons may treat the U.S. financial institution or U.S. insurance broker as the payee if the withholding agent does not have reason to know that the U.S. financial institution or U.S. insurance broker will not comply with its obligations to withhold under sections 1471 and 1472.

(3)(iv) Territory financial institution [§1.1471-3(a)(3)(iv)]

A withholding agent that makes a withholdable payment to a territory financial institution that is a flow-through entity or is acting as an intermediary or agent with respect to the payment may treat the territory financial institution as the payee only if the territory financial institution has agreed (as evidenced by a withholding certificate described in paragraphs (c)(3)(iii)(A) and (F) of this section) to be treated as a U.S. person with respect to the payment for purposes of both chapters 3 and 4. In all other cases, the withholding agent must treat as the payee the partner, beneficiary, or owner (as applicable) of the territory financial institution that is a flow-through entity (looking through partners, beneficiaries, and owners that are themselves flow-through entities that are not described in paragraphs (a)(3)(ii)(A)(1) through (3)) or the person on whose behalf the territory financial institution is acting.

(3)(v) Disregarded entity or branch [§1.1471-3(a)(3)(v)]

[Reserved]. For further guidance, see §1.1471-3T(a)(3)(v).

Except as otherwise provided in paragraph (a)(3)(v) through (vii) of this section, a withholding agent that makes a withholdable payment to an entity that is disregarded for U.S. federal tax purposes under §301.7701-2(c)(2)(i) as an entity separate from its single owner must treat the single owner as the payee. The rules under §1.1471-3(d)(4) and (e)(3) apply to determine the circumstances under which a withholding agent may treat a payment made to a disregarded entity owned by an FFI as made to a payee that is a participating FFI or registered deemed-compliant FFI, and not as a payment made to a payee that is a nonparticipating FFI.

A withholding agent that makes a payment to a limited branch (including an entity disregarded as a separate entity from its owner if such owner is an FFI and the disregarded entity is unable to comply with the terms of an FFI agreement with respect to accounts that it maintains) will be required to treat the payment as being made to a nonparticipating FFI.

(3)(vi) U.S. branch of certain foreign banks or foreign insurance companies. [§1.1471-3(a)(3)(vi)]

[Reserved]. For further guidance, see §1.1471-3T(a)(3)(vi). deemed-compliant FFI,

or NFFE is a payment to a U.S. person if the U.S. branch is treated as a U.S. person under §1.1441-1(b)(2)(iv)(A). In such case, the U.S. branch is treated as the payee.

A U.S. branch treated as a U.S. person (as defined in §1.1471-1(b)(135)), however, is not treated as a U.S. person for purposes of the withholding certificate it may provide to a withholding agent for purposes of chapter 4. Accordingly, a U.S. branch treated as a U.S. person must furnish a withholding certificate on a Form W-8 to certify its chapter 4 status (and not a Form W-9, “Request for Taxpayer Identification Number and Certification”). See also paragraph (f)(6) of this section for the rules under which a withholding agent can presume a payment constitutes income that is effectively connected with a U.S. trade or business.

A U.S. branch treated as a U.S. person may not make an election to be withheld upon, as described in section 1471(b)(3) and §1.1471-2(a)(2)(iii), for purposes of chapter 4. See §1.1471-4(c)(2)(v) for the rule requiring a U.S. branch that has elected to be treated as a U.S. person to apply the due diligence rules applicable to a U.S. withholding agent in lieu of those otherwise applicable to a participating FFI. See also §1.1474-1(i)(1) and (2) for the requirement of a U.S. branch to report information regarding certain U.S. owners of owner documented FFIs and passive NFFEs. See §1.1471-4(d) for rules for when a U.S. branch reports as a U.S. person.

(3)(vii) Foreign branch of a U.S. person [§1.1471-3(a)(3)(vii)]

A payment to a foreign branch of a U.S. person is generally a payment to a U.S. payee. However, a payment to a foreign branch of a U.S. financial institution will be treated as a payment to an FFI if the foreign branch is a QI that is acting as an intermediary with respect to the payment. Therefore, a foreign branch that is a QI will provide the withholding agent with an intermediary withholding certificate and the withholding agent will report the payment as having been made to the foreign branch on a Form 1042-S.

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