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The Qualified Intermediary regime - A full range of services to serve you | Brochure


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Background

The Qualified Intermediary regime | A full range of services to serve you The QI status allows financial intermediaries to avoid a considerable workload of administrative tasks in relation to the U.S. source income payments and, above all, makes it possible to preserve customer identity with regard to
non-U.S. investors.

In return, in signing the Qualified Intermediary Agreement (QIA) (Rev. Proc. 2000-12 & Ann. 2000-48) the financial intermediary becomes subject to a complex series of rules and procedures with regards to: 

  • Documentation of the account holders/beneficial owners
  • Withholding tax
  • Reporting to U.S. tax authorities (Internal Revenue Service – hereinafter referred to as the ‘IRS’)
  • QI external audits to be performed twice during each five year cycle

We can help you

Deloitte Luxembourg has extensive knowledge regarding the QI regime with a dedicated team of highly experienced collaborators composed of tax and audit people. Our office works in close collaboration with our London QI Centre of Excellence led by Chris Tragheim who has strong connections with the IRS.

QI Agreement

Deloitte Luxembourg can provide your organisation with assistance in order to obtain the ‘Qualified Intermediary’ status. We can assist your organisation with the preparation of the application file, based on the applicable U.S. regulations, and the necessary appendices and required information to communicate to the IRS in order to apply for the QI status. The form, i.e. the QIA, needs to be signed with the U.S. tax authorities. The signature of the QIA (Rev. Proc. 2000-12 & Ann. 2000-48) subjects the financial intermediary to a complex set of rules and procedures.

Implementation

A QI must have the training materials, manuals, directives, policies, and procedures in place and effectively operating in order to meet the terms and conditions of the QI agreement. Successful implementation of the QI agreement is dependent partly on local know your customer rules and partly on the technical and procedural requirements of the QI rules. Implementation services can be provided by Deloitte Luxembourg. Services can range from the training of employees involved in the QI compliance to the creation of policies and procedures.

Advice/training/tax alert

Deloitte Luxembourg can provide your organisation with advisory services through a ‘Hotline and Ad Hoc advisory service’. The aim of this Hotline is to provide fast and reliable answers to technical queries. Specific ‘A la carte’ trainings are also proposed. Please note that Deloitte Luxembourg sends on a regular basis tax alerts/ operational tax news in the framework of the QI regime and also organises conferences on that topic.

QI External audit

The Qualified Intermediary regime | A full range of services to serve you

Since 1 January 2001, most of the Luxembourg banks acting as custodian have signed a QI agreement with the U.S. tax authorities (IRS) resulting in a series of obligations in terms of documentation, withholding and reporting. These obligations are subject to a review during the audit QI process. On the basis that the deadline for submission of the Agreed Upon Procedures (AUP) to the IRS is extended to 31 December of the year following the AUP year, we typically recommend that the AUP fieldwork is conducted in April or May. This will allow time for any possible remediation actions to be undertaken.

Deloitte’s AUP engagement can also include (besides the core audit procedures carried out in accordance
with the work program stipulated in the Rev. Proc. 2002-55 by the IRS): 

  • Extension request to the IRS to postpone the deadline of the submission of the report
  • Assistance with the preparation for the AUP. We will provide your organisation with an overview of the AUP process and be available to answer any questions 
  • Post fieldwork follow-up, including the remittance of interim reports
  • Write-up of the AUP reports and draft copies sent to your organisation for approval and comments
  • Submission of the AUP reports to the IRS

Other specific procedures answering IRS request

We noted in recent years an increased oversight by the IRS of the QIs: it has become a routine for the IRS to raise additional questions based on the submitted AUP report (which causes the QIs to enter into a phase 2 or phase 3 audit). Deloitte is ready to assist first in discussing with the IRS the matter arising, then finding pragmatic solutions and recommendations, and finally ensuring a proper implementation path.

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