QI – Qualified Intermediary Program

The Qualified Intermediary (QI) Program is a voluntary IRS program that allows foreign financial institutions (FFIs) as well as foreign branches of certain U.S. entities to enter into a contractual agreement (QI Agreement) with the IRS. Under this agreement, they assume defined withholding and reporting obligations on US-source income in exchange for administrative relief.

Introduced in 2001, the program simplified the previously complex regime under which foreign intermediaries had to fully disclose every transaction. It was established alongside the Withholding Foreign Partnership (WP) and Withholding Foreign Trust (WT) agreements and remains the foundation for the relationship between the IRS and international financial intermediaries on US withholding tax matters. The program was substantially expanded and tightened following the introduction of FATCA.

A QI assumes responsibility for customer identification (Know Your Customer / KYC), application of reduced withholding rates under tax treaties, and annual reporting to the IRS. In return, it may generally keep the identities of its clients confidential from upstream US withholding agents.

Before the QI Program, the US withholding tax regime for foreign intermediaries was highly complex. Foreign banks either had to report each customer transaction in full to the IRS or faced flat withholding rates without treaty benefits. The 1997 IRS reform (Treasury Regulations § 1.1441-1 et seq.) established the theoretical framework, and Rev. Proc. 2000-12 formalized the first QI Agreement, which took effect on January 1, 2001.

By 2010, several thousand financial institutions worldwide had signed QI agreements. With the enactment of FATCA in 2010, the QI Program was integrated into the broader FATCA framework: QIs must now also apply FATCA-compliant due diligence procedures. Compliance is monitored through periodic compliance certifications submitted by the Responsible Officer (RO) appointed by the QI entity.

The revised QI Agreement (Rev. Proc. 2017-15) took effect on January 1, 2017, introducing among other things the concept of Qualified Derivatives Dealers (QDDs), which assume specific obligations relating to US dividend payments and equity swaps. The current so-called 2023 QI Agreement (Rev. Proc. 2022-43) took effect on January 1, 2023, replacing the 2017 QI Agreement. It expanded the scope to include, among other things, withholding obligations for Publicly Traded Partnerships (PTPs).

The QI Program is aimed at foreign financial institutions as well as foreign branches of certain U.S. entities that hold or manage US securities or US-source income for their clients. Typical QIs include:

• Foreign banks and securities dealers
• Clearing houses and central securities depositories
• Insurance companies (to the extent they hold US investments)
• Qualified Derivatives Dealers (since 2017)
• Foreign branches of certain U.S. entities

The program does not apply to US persons (who are subject to US tax law directly). Pure non-financial foreign entities (NFFEs) also fall outside the QI scope. QI status is voluntary; without a QI agreement, flat 30% withholding rates apply with no treaty benefits.

Since the 2023 QI Agreement, QIs may also assume withholding obligations for interests in Publicly Traded Partnerships (PTPs) under Sections 1446(a) and 1446(f) of the IRC.

Key obligations of a Qualified Intermediary:

• QI Agreement and QI-EIN: Conclude and maintain a QI Agreement with the IRS through the QAAMS portal (Qualified Intermediary, Withholding Foreign Partnership, Withholding Foreign Trust Application and Accounts Management System); appoint a Responsible Officer (RO). Each QI is assigned a QI-EIN; the IRS maintains a quarterly updated public QI list.
• Customer Documentation: Obtain and maintain W-8 and W-9 forms for all relevant account holders; identify US persons and recalcitrant account holders.
• Withholding Responsibility: Correctly apply withholding tax rates (30% or reduced treaty rates) under Chapters 3 and 4 of the IRC; withhold and remit taxes to the IRS. Since the 2023 QI Agreement, also withholding on PTP interests under Sections 1446(a) and 1446(f) of the IRC.
• Payor Obligations: Simplified payor obligations under Chapter 61 and Section 3406 of the IRC (backup withholding).
• Reporting: Annual reporting to the IRS via Form 1042-S; transmission of account information under the FATCA framework.
• Compliance Review: Periodic internal and external compliance reviews; submission of compliance certifications by the RO, typically due by July 1 of the following year (extensions by the IRS possible).
• QDD Obligations (if applicable): Qualified Derivatives Dealers must fulfill additional recordkeeping and reporting requirements for dividend equivalent payments.

3 corrections:
- QI Program did not replace Withholding Foreign Partnerships
- last_amended date should be 2023-01-01
- Official URL returns 404 error page
1 update:
- Current QI Agreement (2023) not correctly referenced
5 clarifications.
3 notes.