What is the Qualified Intermediary regime?

Under the Qualified Intermediary (QI) regime, non-US financial services providers such as banks and custodians can opt-in to become a withholding agent for US tax withholding and reporting purposes. Once an agreement with the IRS is approved to be a QI, non-US financial service providers can provide at-source US withholding tax services, and annual reporting, on certain US sourced income received on behalf of its customers or other business partners. In essence, the QI regime is a service of non-US financial service providers seeking to improve their customers’ (or business partners) US tax withholding and reporting experience on their US investments.

For non-US financial services providers, the QI regime is the alternative to being a Non-Qualified Intermediary (or NQI). Where a non-US financial services provider is an NQI, upstream paying agents are in control of the at-source US withholding tax and reporting services instead.

Additionally, non-US financial services providers may have other US tax withholding and reporting obligations outside of being QI for which they are obligated to comply with. Need help to obtain the Qualified Intermediary status? PwC can help you, guide you and assist you through the process. Contact us for more information about our services.

The QI status is obtained by entering into a Qualified Intermediary Agreement (or QI Agreement) with the IRS. Generally, under the QI Agreement US tax withholding and reporting regulations can be applied:

At the moment income is credited to the customer account.
Based on documentation standards that leverage already applicable customer due diligence.
Without having to share customer confidential details with upstream paying agents.

With benefits also comes obligations. QIs commit to the IRS to:

Determine the applicable tax rate for its customers based on complete and valid customer documentation.
In many cases, withhold US tax on payments and deposit the amounts with the IRS.
Perform annual information reporting to the IRS and the payees of income (e.g. customers or business partners).
Implement a QI compliance framework and certify on its effectiveness once every three-years.

Find out more about the four pillars of compliance here