This new QI agreement makes modifications to a number of key areas, and once it has been finalized, it will replace the existing agreement.
Once the QI agreement has been finalized, it will replace the existing agreement that is set forth in Rev. Proc. 2014-39. This Notice was released on July 1, 2016 and makes a number of significant changes including the introduction of new rules regarding "Qualified Derivatives Dealers" and QIs that make substitute interest payments. As well, the new agreement contains important additions to the compliance review requirements.
Many Canadian and other non-U.S. financial institutions have entered into an agreement with the IRS to act as a QI. The primary purpose of the QI regime is to ensure that U.S. withholding tax is properly applied to certain U.S.-source payments made to non-U.S. persons. Under the QI agreement, the QI generally acts as an agent of the IRS in performing U.S. withholdings on such payments.
The existing QI agreement is generally effective from July 1, 2014 through December 31, 2016. The proposed QI agreement, when finalized, will come into effect on January 1, 2017.
Overview of key changes
The proposed QI agreement has modified the existing agreement in a number of key areas by creating the following updates (among others):
For more information, contact your KPMG adviser.
Information is current to July 12, 2016.