General tax information - types of securities, deadlines, other market specifics - Canada
Types of securities
The CBL-eligible securities issued in Canada are as follows:
- Government bonds;
- Corporate bonds;
- Trust instruments (capital trust securities and trust units).
As of 1 January 2012, customers must refrain from holding, on their Clearstream Banking account, securities on behalf of beneficial owners (including themselves, if applicable) who are resident for tax purposes in Canada as defined by relevant Canadian laws and regulations.
The customer shall indemnify and hold harmless Clearstream Banking, its directors, officers, agents, employees or affiliates (the “Indemnified Persons”) for any loss, expense, liability, damage or claims incurred by any of the Indemnified Persons as a result of the non-compliance with this holding restriction.
“Related” non–resident not dealing “at arms length” with the issuer
According to the Canada Revenue Agency (CRA), “at arm's length” is a concept describing a relationship in which the parties are acting independently of each other.
25% withholding tax would apply, upon request from customers, to an interest payment in the rare case that interest is paid to a related non-resident not dealing at arm's-length with the issuer on the following types of securities:
- Government bonds (Treasury bills, federal, provincial or municipal bonds) issued before 15 April 1996; and
- Corporate bonds.
Clearstream Banking applies 0% withholding tax by default on interest payments from the above securities. No certification or tax instruction is required to obtain this exemption.
However, 25% withholding tax may be applied, upon request from the customer, if the underlying final beneficial owner is a related non-resident not dealing at arm's length with the issuer, as the beneficial owner in such a case would not qualify for the Clearstream Banking default rate of 0%.
It is the responsibility of the Clearstream Banking customer to ensure that final beneficial owners are eligible for the tax rates applied for, including the Clearstream Banking default rate. Neither Clearstream Banking nor its local depository has any direct or indirect liability towards the Canadian authorities in this regard.
In the rare cases of “participating interest”, 25% withholding tax would be applicable.
Participating interest refers to the beneficial ownership by one organisation of shares in another organisation, provided that these shares are held on a long-term basis for the purpose of exercising some measure of control or influence over the owned organisation's activities.
Financial intermediaries resident in Switzerland and holding Canadian securities on behalf of final beneficial owners are entitled to the application of withholding tax on such holdings according to the Double Taxation Treaty (DTT) between Canada and Switzerland and under the terms of Canadian Information Circular IC76-12.
Such Swiss Intermediaries must be fully aware of and compliant with all of their obligations as stated in the DTT and in such terms.
Relief at source and quick refund are available to Clearstream Banking customers who act as Swiss Intermediary for final beneficial owners of Canadian equities and trust instruments.
Statutory deadline for reclaiming withholding tax
The statutory deadline for reclaiming withholding tax using the standard procedure is two years after the end of the calendar year in on which the dividend was distributed.
Clearstream deadline for standard refund applications
The deadline by which Clearstream Banking must receive the documentation for a standard refund application is, at the latest, three months before the statutory deadline.
All standard refund applications received after this deadline will be processed by Clearstream Banking on a "best efforts" basis. However, in such cases, Clearstream Banking will apply an extra charge and accepts no responsibility for forms that have not reached the Canadian Tax Authorities by the date considered being the statute of limitations deadline.
Clearstream deadline for quick refund applications
The deadline for reclaiming withholding tax on Canadian Securities using the quick refund through Clearstream Banking is at the latest 10:00 CET on the 5th calendar day of the year following the dividend payment (or the last business day before this if the 5th is not a business day).
Notes on tax reclaims
Customers warrant the completeness and accuracy of the information they supply to Clearstream Banking.
With respect to tax reclaims in general, customers are reminded that Clearstream Banking accepts no responsibility for their acceptance or non-acceptance by the tax authorities of the respective country. It is the customer's responsibility to determine any entitlement to a refund of tax withheld and to complete the forms required correctly and calculate the amount due. Clearstream Banking is under no obligation to carry out any investigation in respect of such information.
When are refunds received?
The estimated time for receiving a refund can vary depending on the time that the application is filed and the complexity of the information supplied in the reclaim form. Clearstream Banking has collected information from sources considered reliable but does not guarantee the accuracy of the timings presented.
The estimated time for receiving a standard refund is 18-24 months from the date on which Clearstream Banking receives the certified documents.
The estimated time for receiving a quick refund is two weeks from the date on which Clearstream Banking receives the request.