Implementation Rules for Lob Provisions in the New QI Agreement

In April 2016, the IRS published a revised version of the form W-8BEN-E (Rev. April 2016). From November 2016 on, the use of the new version will be used for the documentation of accounts held by entities. According to the new version of the form W-8BEN-E, an entity which applies for treaty benefits will be required to fill out Part III of the form W-8BEN-E to provide information regarding the Limitation on Benefits Provision (LoB Provision) of the respective Double Tax Agreement it satisfies (hereinafter referred to as “LoB Information”).

The basis for these changes is the new QI Agreement, of which a draft version was published on July 1, 2016. According to the draft of the new QI Agreement, QIs will be required to: 

• request the respective LoB Information from every beneficial owner which applies for treaty benefits

• if applicable, to amend existing forms (“Treaty Statements”) in order to allow beneficial owners to provide the LoB Information. 

• under certain circumstances, to redocument preexisting accounts held by entities that apply for treaty benefits. An account documented with an official form W-8 shall not be subject to redocumentation, unless the validity period of the form expires. If an account is documented with a form other than an official Form W-8, a QI will be required to obtain the LoB Information from a beneficial owner until January 1, 2019.

In addition, QIs will be required to provide the LoB Information of a recipient when filing the upcoming 2016 1042-S reporting.

The final provisions have not yet been released.