Under the 2017 IQ agreement, an IQ that also acts as qDD is required to submit separate 1042-S forms in order to report payments in any capacity by identifying its Chapter 3 specific status code as IQ or QDD. The IRS has concluded the final agreement on qualified intermediaries (IQs) in accordance with the reg. 1.1441-1 (e) (5). An IQ allows foreign individuals to simplify their obligations as withholding agents in accordance with Chapters 3 and 4 and as payers for amounts paid to account holders under Chapter 61 and Code S. 3406. The IQ agreement will enter into force on January 1, 2017 or after January 1, 2017 and will be valid for a period of six years. SIFMA has submitted comments to the Ministry of Finance and the Internal Revenue Service regarding the 2017-15 financial procedure, which contains the requirements for eligible derivatives traders, in accordance with the rules adopted under Section 871 (m) of the internal income code. Starting in 2018, Revenue Procedure 2017-15 provides that QDDs will be withheld from dividends actually received (i.e., physical holding of U.S. shares or taxable conversion rate adjustments for convertible bonds) and that a net long-term exposure to U.S.

equities contained in its trading portfolio will be assessed. To this end, long and long net exposure is measured by the net delta, which is then converted to a number of shares multiplied by the corresponding dividend rate. This method does take into account the dividends actually received and the dividend equivalents from in-scope and non-scope transactions that enter in and out of the reseller register (the amount of Section 871 (m). The 2017 IQ Agreement provides for significant transitional relief for QDDs for fiscal year 2017 for their own tax debt. In 2017, QDDs will not be subject to withholding tax on actual dividends or dividend equivalents they receive in a share transfer capacity, and there is no need for complex net delta calculations that could result in additional taxes from QDD. However, equity and transactions in Section 871 (m) shares and transactions outside the traders` register (i.e. trading and investment positions) could result in tax obligations in 2017, as well as non-dividend-related amounts (e.g. B interest). This caveat assumes that the reader is generally familiar with the rules of withholding tax and FATCA in the United States, including the provisions for participating IUs and IMOs and the amendments to Section 871 (m) that will come into effect in 2017.

(See EY Tax Alert, US IRS issues proposed regulations with verification and certification rules for sponsoring entities, trustees of Trustee-documented Trust and Compliance FIs, dated 12 January 2017 for discussion of the recent rules on US holding tax and FATCA, EY Tax Alert, US IRS issues Section 871 (m) transition rules, dated 9 December 2016 for discussion of Section 871 (m) transition , EY Tax Alert, US IRS has issued a proposed qualified intermediation agreement, dated July 7, 2016 for information on the proposed IQ agreement, and EY Tax Alert, the IRS gives FFI`s final approval, from January 3, 2014 for information on the initial agreement of FFI.) To provide extra time for QDD to implement the Sec Code calculation.