QI-related legislative & executive elements
Final Qualified Intermediary Withholding Agreement
(Rev. Proc 2000-12 - emphasis aded)

(compare with: IRS' Shott Declaration of Feb 4, 2009;
see also: Proposed Amendments to Qualified Intermediary Withholding Agreement,
Qualified Intermediary (QI) - an Agent of the U.S. Government: genesis, content & critics,
Amtshilfe in Steuersachen an die USA: Zur Bedeutung der QI-Normen, Jusletter 26.1.09, Prof.Dr.iur. Urs R. Behnisch,
Farewell America, Wegelin newsletter # 265, Konrad Hummler)
.

.
"Where the client agrees, direct investments in US securities should be sold
and replaced with investments on the approved list shown on the Private Web.
These include UBS investment funds and certain derivative products."
("IRS 2001, FPWM policy for dealing with US persons under QI Agreement",
extract from confidential internal UBS memo of July 4, 2000, reproduced in:
U.S. Government exhibit 8 in U.S. v. UBS AG, 09-cv-20423: www.solami.com/UBSMReeves.pdf)
.
"In 2008, a grand jury in the Southern District of Flordia indicted Raoul Weil,
head of UBS's wealth management business, and since 2007 Chief Executive Officer
of a division of UBS that oversaw UBS's cross-border business within the United States.
The indictment charges that Weil and others conspired to defraud the United States
and the Internal Revenue Service in the ascertainment, computation and collection
of federal income taxes. In particular, the indictment charges that Weil assisted
20,000 US customers of UBS to knowingly conceal from the IRS $20 billion in assets
that they held in secret accounts at UBS (Ex. 28 [which, under QI rules binding on UBS,
should either have been reported to the IRS, or UBS should have "backup withheld"
and transfered to the IRS 28% of the proceeds of the involved U.S. securities]).
The Court has declared him a fugitive from justice."
(Declaration by IRS Revenue Agent Daniel Reeves to The Hon. Judge Alan S.Gold
of Feb.6, 2009 (para 58a: www.solami.com/UBSMReeves.pdf)
.
"1.   The case at hand is labelled: "U.S. Government vs. UBS AG", yet the U.S. Government's
"Petition to enforce John Doe summons" of Feb.19, 2009, specifies:
    '12. Except for the items specifically identified in Revenue Agent Reeve's Declaration filed with this Petition,
the testimony and documents described in the summons are not already in the possession of the IRS.' -
thus ignoring the comprehensive documents other U.S. agencies have accumulated over the period in question,
notably by way of the comprehensive electronic surveillance through the SWIFT transfer and others systems.
Could discovery provide a way to force the plaintiff to divulge what it - and not only the IRS - knows already?
2.   According to an advisory opinion of Feb. 2009 by Swiss professor Urs Behnisch ( www.solami.com/QI.htm),
during the negotiations over the planned QI scheme, ie during 2000, the IRS, reportedly, was formally appraised
of the unparalleled and strictly enforced Swiss "know your customer" rules, providing for full disclosure
of the real economic beneficiary behind off-shore companies entertaining UBS accounts in Switzerland,
in contrast to QI rules which, under U.S. law, recognized these companies as beneficiary owners,
with Swiss QIs therefore not obliged to report to the IRS the true economic beneficiaries, thus allowing -
with full knowledge of the IRS - US persons to hide behind those companies, as long as the Swiss QI
in question exercised its obligation to backup withhold and transfer to the IRS 28% (originally 31%) of the
'U.S. source income' ("deemed sales" and other security proceeds - see: www.solami.com/QIdetails.htm).
For a courtisan or even a Mafia type it used to be a question of honor to deliver on the goods promised & paid for,
but for the IRS it seems conscionable to take and enforce protection money and then to turn around, renege on
the deal and even to hammer the blue-eyed for unilaterally faithful and obedient intermediary, i.e. the QI servants
 3.   The explanations on the nature of the QI scheme, as furnished by the IRS to the Court, not least those
contained in the Declaration of the IRS Deputy Commissioner Barry B. Shott(www.solami.com/UBSMShott.pdf),
still go under my skin. A telling example of the flat earth mind at work is the unabashed assertion implying
that the Wild West and bounty hunting mentality is still very much alive and essentially unchallenged
among those who regularly confound Switzerland with either Swaziland or Sweden:
'5.  The purpose of the QI program is to make it easier for the IRS to obtain foreign banks' compliance with U.S. tax laws ..'
There are some answers under way among Swiss lawmakers to this kind of "gunboat diplomacy",
eg in the form of the motion "Lex Helvetica"(www.solami.com/impulse.htm#OF) introduced in the Swiss Lower Chamber
and which provide for pacta sunt servanda, with a flat prohibition of any judicial or administrative assistance
vis-à-vis any treaty partner who, on any level, fails to honor its treaty commitments entered into with Switzerland.
Moreover, a widely supported signature collection is already quite advanced for a constitutional amendment
enrooting banking secrecy and property protection in the Swiss Constitution. In the event, not even
a weak Swiss government will then be able to knuckle under and react differently from what our outstanding
late diplomat Edouard Brunner had and would have counseled in similar circumstances, namely to smilingly
and elegantly advise recklessly marauding friends from across the Atlantic 'that the world ain't flat',
essentially directing them to consult first with their colleagues in other involved departments or
to release their rough-shodding energies by flying a kyte (www.solami.com/edouardbrunner.htm#Iran)."
(extract of observations to a friend of the court of 10.08.09 by Iconoclast)

"Nachdem von Medienseite mir zu Ohren kam, dass offizielle Pressesprecher die QI-Vereinbarung
... als "Rechtsbasis" für die Interventionen der offiziellen Schweiz in Washington und Miami
dargestellt haben sollen, wäre ich an einer Klarstellung interessiert. Darüber nämlich,
was denn die offizielle Schweizer Lesart dieses - m.E. ohnehin von Anfang an illegalen -
IRS-Verwaltungs-Ukase tatsächlich ist. Aber auch darüber, ob im nationalen Interesse
nicht auch der Rattenschwanz von IRS-initiierten und QI-basierten Gerichtsfällen
gegen die UBS, allenfalls weitere Schweizer Banken und deren Mitarbeiter und Kunden
mit allem politischen Nachdruck bekämpft werden müsste, könnte und wird.
 Denn all diese Verfahren beruhen vorwiegend auf unrechtmässig beschafften Beweismaterialien,
deren Verwendung zu Steuer- und Strafzwecken - wie in der Begründung zur Motion 09.3452
Lex Helvetica angeführt (www.solami.com/lexhelvetica.htm) - als Hehlerei von Staats wegen
nicht zuletzt auch aus prophylaktischen Gründen nachhaltig als unannehmbar gerügt werden sollten.
Verfahren im übrigen, welche hinter den Kulissen von kompetenten, tiefgängigen und klarsichtigen
Unterhändlern sehr wohl auch erfolgsträchtig zur Entgleisung gebracht werden könnten -
z.B. mit einer unnachgiebigen QI-Legalitätshinterfragung, z.B. mit dem discovery Begehren,
Auskunft zu erhalten über den Einblick in Bankkundendateien, welche gewissen U.S. Agencies
bereits "zugefallen" sind, sei es direkt via die SWIFT-Organisation,
oder über die UBS im Rahmen der damaligen Y2K-Operationen."
(aus einem Brief an die Vorsteherin des in dieser Sache federführenden EJPD vom 11.8.09)


Extract from "Foreign Account Tax Compliance Act" (FATCA), contained in:
 Hiring Incentives to Restore Employment Act (HIRE),Feb 2010, Sec 501  p.68

‘‘(3) SEPARATE REQUIREMENTS FOR QUALIFIED INTERMEDIARIES.
In the case of a foreign financial institution which is treated as a qualified intermediary by the Secretary for purposes of section 1441 and the regulations issued thereunder, the requirements of this section shall be in addition to any reporting or other requirements imposed by the Secretary for purposes of such treatment."
 

Extracts from Qualified Intermediary Program Provides Some Assurance
That Taxes on Foreign Investors Are Withheld and Reported, but Can Be Improved,
GAO-08-99,  US Government Accountability Office, Dec 2007 (emphasis added)

p.10:   "Under the QI program, foreign financial institutions voluntarily sign an agreement to withhold and report the appropriate amount of tax on the U.S. source income they send to their offshore customers. This entails determining the kind and amount of their clients’ U.S. source income, determining whether clients are eligible for benefits (which is determined by the client’s national residency), and then calculating, withholding, and reporting appropriate amounts to IRS. When customers wish to claim treaty benefits or exemptions, they must also submit to a QI or other withholding agent an IRS Form W-8BEN, known as a withholding certificate, or other acceptable documentation. On the withholding certificate the customer provides various identifying information and completes applicable certifications, including that the customer is a resident of a country qualifying for treaty benefits or exemptions and that any limitations on benefits provisions in the treaty are met.10 To determine whether a client is eligible for treaty benefits and exemptions, the QIs accept documentation declaring clients’ residency, most often a self-certified Form W-8BEN, and verify that with other documents accepted as part of their account-opening procedures, such as passports or national health cards, in accordance with the “know your customer” rules already established by the jurisdiction in which they are located.
    If there is insufficient documentation to adequately determine the treaty status of an account owner, the QI, a nonqualified intermediary, or a U.S. financial institution must use the presumption rules11 and apply backup withholding.Backup withholding is regulated separately, reported separately, and processed separately from routine NRA [non-resident alien] income and withholding. Furthermore, U.S. persons generally are taxed on their worldwide income. Their income and assets are withheld and reported separately and individually.

Income & Witholding Flows (without Backup Withholding!)



    (p.11)    "One of the principal incentives for foreign financial institutions to become QIs is their ability to retain the anonymity of their client list. QIs may report customer income and withholding information for a group of similar recipients receiving similar benefits, known as “pooled reporting.” NQIs [non-QIs], on the other hand, must reveal the identity of their clients to upstream withholding agents through acceptable documentation in order for their customers to receive treaty benefits as well as interest and capital gains exemptions. Income owned by U.S. taxpayers held offshore may not be pooled and must be reported to IRS individually, either by the QI, NQI, or the last U.S. payor in a chain of payments. Payors of U.S. source income to U.S. taxpayers are not required to withhold from this income, but they must report the income on IRS Form 1099. U.S. taxpayers must report all of their current income on their income tax returns, including U.S. source and foreign source income, as well as ownership of foreign bank accounts and significant ownership in foreign corporations.12 QIs may opt out of primary withholding and reporting responsibilities for designated accounts — including those owned by U.S. persons—ceding those responsibilities and liabilities to financial institutions upstream in the chain of payments. Eventually, the responsibilities and liabilities associated with these accounts may fall to the last payor within the United States (and therefore within the jurisdiction of IRS)."
 

Extracts from SELECTED ISSUES RELATING TO TAX COMPLIANCE WITH RESPECT TO
OFFSHORE ACCOUNTS AND ENTITIES, JCX-65-08, Joint Committee on Taxation, July 23, 2008

p.36:  " Since the adoption of the QI regime in 2001, 7,007 QI agreements have been signed. There are currently 5,660 active QI agreements involving financial institutions in 60 countries.80 The QI program provides a significant benefit to foreign financial institutions—in particular, the ability to obtain a reduced rate or exemption from U.S. withholding tax for their non-U.S. customers without disclosing the identities of those customers to the IRS or competing financial institutions.  At the same time, however, the contractual nature of the QI program provides the IRS with an important mechanism to enforce compliance with U.S. reporting and withholding rules.  For example, a foreign financial institution that is a QI is contractually required to disclose the identity of its U.S. customers to the IRS, report the payment of certain amounts to those customers and, in some circumstances, apply backup withholding.  These contractual requirements extend beyond the scope of the reporting and withholding that would otherwise be required under applicable Treasury regulations.  Moreover, the fact that so many of the world’s major financial institutions have entered into QI agreements places a non-QI financial institution at a competitive disadvantage and creates a significant incentive for existing QIs to maintain their QI status.  The IRS’s ability to terminate a QI agreement in the event of noncompliance, thereby placing a financial institution at such a disadvantage, is a powerful tool for enforcing compliance and ensuring cooperation by a QI when instances of noncompliance are discovered."

p.5:   "Liechtenstein Global Trust Group 
The report describes practices employed by LGT, a leading Liechtenstein financial institution that is alleged to have assisted U.S. clients in hiding assets offshore during the period from 1998 to 2007.  According to the report, those practices included maintaining U.S. client accounts that were not disclosed to U.S. tax authorities; advising U.S. clients to open accounts in the name of Liechtenstein foundations to hide their beneficial ownership of the account assets; advising clients on the use of complex offshore structures to hide ownership of assets outside of Liechtenstein; and establishing “transfer corporations” to disguise asset transfers to and from LGT accounts.  According to the report, LGT also advised clients on how to structure their investments to avoid disclosure to the IRS under the QI program.9
    The LGT inquiry originated with an investigation by German authorities into the role of LGT in facilitating the evasion of German tax.10  On February 25, 2008, the German authorities announced that they would share the information they had obtained in regard to LGT with authorities in other countries whose residents had utilized Liechtenstein to engage in tax evasion.11  On February 26, the IRS issued a news release stating that it was initiating enforcement actions involving more than 100 U.S. taxpayers to ensure that they properly reported income, and paid taxes, in connection with accounts in Liechtenstein.12  The news release also stated that the tax authorities in Australia, Canada, France, Italy, New Zealand,Sweden, the United Kingdom, and the United States were working together to address
the use of Liechtenstein accounts for tax evasion purposes."

p.6/7:   "UBS AG
The report also summarizes the PSI staff’s findings regarding the practices employed by UBS, based in Switzerland and one of the world’s largest financial institutions, to facilitate tax evasion by U.S. clients and avoidance of reporting requirements under the QI program. 17 According to the report, these practices included maintaining “undeclared” accounts in Switzerland for an estimated 19,000 U.S. clients with billions of dollars in undisclosed assets.18 [18  In response to PSI inquiries, UBS estimated that it has about 20,000 accounts in Switzerland for U.S. clients, of which roughly 1,000 are declared accounts and 19,000 are undeclared accounts that had not been disclosed to the IRS.  UBS also estimated that those accounts contained assets with a combined value of about $17.9 billion.  However, UBS was unable to specify the breakdown in assets between the undeclared and declared accounts, except to note that the amount of assets in the undeclared accounts was much greater than the amount in the declared accounts.  2008 PSI Report at 9.]
     UBS had voluntarily entered into a QI agreement with the IRS, effective January 1, 2001, under which UBS agreed to identify and document any customers who held U.S. investments or received U.S.-source income in accounts maintained with UBS.  Alternatively, if a U.S. customer refused to be identified under the QI agreement, UBS was required to withhold U.S. tax at a 28-percent rate on payments made to the customer, and to bar the customer from holding U.S. investments.  The reporting or 28-percent withholding requirements also applied to income from certain non-U.S. investments made as a result of contact with the U.S. client in the United States.
    According to the report, many of UBS’s U.S. clients refused to be identified, to have taxes withheld, or to sell their U.S. assets as required under the QI agreement.  To retain these customers, UBS bankers assisted the customers in concealing their ownership of the assets held in offshore accounts by helping to create nominee and sham entities.  These entities were set up in various jurisdictions, including Switzerland, Liechtenstein, Panama, the British Virgin Islands, and Hong Kong.  The UBS bankers and their U.S. customers then claimed that the offshore accounts were owned by these nominee and sham entities and were not subject to the reporting requirements imposed by the QI agreement.
    On July 1, 2008, a Federal district court in Florida granted the IRS permission to issue a John Doe summons to UBS seeking the names of as many as 20,000 U.S. citizens who were UBS customers for which reporting or withholding obligations may not have been met. [see also: amicus curiae brief]"


Extracts from Technical Explanation Of The Revenue Provisions Contained In
The “Hiring Incentives To Restore Employment Act”Under Consideration By The Senate, 
JCX-4-10, Joint Committee on Taxation, Feb 23, 2010, p.22-36
p.29:     "If an IRS Form W-9 is not provided by a U.S. payee (other than payees exempt from reporting), the payor is required to impose a backup withholding tax of 28 percent of the gross amount of the payment.137   The backup withholding tax may be credited by the payee against regular income tax liability.138   This combination of reporting and backup withholding is designed to ensure that U.S. persons not exempt from reporting pay tax with respect to investment income, either by providing the IRS with the information that it needs to audit payment of the tax or, in the absence of such information, requiring collection of the tax on payment."

p.30:     "The qualified intermediary program
    A QI is defined as a foreign financial institution or a foreign clearing organization, other than a U.S. branch or U.S. office of such institution or organization, or a foreign branch of a U.S. financial institution that has entered into a withholding and reporting agreement (a “QI agreement”) with the IRS.140
    A foreign financial institution that becomes a QI is not required to forward beneficial ownership information with respect to its customers to a U.S. financial institution or other withholding agent of U.S.-source investment-type income to establish the customer’s eligibility for an exemption from, or reduced rate of, U.S. withholding tax.141  Instead, the QI is permitted to establish for itself the eligibility of its customers for an exemption or reduced rate, based on an IRS Form W-8 or W-9, or other specified documentary evidence, and information as to residence obtained under the know-your-customer rules to which the QI is subject in its home jurisdiction as approved by the IRS or as specified in the QI agreement.142 The QI certifies as to eligibility on behalf of its customers, and provides withholding rate pool information to the U.S. "

p.32:     "If a U.S. non-exempt recipient has not provided an IRS Form W-9, the QI must disclose the name, address, and taxpayer identification number (“TIN”) (if available) to the withholding agent (and the withholding agent must apply backup withholding).  However, no such disclosure is necessary if the QI is, under local law, prohibited from making the disclosure and the QI has followed certain procedural requirements (including providing for backup withholding, as described further below)."

p.33:     "If a foreign account holder is the beneficial owner of a payment, then a QI may shield the account holder’s identity from U.S. custodians and the IRS.  If a foreign account holder is not the beneficial owner of a payment (for example, because the account holder is a nominee), the account holder must provide the QI with an IRS Form W-8IMY for itself along with specific information about each beneficial owner to which the payment relates.  A QI that receives this information may shield the account holder’s identity from a U.S. custodian, but not from the IRS.151
    In general, if an account holder is a U.S. person, the account holder must provide the QI with an IRS Form W-9 or appropriate documentary evidence that supports the account holder’s status as a U.S. person.  However, if a QI does not have sufficient documentation to determine whether an account holder is a U.S. or foreign person, the QI must apply certain presumption rules detailed in the QI agreement.  These presumption rules may not be used to grant a reduced rate of nonresident withholding; instead they merely determine whether a payment should be subject to full nonresident withholding (at a 30-percent rate), subject to backup withholding (at a 28-percent rate), or treated as exempt from backup withholding.
    In general, under the QI agreement presumptions, U.S.-source investment income that is paid outside the United States to an offshore account is presumed to be paid to an undocumented foreign account holder.  A QI must treat such a payment as subject to withholding at a 30-percent rate and report the payment to an unknown account holder on IRS Form 1042-S.  However, most U.S.-source deposit interest and interest or original issue discount on short-term obligations that is paid outside the United States to an offshore account is presumed made to an undocumented U.S. non-exempt recipient account holder and thus is subject to backup withholding at a 28-percent rate.152  Importantly, both foreign-source income and broker proceeds are presumed to be paid to a U.S. exempt recipient (and thus are exempt from both nonresident and backup withholding) when such amounts are paid outside the United States to an offshore account."

p.35:    "Foreign law prohibition of disclosure 
The QI agreement includes procedures to address situations in which foreign law (including by contract) prohibits the QI from disclosing the identities of U.S. non-exempt recipients (such as individuals).  Separate procedures are provided for accounts established with a QI prior to January 1, 2001, and for accounts established on or after January 1, 2001.
Accounts established prior to January 1, 2001.–For accounts established prior to January 1, 2001, if the QI knows that the account holder is a U.S. non-exempt recipient, the QI must (1) request from the account holder the authority to disclose its name, address, TIN (if available), and reportable payments; (2) request from the account holder the authority to sell any assets that generate, or could generate, reportable payments; or (3) request that the account holder disclose itself by mandating the QI to provide an IRS Form W-9 completed by the account holder.  The QI must make these requests at least two times during each calendar year and in a manner consistent with the QI’s normal communications with the account holder (or at the time and in the manner that the QI is authorized to communicate with the account holder).  Until the QI receives a waiver on all prohibitions against disclosure, authorization to sell all assets that generate, or could generate, reportable payments, or a mandate from the account holder to provide an IRS Form W-9, the QI must backup withhold on all reportable payments paid to the account holder and report those payments on IRS Form 1099 or, in certain cases, provide another withholding agent with all of the information required for that withholding agent to backup withhold and report the payments on IRS Form 1099.
Accounts established on or after January 1, 2001.–For any account established by a U.S. non-exempt recipient on or after January 1, 2001, the QI must (1) request from the account holder the authority to disclose its name, address, TIN (if available), and reportable payments;
(2) request from the account holder, prior to opening the account, the authority to exclude from the account holder’s account any assets that generate, or could generate, reportable payments; or
(3) request that the account holder disclose itself by mandating the QI to transfer an IRS Form W-9 completed by the account holder.
    If a QI is authorized to disclose the account holder’s name, address, TIN, and reportable amounts, it must obtain a valid IRS Form W-9 from the account holder, and, to the extent the QI does not have primary IRS Form 1099 and backup withholding responsibility, provide the IRS Form W-9 to the appropriate withholding agent promptly after obtaining the form.  If an IRS Form W-9 is not obtained, the QI must provide the account holder’s name, address, and TIN (if available) to the withholding agents from whom the QI receives reportable amounts on behalf of the account holder, together with the withholding rate applicable to the account holder.  If a QI is not authorized to disclose an account holder’s name, address, TIN (if available), and reportable amounts, but is authorized to exclude from the account holder’s account any assets that generate, or could generate, reportable payments, the QI must follow procedures designed to ensure that it will not hold any assets that generate, or could generate, reportable payments in the account holder’s account.157" [thus: if QI is not authorized to exclude US securities from an account,QI need not report the account holder to the IRS but is obliged to impose on the US assets in question the IRS' fiat28% backup withholding tax which the only constitutional lawmaker, i.e. the U.S. Congress, is not on record for ever having even considered, much less approved]
 

Extracts from the IRS' QI Regulations
Sec. 2.07. Broker Proceeds. “Broker proceeds” means the gross proceeds from a sale of an asset to the extent that the gross proceeds would be subject to Form 1099 reporting if paid to a U.S. non-exempt recipient. For purposes of this Agreement, broker proceeds also include any proceeds paid by QI from the sale of assets pursuant to the provisions of section 6.04 of this Agreement that are owned by a U.S. non-exempt recipient and that produce, or could produce, reportable payments regardless of whether the sale is effected at an office inside or outside the United States and regardless of whether or not the sale is effected by QI or another person on instructions from QI. Thus, the exception in Treas. Reg. §1.6045-1(a), which excludes from Form 1099 reporting certain sales effected at an office outside the United States, shall not apply in the case of U.S. non-exempt recipients whose identity is prohibited by law from disclosure. In addition, the exception from backup withholding on certain payments contained in Treas. Reg. §31.3406(g)-1(e) shall not apply to such broker proceeds.
...
Sec. 2.44. Reportable Payment.  For purposes of this Agreement, a reportable payment means amounts described in section 2.44(A) of this Agreement, in the case of a U.S.payor, and amounts described in section 2.44(B) of this Agreement, in the case of a non-U.S. payor.
(A) U.S. Payor.  If QI is a U.S. payor, a reportable payment means any reportable payment as defined in section 3406(b) of the Code, including any broker proceeds from the sale ofassets beneficially owned by a U.S. non-exempt recipient account holder that produce, or could produce, reportable payments if the identity and account information of that account holder is prohibited by law, including by contract, from disclosure as described in section 6.04 of this Agreement.   For this purpose, it is irrelevant whether the sale is effected by QI or QI instructs another person to effect the sale.  It is also irrelevant whether the sale is effected at an office inside or outside the United States. Thus, the exception in Treas. Reg. §1.6045-1(a) (which excepts sales effected at an office outside the United States by a non-U.S. payor) and the exception in Treas. Reg. 31.3406(g)-1(e) (which excepts certain payments made outside the United States from backup withholding) do not apply in the case of an account holder whose identity is prohibited by law from disclosure.
(B) Non-U.S. Payor.  If QI is a non-U.S. payor a reportable payment means–
(1) Any reportable amount (unless an exception to reporting applies under chapter 61 of the Code);
(2) Any broker proceeds from the sale of assets that produce, or could produce, reportable amounts if the sale is effected at an office inside the United States, as defined in Treas. Reg. §1.6045-1(g)(3), (unless an exception to reporting applies under chapter 61 of the Code);
(3) Any broker proceeds from the sale of an asset that produces, or could produce, reportable amounts that are beneficially owned by a U.S. non-exempt recipient whose identity and account information is prohibited by law, including by contract, from disclosure as described in section 6.04 of this Agreement. For this purpose, it is irrelevant whether the sale is effected by QI or another person upon instructions from QI.  It is also irrelevant whether the sale is effected at an office inside or outside the United States.  Thus, the exception in Treas. Reg. §1.6045-1(a) (which excepts sales effected at an office outside the United States by a non-U.S. payor) and the exception in Treas. Reg. 31.3406(g)-1(e) (which excepts certain payments made outside the United States from backup withholding) do not apply in the case of an account holder whose identity is prohibited by law from disclosure; and
(4) Any foreign source interest, dividends, rents, royalties, or other fixed and determinable income if such income is paid in the United States or to an account maintained in the United States or any other amount presumed paid to a U.S. non-exempt recipient under section 5.13(C)(4) of this Agreement (unless an exception to reporting applies under chapter 61 of the Code).
...
Sec. 3.04. Backup Withholding Responsibility. QI is a payor under section 3406 of the Code with respect to reportable payments. Under section 3406, a payor is required to deduct and withhold 31 percent [this was later amended to 28%] from the payment of a reportable payment to a U.S. non-exempt recipient if the U.S. non-exempt recipient has not provided its TIN in the manner required under that section; the IRS notifies the payor that the TIN furnished by the payee is incorrect; there has been a notified payee under-reporting described in section 3406(c); or there has been a payee certification failure described in section 3406(d). QI represents that [due to the suspension of article 271 CP by CF Villiger] there are no legal restrictions that prohibit it from complying with the Form 1099 reporting requirements of this Agreement or imposing backup withholding and depositing the amounts withheld in accordance with section 3.08 of this Agreement.
...
Sec. 3.08. Deposit Requirements. If QI is a U.S. payor or a non-U.S. payor that assumes primary NRA withholding responsibility or primary Form 1099 and backup withholding responsibility, it must deposit amounts withheld under chapter 3 or section 3406 of the Code with a Federal Reserve bank or authorized financial institution at the time and in the manner provided under section 6302 of the Code (see Treas. Reg. §1.6302-2(a) or §31.6302-1(h)). If QI is a non-U.S. payor that does not assume primary NRA withholding responsibility or primary Form 1099 and backup withholding responsibility, QI must deposit amounts withheld by the 15th day following the month in which the NRA or backup withholding occurred.
...
Sec. 5.09. Documentation for U.S. Non-Exempt Recipients. QI shall not treat an account holder as a U.S. non-exempt recipient unless QI obtains a valid Form W-9 from the account holder, QI knows an account holder is a U.S. non-exempt recipient, or QI must presume a person is a U.S. non-exempt recipient under sections 5.13(C)(2) or (4) of this Agreement. See section 6.04 of this Agreement for rules that apply if the identity of a U.S. non-exempt recipient is prohibited by law from being disclosed.
...
Sec. 5.13 (C) Presumption Rules ... (2) Payments of Deposit Interest and OID on Short-Term Obligations. An amount of U.S. source deposit interest (other than an amount that is part of the purchase price of a certificate of deposit sold in a transaction other than a redemption) or an amount of U.S. source interest or original issue discount on the redemption of a short-term obligation that is paid outside the United States to an offshore account is presumed made to an undocumented U.S. non-exempt recipient account holder. QI must backup withhold at 31 percent [this was later amended to 28%] and report such amounts on Form 1099 unless it has provided sufficient information for another payor from which it receives such amounts to backup withhold and report the payments and QI does not know that the other payor has failed to backup withhold or report.

Sec. 6.04. Legal Prohibitions Against Disclosure of U.S. Non-Exempt Recipients.
(A) Accounts Established Prior to January 1, 2001. If QI knows an account holder is a U.S. non-exempt recipient and the account holder’s account was established with QI prior to January 1, 2001 (a pre-2001 account), QI agrees to the following procedures:
(1) If QI is prohibited by law, including by contract, from disclosing to a withholding agent or to the IRS on Form 1099 the account holder’s name, address, and TIN, for reportable payments paid to the account holder, then QI must–
(i) Request from the account holder the authority to make such a disclosure;
(ii) Request from the account holder the authority to sell any assets that generate, or could generate, reportable payments; or
(iii) Request that the account holder disclose himself by mandating QI to provide a Form W-9 completed by the account holder.
(2) QI must make the requests described in section 6.04(A)(1) at least two times during each calendar year and in a manner consistent with QI’s normal communications with the account holder (e.g., by mail, telephone, etc.). If QI is not authorized to initiate communications with the account holder (e.g., QI can only communicate with the account holder in person), QI must make the request at the time and in the manner that QI is authorized to communicate with the account holder.
(3) Until QI receives a waiver of all prohibitions against disclosure or authorization to sell all assets that generate, or could generate, reportable payments, or a mandate from the account holder to provide a Form W-9, QI shall backup withhold on all reportable payments paid to the account holder and report those payments on Form 1099 or, in the case of reportable amounts and designated proceeds, provide another withholding agent with all the information required for that withholding agent to backup withhold and report the payments on Form 1099. If the account holder disposes of any assets that generate, or could generate, reportable payments prior to providing QI with a waiver of all prohibitions against disclosure or authorization to sell all such assets, QI shall apply backup withholding and Form 1099 reporting in accordance with sections 3 and 8 of this Agreement.
(4) If QI has not assumed primary Form 1099 reporting and backup withholding responsibility but is authorized, or is mandated, to disclose the account holder’s name, address, TIN and reportable amounts (and, designated broker proceeds if section 3.05(C) of this Agreement applies) to a withholding agent, QI must provide the account holder’s Form W-9 (or, if a Form W-9 was not obtained, the account holder’s name, address, and TIN, if available) to the withholding agent together with appropriate withholding rate pool information within 30 days of the date QI receives such authorization.
(5) If QI is authorized to dispose of the account holder’s assets that generate, or could generate, reportable payments, QI must sell or exchange all such assets within 60 days of receiving authorization. In addition, if QI later discovers that an account contains such assets, QI must sell such assets within 60 days of the discovery. See sections 3 and 8 of this Agreement for backup withholding and Form 1099 reporting responsibilities.
(6) If QI is not authorized to disclose the account holder’s identity or to sell or exchange all of the account holder’s assets that generate or could generate reportable payments, but QI is not prohibited by law, including by contract, from disposing of the account holder’s assets even though it has not obtained specific authorization, QI must sell or exchange all such assets on or before December 31, 2002, and apply backup withholding and Form 1099 reporting in accordance with sections 3 and 8 of this Agreement.
(B) Account Holder Discovered to be U.S. Non-Exempt Recipient. If QI’s records indicate that the account holder of a pre-2001 account is a foreign person and the QI discovers that the account holder is a U.S. non-exempt recipient, QI shall follow the procedures of section 6.04(A) of this Agreement, except that if QI may legally sell or exchange the account holder’s assets that generate, or could generate, reportable payments without authorization, QI must sell or exchange all such assets on or before the date that is 365 days after QI learns that the account holder is a U.S. non-exempt recipient, or, if later, December 31, 2002.
(C) Accounts Opened on or After January 1, 2001. QI agrees to the following procedures for accounts opened by U.S. non-exempt recipients on or after January 1, 2001 (post-2000 accounts):
(1) If QI is prohibited by law, including by contract, from disclosing to a withholding agent or to the IRS on Form 1099 the account holder’s name, address, and TIN, for reportable payments paid to the account holder, then QI must–
(i) Request from the account holder the authority to make such a disclosure;
(ii) Request from the account holder, prior to opening the account, the authority to exclude from the account holder’s account any assets that generate, or could generate, reportable payments; or
(iii) Request that the account holder disclose himself by mandating QI to transfer a Form W-9 completed by the account holder.
(2) If QI is authorized to disclose the account holder’s name, address, TIN (if available) and reportable amounts (and designated broker proceeds, if section 3.05(C) of this Agreement applies), QI must obtain a valid Form W-9 from the account holder and, to the extent QI does not have primary Form 1099 and backup withholding responsibility, provide the Form W-9 to the appropriate withholding agent promptly after obtaining the Form W-9.
If a Form W-9 is not obtained, then QI must provide the account holder’s name, address, and TIN, if any, to the withholding agents from whom QI receives reportable amounts (and, if applicable, designated broker proceeds) on behalf of the account holder together with appropriate withholding rate pool information relating to the account holder. To the extent QI has assumed primary Form 1099 reporting and backup withholding, it must backup withhold on all reportable payments until it receives a valid Form W-9.
(3) If QI is not authorized to disclose an account holder’s name and other required information but is authorized to exclude from the account holder’s account any assets that generate, or could generate, reportable payments, QI must follow procedures designed to ensure that it will not hold any assets that generate, or could generate, reportable payments in the account holder’s account.
(4) If QI is authorized to exclude from the account holder’s account any assets that generate, or could generate, reportable payments and QI discovers that the account contains such assets, QI must sell such assets within 60 days of discovering such assets and apply backup withholding and Form 1099 reporting in accordance with sections 3 and 8 of this Agreement.
(5) QI agrees that if any account holder in a post-2000 account is discovered, after the opening of the account, to be a U.S. non-exempt recipient then QI will–
(i) Immediately correct the withholding statement information provided to the withholding agent, if necessary, and
(ii) Either obtain a Form W-9 within 60 days of discovering that the account holder is a U.S. non-exempt recipient, and, if QI has not assumed primary Form 1099 reporting and backup withholding responsibility, provide the Form W-9 to the appropriate withholding agents together with appropriate withholding pool information promptly after obtaining the Form W-9 or, if QI is not authorized to disclose account holder information, sell all of the account holder’s assets that generate or could generate reportable payments within 60 calendar days from the day that QI discovers the account holder is a U.S. non-exempt recipient. QI must backup withhold, or instruct a withholding agent to backup withhold on any reportable payments made after the time QI discovers the account holder’s U.S. nonexempt recipient status and before obtaining a valid Form W-9 from the account holder.
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Sec. 12.02. This Agreement may be amended by the IRS if the IRS determines that such amendment is needed for the sound administration of the internal revenue laws or internal revenue regulations. The agreement may also be modified by either QI or the IRS upon mutual agreement. Such amendments or modifications shall be in writing.
Sec. 12.03. Any waiver of a provision of this Agreement is a waiver solely of that provision. The waiver does not obligate the IRS to waive other provisions of this Agreement or the same provision at a later date.
Sec. 12.04. This Agreement shall be governed by the laws of the United States. Any legal action brought under this Agreement shall be brought only in a United States court with jurisdiction to hear and resolve matters under the internal revenue laws of the United States. For this purpose, QI agrees to submit to the jurisdiction of such United States court.