A treaty statement is required for non-US entity clients that are beneficial owners in order to certify all necessary requirements have been satisfied in order to qualify for benefits under an income tax treaty. The text of the treaty statement is set out in Section 5.03.(B) of the QI Agreement, and is as follows:
[Name of entity account holder] meets all provisions of the applicable treaty that are necessary to claim a reduced rate of withholding, including any limitation on benefits provisions, and derives the income within the meaning of section 894, and the regulations thereunder, as the beneficial owner.
In addition, starting from January 1, 2017, the QI agreement required QIs to obtain LOB certification from entity account holders, either by completing Form W-8BEN-E or, in the case the QI utilizes the know-your-customer (“KYC”) documentation procedure, a treaty statement that includes LOB certification. QIs were provided a two-year transition period, until January 1, 2019, to obtain a new treaty statement with LOB certification from legacy entity account holders documented according to the KYC rules while the deadline for existing entity clients that had provided Form W-8BEN-E remains the natural three-year expiration of the form. In addition, a treaty statement and LOB certification obtained under the KYC rules now has the same expiry period as Form W-8BEN-E (e.g., three full calendar years).
The proposed regulations extended the transition period to January 1, 2020 for QIs to obtain a new treaty statement and LOB certification from legacy entity account holders documented according to the KYC rules.
A QI is required to obtain a treaty statement from clients that 1) are not individuals and 2) have been documented under the KYC rules. A treaty statement is not required in case the QI obtains a completed Form W-8BEN-E as the treaty statement and LOB certification are incorporated into the Form W-8BEN-E certifications.