France T2S: Tax impact on account structure and service offering - update

15.06.2018

Note: This announcement originally published on 13 December 2017, updated on 5 February 2018 has been corrected to show an earlier deadline for the quick refund procedure that has already been updated in the Market Taxation Guide. 

Effective

9 April 2018

Clearstream Banking S.A.1 (CBL) will deposit and settle French T2S eligible assets with Clearstream Banking AG 2 (CBF) in order to enable future OneClearstream service upgrades (the “Migration Date”). This forms part of our ongoing efforts to harmonise our services allowing customers to benefit from advantages across multiple areas of our business.

CBL will access Euroclear France for settlement in T2S via CBF, as follows:

Country

CSD

Type of link

Securities eligible

France

Euroclear France (EF)

Relayed link via CBF (All T2S eligible assets) to EF and a direct operated link via BP2S to EF (All non-T2S eligible assets, non-ESES3 assets)

Fixed income and equities eligible in EF

Consequently, CBF will act as French tax agent for French T2S eligible securities (the “Securities”) processed via the link with EF.

Important improvements to CBL4 and CBF tax services

As a result of our ongoing collaboration with the French Tax Authorities (FTA) and in order to satisfy our customer requests to offer a complete tax service, we are pleased to inform customers that we have obtained the agreement of the FTA to offer quick and standard refund services to all beneficiaries eligible for tax relief. 

Tax relief

Currently, the requirements (pre-migration) for tax relief at source are as follows:

  • Original valid certification in place before the record date of the first applicable dividend payment.
  • Tax breakdown including the holdings for each applicable tax rate at the latest on the record date of each relevant dividend payment for relief at source.
  • List of beneficial owners to be provided at the latest 20 business days after the relevant dividend payment date.

Post-migration, we will be able to extend our current service and offer the possibility for tax adjustments (“quick refund”) in addition to tax relief at source. The requirements will change as follows:

  • Original valid certification in place before the record date of the first applicable dividend payment
  • Tax breakdown including the holdings per each applicable tax rate submitted by customers at the latest:
    • For tax relief at source, on the record date of each relevant dividend payment.
    • For quick refund, by the 10th of the month (or if the 10th is not a business day, the first business day before the 10th) following the one when the payment took place. Customers may adjust the initial tax breakdown before this date and the last tax breakdown provided before above deadline will be considered as final and reported to the FTA.
  • List of beneficial owners to be provided at the latest 45 calendar days after the dividend payment date.

Standard refund

In addition, CBL and CBF will further enhance their tax offering, post-migration, to include the standard refund process, enabling CBL and CBF to offer a complete tax service for the French T2S eligible securities. This follows the confirmation from the FTA that CBL and CBF will be permitted to accept and process applications submitted by eligible foreign Collective Investment Vehicles (“CIVs”) to reclaim the tax over-withheld at source via the standard refund process instead of the “contentieux” tax reclaim process, considered by the applicants as being heavy, costly and time consuming.

The details of this new service are still being clarified with the FTA.

The tax procedure available in the Market Taxation Guide – France will be updated to reflect the improvements.

Segregation of holdings for CBF customers

From the Migration Date, CBF customers with CSD 7-digit accounts will be able to segregate their assets per tax rate in their subaccounts under the condition that valid certification is in place. Therefore, the total holding in the subaccount will be, by default, taxed at source at the appropriate reduced tax rate (standing instruction) and the customer will be only obliged to provide the beneficial owners list by the prescribed deadlines. Customer instructions for CBF to transfer the holdings from the main account to the subaccounts prior to each event will no longer be needed and will therefore be rejected.

We remind CBF customers that if any certificate or instruction does not have the 7-digit account number it will be rejected. Furthermore, no certificate can be duplicated from the main account to the subaccounts (or vice-versa) unless the customer sends an explicit instruction to CBF by an authenticated means of communication.

For more details, please refer to Announcement D17050 of 23 November 2017.

Tax certification

According to French law requirements, every entity acting as tax agent is obliged to receive the original certification from each beneficial owner applying for tax relief.

Duplication and renewal of existing certificates – CBL customers

Form 5000 for the year 2018 (latest template Millesime 2017 – Cerfa*03) must be provided twice by all CBL customers for each eligible beneficial owner, as follows:

  • The first one will be used by default for the post-migration CBF activity and will be charged according to the Fee Schedule;
  • The second one will be submitted to BP2S for pre-migration events, that is dividends paid before the Migration Date (between 1 January 2018 and 6 April 2018 inclusive), as well as from securities not transferred to CBF. The second certificate for the same beneficial owner will be free of charge.

?Customers wishing to use Form 5000 in a different way, must instruct CBL accordingly in a cover letter accompanying the originals, or by SWIFT message.

One-time certificates (RPPM, 131 sexies, OTCs) must be renewed once. New one-time certificates submitted by CBL customers will be used for the CBF activity and no charges will apply if the same certificate was valid before the migration date for the same beneficial owner.

One-time certificates submitted for new beneficiaries will be charged according to the Fee Schedule.

NFPO certificate (to be provided every 3 years) must be renewed by CBL customers to cover the CBF activity. No charges will apply for certificates sent to renew the ones that were valid before the migration date for the same beneficial owner.
NFPO certificates submitted for new beneficiaries will be charged according to the Fee Schedule.

Duplication and renewal of existing certificates – CBF customers

Form 5000 for the year 2018 (latest template Millesime 2017 – Cerfa*03) must be provided by all CBF customers and will be charged according to the Fee Schedule.

Customers holding French T2S-eligible securities (in their 7-digit accounts) and French securities that will continue to be processed via BP2S (in their 6-series accounts), must continue to provide two Forms 5000 and will be charged twice (similar to the current situation).

Customers holding French T2S eligible securities in their 7-digit accounts and in their 6-series accounts, may instruct Clearstream Banking via SWIFT message in order to consider the 5000 certificates submitted for their holdings in CBF as applicable for their 6-series accounts as well after the Migration Date. If no customer instruction is sent, the 6-series accounts will no longer be certified for their holdings on T2S-eligible securities processed through CBF. No charges will apply for this duplication.

One-time certificates (RPPM, 131 sexies, OTCs)

CBF customers that already have valid one-time certificates in place for their CBF activity (7-digit accounts) are not obliged to renew them.

However, customers holding French T2S eligible securities in their 7-digit accounts and in their 6-series accounts, may instruct Clearstream Banking via SWIFT message in order to consider the one-time certificates submitted for their holdings in CBF as applicable for their 6-series accounts as well after the migration date. If no customer instruction is sent, the 6-series accounts will no longer be certified for their holdings on T2S-eligible securities processed through CBF. No charges will apply for this duplication.

NFPO certificate (to be provided every 3 years) CBF customers that have valid NFPO certificates in place for their CBF activity are not obliged to renew them. However, customers holding French T2S eligible securities in their 7-digit accounts and in their 6-series accounts, may instruct Clearstream Banking via SWIFT message in order to consider the NFPO certificates submitted for their holdings in CBF as applicable for their 6-series accounts as well after the migration date. If no customer instruction is sent, the 6-series accounts will no longer be certified for their holdings on T2S-eligible securities processed through CBF. No charges will apply for this duplication.

New template for One-Time Certificate for French securities – both CBL and CBF account holders

New One-Time Certificates for French securities (“OTC”) will become mandatory from the Migration Date for all Clearstream Banking customers and must be provided once before the first tax relief application in order to certify the account. Any request for tax relief at source or quick refund where the account is not certified with the new OTC template will be rejected. The new template:

  • Covers all the eligibilities for tax relief, that is, treaty benefits or domestic law benefits;
  • Gives the possibility to apply for a standing instruction:
    • if the customer holds the securities for itself or for a single beneficial owner (first box), or
    • if CBF customers segregate their holdings per tax rate in their subaccounts (second box) – see below “Segregation of holdings”, or
    • if CBL customers5 segregate their holdings per tax rate in a dedicated account (second box).

No charges will apply for OTCs sent to renew the ones that were valid before the migration date for the same account.

OTCs submitted for accounts that were not certified in the past will be charged according to the Fee Schedule.

Further information

For further information, please consult your Customer Service Officer, Customer Relationship Manager or Tax Help Desk.

 

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1. Clearstream Banking S.A. (CBL) registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.

2. Clearstream Banking AG (CBF), registered office at Mergenthalerallee 61, 65760 Eschborn, Germany, registered with the Commercial Register of the District Court in Frankfurt am Main, Germany, under number HRB 7500.

3. ESES is Euroclear’s settlement platform for the Belgium, French and Dutch markets.

4. Applicable only to French T2S eligible assets processed via CBF. Securities that, after the migration date, will continue to be accessed via current CBL depository (that is BP2S) will continue to follow the tax process requested by BP2S, acting as French tax agent for these securities.

4. Includes CBF 6-series accounts.