The IRS Issues Application Procedures for Qualified Intermediary Status Under Section 1441

As a general matter, payments to foreign persons of interest, dividends, royalties and certain other types of income are subject to a 30% withholding tax. The payor of such income is responsible for withholding and remitting the withheld tax to the IRS. However, under the new Section 1441 withholding regulations (discussed in the July 1999 edition of The Tax Advisor), the payor will not be required to withhold and remit any tax if it makes payment to a "qualified intermediary" that assumes primary withholding responsibility for the payment. A qualified intermediary is either:

1. a foreign financial institution or clearing organization;
2. a foreign branch of a U.S. financial institution or clearing organization;