Publication 686 (6-2004) CERTIFICATION FOR REDUCED TAX RATES IN TAX TREATY COUNTRIES

Form 8802. Beginning July 5, 2004, you must file Form 8802, Application for United States Residency Certification, to request U.S. residency certification.

Introduction

Many foreign countries withhold tax on certain types of income paid from sources within those countries to residents of other countries. The rate at which any country withholds tax on each type of income is generally set by that country's statutes. Generally, tax treaties between the United States and foreign countries reduce the statutory tax rate (sometimes to zero) for income paid to residents of the United States. This reduced rate is referred to as the treaty-reduced rate.

Upon receiving certification by the U.S. Government that an individual or entity is a U.S. resident, some countries will allow withholding of tax at the treaty-reduced rate. Other countries always withhold tax at their statutory tax rate and will refund the amount that is more than the treaty-reduced rate on receiving proof of U.S. residency.

To apply for certification, you must file Form 8802. This publication is a supplement to the instructions for Form 8802.

This publication discusses:

Comments and suggestions.  

Comments about this publication and your suggestions for future editions should be sent to:

      Internal Revenue Service

      Office of Tax Treaty

      SE:LM:IN:TT:1

      1111 Constitution Avenue, NW

      Washington, DC 20224

      U.S.A.

You may want to see:

Publication

The United States has income tax treaties with many countries. Generally, treaty benefits are available only to residents of the United States. In addition, to be eligible for benefits, a U.S. resident must be the beneficial owner of the payment. In the case of an entity such as a corporation that is a U.S. resident, it must meet the requirements of a limitation on benefits article, if any, in a treaty.

Caution. The United States cannot certify that a limitation on benefits article has been met or that an individual or other entity is the beneficial owner of an item of income. If asked by the foreign withholding agent, the individual or other entity must document that these requirements have been met.

Many U.S. treaty partners require that the U.S. Government certify that the person claiming the benefits is a resident of the United States. The United States provides this residency certification on a computer-generated letter from the Internal Revenue Service (IRS). This letter is Form 6166, Certification of United States Residency.

Tip. You should examine the specific treaty articles to find out if any tax credit, tax exemption, reduced rate of tax, or other treaty benefit or safeguard applies.

Publication 901, U.S. Tax Treaties, gives a quick reference to tax treaty provisions between the United States and tax treaty countries.

Proof of U.S. Residency

In general, under an income tax treaty, an individual or other entity is a resident of the United States if the individual or other entity is subject to U.S. tax by reason of its residence, citizenship, place of incorporation, or other similar criteria. U.S. residents are subject to tax in the United States on their worldwide income. An entity is considered subject to tax on its worldwide income even if it is an entity that is statutorily exempt from tax, such as a pension fund or charity. Similarly, individuals are considered subject to tax even if their income is less than the amount that would require that they file an income tax return. An entity is not subject to tax, however, if the entity is a partnership, grantor trust, or other fiscally transparent entity. In such instances, the partner or owner of such entity may be entitled to certification based on the status of the partner or owner.

In general, residency certification is granted only when the IRS can verify that the individual or entity claiming residence has, for the year for which certification is requested, either:

The United States will only certify that, for the certification year (the calendar year for which certification is requested), you or the entity was a resident for purposes of U.S. taxation or, in the case of a fiscally transparent entity, that the entity, when required, filed an information return and its partners, members, or other owners filed income tax returns as residents of the United States.

Certification forms. Most treaty countries that require certification provide special forms for that purpose. These forms contain questions that you must answer followed by a statement to be completed by the country of residence certifying that you or the entity is a resident of that country.

The IRS generally does not certify U.S. residency by using forms from other countries. The IRS requires that you submit a completed Form 8802, which is used to determine eligibility for certification.

If, after processing the Form 8802, the IRS determines that you or the entity is eligible for U.S. residency certification, you will receive Form 6166, a computer-generated letter. This letter is the certification. It is on stationery bearing the U.S. Treasury Department letterhead, the U.S. Government watermark, and the copied signature of the Director, Customer Account Services (the Director), Philadelphia Accounts Management Service Center.

You can send Form 6166 to the foreign country to claim treaty benefits. Along with Form 6166, you should enclose the completed foreign country's certification form, if any.

Caution. If you are applying to the United Kingdom or Spain for treaty benefits, see the special procedures in the Form 8802 instructions.

Sending certification to a third party. If you request that Form 6166 be mailed to a third party (an appointee), you must provide written authorization for the IRS to release the certification to the third party. If the certification is for a partnership, disregarded entity, S corporation (including a QSSS), simple trust, grantor trust, or common trust fund, each partner/shareholder/owner/participant/beneficiary must also provide such written authorization.

Form 8821, Taxpayer Information Authorization, is used to authorize disclosure of taxpayer information to a designee of the taxpayer.

Caution. Form 8821 cannot be used to authorize a third party to sign Form 8802 on your behalf.

Lines 3b and 3c of Form 8802 can, in certain circumstances, be used in place of Form 8821 to appoint a third party to receive and inspect Form 6166.

Form 8802 does not authorize the third party to represent you before the IRS. If you are interested in having a third party represent you before the IRS, you must complete Form 2848, Power of Attorney and Declaration of Representative. Form 8802 applicants should note that only those individuals who are recognized to practice before the IRS can be authorized to represent the applicant. The only individuals who can be recognized representatives are the following.

If the request for certification is denied and you believe that you are entitled to treaty benefits under a specific treaty article, you can request assistance from the U.S. competent authority using the procedures described in

. A request for competent authority assistance regarding a residency issue will be accepted only if it is established that the issue requires consultation with the foreign competent authority to ensure consistent treatment by the United States and the applicable treaty partner.

The U.S. competent authority does not make unilateral determinations with respect to residency. Residency determinations are made by mutual agreement between the two competent authorities.

The U.S. competent authority cannot consider requests involving countries with which the United States does not have a tax treaty.

      Your request for competent authority assistance should be addressed to:

      Internal Revenue Service

      Director, International

      SE:LM:IN:T:1

      1111 Constitution Avenue, NW

      Washington, DC 20224.

Additional information on requesting competent authority assistance is found in

, C.B. 242. You can find

on page 242 of Internal Revenue Bulletin 2002-31 at

.

General Application Procedures

To apply for U.S. residency certification, you must complete and sign Form 8802. You can apply for certification for the current and any prior calendar year. Only certain individuals have the authority to sign Form 8802. Generally, these individuals may authorize a representative to sign the Form 8802 on their behalf; they must use Form 2848 to do this. Custodians of accounts cannot be representatives and cannot be authorized to sign Form 8802 unless they are recognized to practice before the IRS. See Table 1 for a list of those who have authority to sign Form 8802.

Table 1. Who Has Authority To Sign Form 8802

                       THEN the individual with authority

IF the applicant is...     to sign Form 8802 is...    

 ------------------------------------------------------------------------

 an individual              the individual.

 a married couple           both the husband and the wife.

 a partnership              any partner or partners duly authorized to

                            act for the partnership (general partner or

                            tax matters partner). The partner must certify

                            that he or she has such authority.

 an S Corporation           any corporate officer, for example, president,

                            vice president, treasurer, chief accounting

                            officer, etc., duly authorized by the

                            corporation to bind the corporation in

                            accordance with applicable state law.

 a trust, common trust      the fiduciary (trustee, executor,

 fund, grantor trust or     administrator, receiver, or guardian).

 simple trust

 an estate                  the personal representative (executor,

                            executrix, administrator, administratrix,

                            or anyone who is in charge of the property

                            of the decedent).

 a corporation              any corporate officer, for example,

                            president, vice-president, treasurer, chief

                            accounting officer, etc., duly authorized by

                            the corporation to bind the corporation in

                            accordance with applicable state law.

 an employee benefit        any organization officer, for example,

 plan or trust              president, vice-president, treasurer, chief

                            accounting officer, etc. duly authorized by

                            the plan or trust to bind the plan or trust

                            in accordance with applicable state law.

 an exempt organization     any organization officer, for example,

                            president, vice-president, treasurer, chief

                            accounting officer, etc., duly authorized by

                            the organization to bind the organization in

                            accordance with applicable state law.

 a partnership under an     any partner or partners duly authorized to act

 IRC

 election

                            for the partnership. The partner must certify

                            that he or she has such authority.

 a financial asset          any corporate officer, for example,

 securitization investment  president, vice-president, treasurer, chief

 trust (FASIT)              accounting officer, etc., duly authorized by

                            the owner corporation to bind the owner

                            corporation in accordance with applicable

                            state law.

 a governmental             an officer of the governmental organization

 organization               with authority in the course of his or her

                            official duties to bind the organization.

You must send the Form 8802 and all required statements and documentation to:

     Internal Revenue Service

      Philadelphia Accounts Management Center

      U.S. Residency Certification Request

      P.O. Box 16347

      Philadelphia, PA 19114-0447

      U.S.A.

You can also fax your request to the Philadelphia Service Center at 215-516-1035 or 215-516-3412. These are not toll-free numbers.

Certification requests are generally processed within 30 days from the date received. When this is not possible, you should receive notification of the delay. If you do not receive either the certification, a notification of the delay, or a denial of certification within 30 days from the time the request was mailed or faxed to the IRS, contact the certification unit at 215-516-7135. This is not a toll-free number.

Certification of U.S. residency. The United States is certifying that, for the certification year, the applicant was a U.S. resident for purposes of U.S. taxation. In the case of a fiscally transparent entity, the United States is certifying that the entity filed any required information returns and its partners, members, or other owners filed income tax returns as residents of the United States. In general, residency certification is granted only when the IRS can verify that the applicant has, for the certification year, either:

If the applicant was not required to file a U.S. return for the tax periods on which certification will be based, other evidence of U.S. residency may be required. For more information, see the instructions for Form 8802, line 5.

Penalties of Perjury Statements

If the certification request is for the current year and/or the prior year, and a return is not yet due or is not required, you may be required to submit a penalties of perjury statement with Form 8802. You can enter the statement in the space provided under line 11 of Form 8802 or attach the statement to the form.

Caution. Penalties of perjury statements submitted independently of Form 8802 must have a valid signature. See Table 1.

Requests for current year certification. If you are requesting certification for the current year, and the required return for the current year is not due and has not been filed, you must include a penalties of perjury statement that attests to the applicant's current residency status.

Table 2 lists the various statements that must be made under penalties of perjury when Form 8802 is submitted for the current year.

If the prior year return has not been filed or a return was not required, the penalties of perjury statement must also address your residency status in the prior year. For example, if the current year is 2004, the penalties of perjury statement must include the following: ____ [insert applicant's name and TIN] was a U.S. resident for 2003 and will continue to be throughout the current year.

Note. This statement is required of all applicants in this situation. In some instances, the applicant will not have been a resident for the prior year and therefore will only attest to residency status in the current year.

Foreign partnership not required to file Form 1065. Generally, foreign partnerships are not required to file Form 1065, U.S. Return of Partnership Income, if they do not have gross income that is effectively connected to the conduct of a trade or business within the United States or do not have income derived from sources within the United States.

However, foreign partnerships that have U.S. partners can apply for residency certification for their U.S. partners. Applications must include the following.

The foreign partnership is also required to submit a statement signed under penalties of perjury that the partnership is not required to file Form 1065 under Regulation section

Applicants from Spain must include a statement, in addition to the applicable statement from Table 2, that the applicant does not have a permanent address in Spain.

 Table 2. Current Year Penalties of Perjury Statements

                                   THEN the Form 8802 penalties of

 IF the applicant is...   perjury statement must include...

 ------------------------------------------------------------------------

 an individual            a statement from the individual stating:

                            ____

[insert name of individual]

  ____

[insert

                            TIN]

 is a U.S. resident and will continue to

                            be throughout the current tax year.

 ------------------------------------------------------------------------

 a partnership            • a statement from each individual partner for

                            which certification is requested stating:

                            ____

[insert name of partner]

  ____

[insert TIN]

                            is a U.S. resident and will continue to be

                            throughout the current tax year, and

                          • a statement from a general partner stating:

                            ____

[insert name of partnership]

  ____

[insert

                            EIN]

has filed its required return and the

                            entity classification has not changed since

                            the return was filed.

 ------------------------------------------------------------------------

 an S corporation         • a statement from each individual shareholder

                            for which certification is requested stating:

                            ____

[insert name of shareholder]

  ____

[insert

                            TIN]

 is a U.S. resident and will continue to

                            be throughout the current tax year, and

                          • a statement from an officer of the corporation

                            with the authority to legally bind the

                            corporation stating:

                            ____

[insert name of S corporation]

  ____

[insert

                            EIN]

 has filed its required return and the

                            entity classification has not changed since the

                            return was filed.

 ------------------------------------------------------------------------

 a common trust fund,

 domestic nongrantor

 trust, or grantor trust  • a statement from each individual

                            participant/beneficiary/owner stating:

                            ____

[insert name]

  ____

[insert TIN]

  is

                            a U.S. resident and will continue to be

                            throughout the current tax year, and

                          • a statement from the trustee stating:

                            ____

[insert name of trust]

  ____

[insert EIN]

                            has filed its required return and the

                            entity classification has not changed since

                            the return was filed.

Note:

  When the participant, beneficiary, or

                            owner, is other than an individual, use the

                            statement that corresponds to the type of entity.

 ------------------------------------------------------------------------

 a trust                  a statement from the trustee stating:

                            ____

[insert name of trust]

  ____

[insert EIN]

                            is a U.S. resident and will continue to be

                            throughout the current tax year.

 ------------------------------------------------------------------------

 a corporation              a statement from an officer of the corporation

                            with the authority to legally bind the

                            corporation stating:

                            ____

[insert name of corporation]

  ____

[insert

                            EIN]

 is a U.S. resident and will continue

                            to be throughout the current tax year.

 ------------------------------------------------------------------------

 an exempt organization   a statement from an officer of the organization

                            with authority to legally bind the organization

                            stating:

                            ____

[insert name of organization]

  ____

[insert

                            EIN]

  is a U.S. resident and will continue

                            to be throughout the current tax year.

 ------------------------------------------------------------------------

 an estate                a statement from the personal representative

                            stating:

                            ____

[insert name of estate]

  ____

[insert EIN]

                            is a U.S. resident and will continue to be

                            throughout the current tax year.

 ------------------------------------------------------------------------

 an employee benefit

 plan/trust               a statement from an officer of the plan/trust

                            with authority to legally bind the plan/trust

                            stating:

                            ____

[insert name of plan/trust]

  ____

[insert

                            EIN]

  is a U.S. resident and will continue

                            to be throughout the current tax year.

 ------------------------------------------------------------------------

 a partnership under an

 IRC section

 election                 • a statement from each partner for which

                            certification is requested stating:

                            ____

[insert name of partner]

  ____

[insert EIN]

                            is a U.S. resident and will continue to be

                            throughout the current tax year, and

                          • a statement from a general partner stating:

                            a. The partnership has made an election pursuant to

                            IRC section

. As a result, it is not required

                            to file Form 1065, U.S. Partnership Return of

                            Income, on an annual basis and all its partners

                            report their respective shares of income, gain,

                            loss, deductions and credits on their tax returns

                            as  required.

                            b. The partnership's entity classification has

                            not changed since the filing of the partners'

                            returns.

 ------------------------------------------------------------------------

 a partnership under

 Regulation

 section

(b)   an additional statement from a general partner stating:

                            ____

 [insert name of partnership]

  ____

[insert EIN]

                            is not required to file Form 1065, U.S. Return of

                            Partnership Income, under Regulation

                            section

(b) and the entity

                            classification has not changed since the filing

                            of the partners' returns.

 ------------------------------------------------------------------------

 a FASIT                  a statement from an officer of the corporation

                            with the authority to legally bind the

                            corporation stating:

                            a. ____

[insert name of corporation]

  ____

[insert

                            EIN]

 is the corporate owner of ____

[insert name

                            of FASIT]

, which is treated as a FASIT under

                            IRC section

, and as such, the ____

[insert

                            name of corporation]

  reports all of ____

[insert

                            name of FASIT]

  income, gain, loss, deductions,

                            and credits on ____

[insert name of corporate

                            owner]

's Form 1120, U.S. Corporate Income Tax

                            Return.

                            b. The corporation is a U.S. resident and will

                            continue to be throughout the current tax year.

 ------------------------------------------------------------------------

How To Get Tax Help        

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate. If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

For more information, see

, The Taxpayer Advocate Service.

Free tax services. To find out what services are available, get Publication 910, Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

Internet. You can access the IRS web site 24 hours a day, 7 days a week at http://www.irs.gov to:

You can also reach us using File Transfer Protocol at

.

Fax. You can get over 100 of the most requested forms and instructions 24 hours a day, 7 days a week, by fax. Just call 703-368-9694 from your fax machine. Follow the directions from the prompts. When you order forms, enter the catalog number for the form you need. The items you request will be faxed to you.

For help with transmission problems, call 703-487-4608.

Long-distance charges may apply.

Phone. Many services are available by phone.

To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to sometimes listen in on or record telephone calls. Another is to ask some callers to complete a short survey at the end of the call.

Walk-in. Many products and services are available on a walk-in basis.

You can send your order for forms, instructions, and publications to the Distribution Center nearest to you and receive a response within 10 workdays after your request is received. Use the address that applies to your part of the country.

• Western part of U.S.: Western Area Distribution Center Rancho Cordova, CA 95743-0001

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• Eastern part of U.S. and foreign addresses: Eastern Area Distribution Center P.O. Box 85074 Richmond, VA 23261-5074

You can order IRS Publication 1796, Federal Tax Products on CD-ROM, and obtain:

Buy the CD-ROM from National Technical Information Service (NTIS) on the Internet at

for $22 (no handling fee) or call 1-877-233-6767 toll free to buy the CD-ROM for $22 (plus a $5 handling fee). The first release is available in early January and the final release is available in late February.

CD-ROM for small businesses. IRS Publication 3207, Small Business Resource Guide, is a must for every small business owner or any taxpayer about to start a business. This handy, interactive CD contains all the business tax forms, instructions and publications needed to successfully manage a business. In addition, the CD provides an abundance of other helpful information, such as how to prepare a business plan, finding financing for your business, and much more. The design of the CD makes finding information easy and quick and incorporates file formats and browsers that can be run on virtually any desktop or laptop computer.

It is available in early April. You can get a free copy by calling 1-800-829-3676 or by visiting the web site at http://www.irs.gov/smallbiz.