Proposed changes to the Qualified Intermediary agreement introduce burdensome requirements to collect US TINs - Tax and Legal blog


This blog is the second of a two-part series and discusses the due diligence challenge linked to a Qualified Intermediary (QI) holding Publicly Traded Partnership (PTP) interests in custody for non-US investors as of 1 January 2023 when the new PTP withholding regulations come into force: the collection of non-US investors’ US TINs for purposes of §1446(a) and §1446(f).

You can access here our first blog in this series which addressed QI difficulties in complying with electronic reporting obligations via FIRE due to new US TIN requirements introduced for identity verification purposes.


In May 2022 the IRS released Notice 2022-23 (“the Notice”, also referred to as “QI rider”), outlining the proposed changes to the Qualified Intermediary agreement (QIA) which will allow QIs to act in QI capacity when investing into PTPs on behalf of non-US investors and receiving amounts from the PTPs subject to §1446(a) and §1446(f) withholding.

As a reminder, based on §1446(a), 21% and 37% withholding respectively applies on PTP distributions of Effectively Connected Income (ECI) credited to non-US corporations and non-US individuals. According to §1446(f) a 10% withholding tax applies on the gross proceeds from the sale, exchange or other disposition of PTP interests held by a non-US person, and on certain PTP distributions (excess of the net cumulative income), unless an exception applies. For purpose of this blog we will assume that PTPs are subject to § 1446(a) and §1446(f) withholding.

The current QIA (Revenue Procedure 2017-15) explicitly excluding §1446 expires on 31 December 2022. The new US Treasury Regulations relating to §1446(a) and §1446(f) will come into force on 1 January 2023. As a result, the IRS will publish an updated QIA including the changes proposed in the Notice (subject to any modifications the IRS will make based on comments received). Although there were some expectations that the updated QIA would be released before 2022 yearend, as we race into the holiday season, it is unknown whether the updated agreement will arrive as an early or late Christmas present. Based on experience with similar situations in the past, QIs will have time to review the new QIA, and if they accept it, the QIA will be retroactively effective to 1 January 2023.

Following the release of the new QIA, in addition to acting as Nonqualified Intermediary (“NQI”), QIs will be allowed three options when transferring PTP interests or receiving PTP distributions on behalf of non-US investors. Namely, a QI will be allowed to act as (1) Withholding QI, (2) Nonwithholding QI or (3) Disclosing QI. The first two options were already available under the current QIA, while the third option is new and will exclusively apply for § 1446 purposes. We refer to our previous blog for a more detailed elaboration of the implications of each status (i.e. constellation of due diligence, withholding, 1042-S and nominee reporting obligations). In the remainder of this blog, we focus on the new obligation, as of 1 January 2023, to collect the US TIN of non-US investors where a Withholding, Nonwithholding or Disclosing QI holds PTP interests for those non-US investors.

US TIN requirements for purposes of sections § 1446(a) and § 1446(f)

Because of § 6031 nominee reporting obligations and the non-US investor's US tax return filing requirements, as of 1 January 2023, QIs are required to apply “their best efforts” to collect the US TIN of non-US investors on whose behalf they hold PTP interests.

US TIN requirements will also apply to non-US partnerships or non-US grantor trusts submitting Forms W-8IMY as partners in PTPs. This is notable given generally flow-through entities that are not treated as payees do not need to provide their US TIN information.

Consequences of not obtaining the US TIN under § 1446(a) and § 1446(f)

In the absence of the US TIN, the non-US investor holding PTP interests via QIs will not be considered properly documented. Accordingly the following presumption rules will generally apply:

  • For purposes of § 1446(a), the investor will be presumed a foreign person subject to the highest 37% withholding rate.
  • For purposes of § 1446(f), the partner will be presumed a foreign person for which a reduced rate of withholding shall not apply.

Additionally, if an upper- tier non-US partnership that is a partner in a PTP fails to provide its US TIN, allocating the gain to its indirect partners properly documented as US persons subject to 0% withholding and/ or non-US persons eligible for a reduced withholding rate under a tax treaty won’t be possible. Instead, the gain will be allocated to the upper- tier partnership subject to 10% withholding.
However, an IRS representative at the last Kaplan conference indicated that US TINs missing only for certain indirect partners won’t prevent the other partners from benefitting from the most beneficial withholding rate. For example in case of two indirect partners, a non-US one having made a treaty claim without providing a US TIN and a US partner having provided a US TIN, only the non-US partner will suffer 10% withholding on its allocable portion. The US partner will still benefit of the 0% withholding on its allocable portion.

Furthermore, it seems that if an account holder does not provide its US TIN for § 1446(a) and § 1446(f) purposes, a QI may not act as a Disclosing QI for any accounts (i.e. all or nothing approach). This means that a QI could act as a Disclosing QI over a period of time and all of a sudden lose this status because of a new investor not providing its US TIN information. This certainly makes the Disclosing QI regimes very difficult to use.

Finally, we observe that the existing QIA provides that an event of default includes the case where “documentation described in section 5 of the QIA is lacking, incorrect, or unreliable for a significant number of direct account holders.” The proposed changes to the QIA introduce new sections expanding the definitions of a material failure and event of default to include failure to comply with certain requirements related to sections § 1446(a) and § 1446(f). It is therefore unclear whether a failure to collect a US TIN from a non-US investor on whose behalf the QI receives a PTP distribution, or an amount realized will constitute a material failure or an event of default.

Obtaining a US TIN is an onerous process

Obtaining a US TIN for non-US individuals (Individual Tax Identification Number also referred to as “ITIN”) may be very difficult. The IRS application Form and the related instructions are very complex, and the IRS is very formalistic when processing such Forms. Moreover non-US individuals either need to send original documents to the IRS, get certified copies of passports from embassies, or engage with an Authorized Agent. This is super complex to navigate!

Furthermore, it may take the IRS significant time to process an ITIN request. In certain situations, the process has taken in excess of a year. The IRS is currently trying to catch-up on requests for ITINs.


As of today, the Notice does not foresee any relief for QIs that cannot obtain US TINs from non-US investors on whose behalf they will receive PTP distributions or amounts realized as of 1 January 2023. Furthermore, the Notice does not elaborate on what constitutes best efforts to obtain US TINs.

Given the onerous process for non-US investors to obtain US TINs and the adverse potential consequences for QIs not obtaining such US TINs, the industry has requested the IRS to provide for transitional and/or good faith relief pursuant to which a QI will not be considered in breach of its documentation requirements for purposes of § 1446(a) and § 1446(f) because of missing US TINs.

With reference to the Disclosing QI status, the industry has specifically requested a permanent relief from the US TIN requirement to qualify as such.

Additionally, industry sought clarification that making an initial request (at account opening or any time prior to the due date of the Form 1042-S reporting payments with respect to PTP acquired) and two follow-up requests would meet the required best efforts that QI needs to undertake to obtain US TINs.

An IRS representative indicated at the last Kaplan conference that given the high visibility of the US TIN issue, the IRS is considering to address it in the updated QIA. In particular, the IRS representative mentioned that the IRS seems to be considering a potential transitional relief for the US TIN requirement.

Deloitte’s view

Despite these pending issues, Swiss banks holding PTP interests in custody for their clients need to already take certain decisions (e.g. exit or remain in the PTP business). Moreover, appropriate external communication is needed to raise clients’ awareness with respect to the suitability of these investments given the burdensome requirements from a withholding perspective as well as the US tax return filing obligation.

For those remaining in the PTP business, it is necessary to quickly become familiar with the rules and preliminary decide in which capacity to act (Withholding QI, Nonwithholding QI, Disclosing QI, or NQI). The implications and the operational challenges will differ depending on the options chosen. Swiss banks holding PTP interests may need to quickly adjust their strategy and processes depending on surprises that may find their way in the new QIA.

For those deciding to exit the PTP business, we believe it might be challenging to ensure that all such investments are blocked (e.g. due to identification issues and trade channels such as purchase orders passed over the phone, etc.) and hence QIs should in any case have a process in place for cases where those investments do appear in client portfolios.

By: Elena Bonsembiante, Senior Manager, Atila Demiraj, Assistant Manager, and Victoria Ciobanu, trainee, Financial Service Industry, Tax and Legal. 

If you would like to discuss more on this topic, please do reach out to one of the key contacts below:

Key contacts


Brandi Caruso - Partner, Financial Services Tax & Legal

Brandi heads Deloitte’s Financial Services Tax team in Switzerland and Liechtenstein. She has extensive expertise in advising the Swiss financial services industry on the implementation of US and international transparency regimes (including QI, FATCA, Section 871(m), CRS, MDR and DAC6). Brandi also leads the Financial Services Tax team's efforts relating to innovative technology solutions. Brandi is a US Certified Public Accountant and has 20 years of experience with Deloitte and has worked in London, San Diego and Zurich.


Karim Schubiger_110x110

Karim Schubiger – Director, Financial Services Tax 

Karim leads the Tax Transparency team in the Suisse Romande and Ticino markets within the Financial Services Tax practice and is responsible for services relating to QI, FATCA, CRS, 871(m) and DAC6. He is a technical advisor and subject matter expert to financial institutions in the banking, trust, and insurance sectors. Prior to joining Deloitte, Karim worked for eight years in support teams of Swiss banks, in particular in areas relating to operations, project and change management as well as operational taxes.



Elena Bonsembiante - Senior Manager, Financial Services Tax

Elena is a QI, FATCA and CRS specialist and an Italian certified public accountant. She is leading as Senior Manager several QI, FATCA and CRS projects for middle sized banks in the French and Italian speaking areas. Prior to joining Deloitte Switzerland, she worked for Deloitte Italy and other Italian Tax Firms. 


Atila Demiraj

Atila Demiraj - Assistant Manager, Financial Services Tax

Atila is an Assistant Manager in our Financial Services Tax team in Zurich. She has experience in various tax-related projects, focusing on AEI/CRS, FATCA and QI Regulatory topics. She holds a master degree in Business Economics from the University of Zurich.



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