News & Events

News & Events

9.22.2009

Foreign Financial Institutions Affected by Proposed Changes to the Qualified Intermediary Program

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Foreign banks, foreign brokerage firms and foreign branches of U.S. banks (collectively referred to as “foreign financial institutions”) should take note of changes proposed in the President’s 2010 Budget “Greenbook” released on May 11, 2009, and proposed Internal Revenue Service (“IRS”) regulations that will affect participation in the IRS’s Qualified Intermediary (“QI”) Program. Pursuant to the proposed IRS rules and possible legislative changes, foreign financial institutions participating in the QI Program may have to disclose the identities of their customers, comply with additional U.S. tax reporting obligations, and collect U.S. withholding tax when receiving payments of interest, rent, dividends or royalties on behalf of customers. If a foreign financial institution does not participate in the QI Program, payments received by the foreign financial institution from a U.S. person will be subject to 30 percent withholding.

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