The New QI Agreement

On January 4, 2017, the IRS published the Final QI Agreement (Rev. Proc. 2017-15). Only minor changes have been made to the Proposed QI Agreement published with Notice 2016-42:

• The final QI Agreement provides more details on the new Qualified Derivatives Dealers (QDD) status and withholding on section 871(m) payments. The scope of entities eligible for a QDD status has been expanded and changes announced with Notice 2016-76 have been included.

• The requirements to a QI Compliance Program and the QI Compliance Review have been clarified, interpretation gaps have been closed and appendices have been revised. Comments to the Proposed QI Agreement requested clarification regarding the certification of internal controls, including what a responsible officer should rely on if the QI requests and obtains a waiver of the periodic review requirement. With the final QI Agreement, when a QI does request and obtain a waiver and does not conduct a periodic review, the responsible officer must use the other processes, certifications, or reviews that he or she determines are necessary in order to be able to make the required certification.

• QI Responsible Officers of QIs that perform a QI Compliance Review for the third calendar year of the certification period will be able to perform their periodic certification of internal controls on or before December 31 of the year following the certification period. For QIs that elect the first or the second year of the certification period for QI compliance review, the certification date remains July 1 of the year following the certification period.

For an overview of the changes to the QI Agreement already announced with Notice 2016-42 please refer to this newsletter.

The new QI Agreement will be valid for 6 years following the date it has come into effect. All QIs with a QI Agreement in force will have to renew their QI Agreement until March 31, 2017. The QI Agreement will be valid retroactively on or after January 1, 2017.

***

On December 22, 2016 the SBA (Swiss Bankers Association) informed that the Federal Department of Finance (FDF) has confirmed that QIs that had obtained permission under Art. 271(1) of the Swiss Criminal Code with respect to their QI Agreement are not required to renew the permission when they renew the QI Agreement. However, QIs that newly enter into a QI Agreement will still be required to request such a permission going forward.