§1474 Special Rules

Summary

If you must take out and send tax under these rules, you are responsible for that tax. You are also protected if someone else later tries to claim the money you paid according to these rules. When figuring if the person who really got the payment paid too much tax, the withheld tax is treated like other withholding tax rules. But for payments where the real owner is a foreign financial institution, special limits apply. If that foreign financial institution gets a lower treaty tax rate, any credit or refund can only cover the part tied to that lower rate, and no interest is paid on that refund. If it is not entitled to a lower treaty rate, no credit or refund is allowed. A beneficial owner must give the Treasury the information needed to show whether it is a U.S.-owned foreign entity and who its big U.S. owners are before any credit or refund is allowed. Some other withholding rules also apply here. The fact that a foreign financial institution qualifies under these rules is not treated as protected tax return information. The Treasury must coordinate these rules with other withholding rules, treat certain agreement-based withholding the same as regular withholding, and write any needed regulations or guidance to make the rules work and stop avoidance.