General information - types of securities, deadlines, other market specifics – U.S.A.
Clearstream Banking status
- Clearstream Banking AG is a Reporting Model I Foreign Financial Institution (Global Intermediary Identification Number: N1V1GJ.00002.ME.276) that has entered into a Qualified Intermediary (QI) agreement with the IRS and that is assuming primary nonresident alien (NRA) withholding responsibility and primary Form 1099 reporting and back-up withholding responsibility.
Types of securities
The full list of eligible securities issued in the U.S.A. may be found on the Creation Link Guide. However, this market taxation guide covers ordinary income distributed by:
- Debt securities
By default, any US taxable interest/dividend payment is subject to a 30% FATCA tax rate1. Should Clearstream Banking’s direct customer provide to Clearstream Banking sufficient information/documentation to evidence that 30% FATCA should not be withheld, the rules of QI regime will apply and tax exemption/reduced tax rate may be granted by Clearstream Banking at source or via a refund request to Clearstream Banking. Refund of withholding tax from the IRS is not available through Clearstream Banking.
Please check the pages “relief at source” and “refund from Clearstream Banking” for a full service description.
Clearstream Banking, acting as a QI with primary nonresident alien withholding responsibility and primary Form 1099 reporting and back-up withholding responsibility, will report U.S. source income paid to:
- non-U.S. recipients on an IRS Form 1042-S by the IRS deadline on 15 March of the year following the year in which the income payment was made (or 15 April of the year following the year in which the income payment was made if Clearstream Banking’s request of extension of deadline to the IRS is accepted by the IRS)
- U.S. specified recipients on an IRS Form 1099 (1099-INT for interests and 1099-DIV for dividends) by the IRS deadline on 31 January of the year following the year in which the income payment was made.
In order to facilitate Clearstream Banking’s customers’ reconciliation processes, Clearstream Banking customers are invited to check on a regular basis which income payments will be reported by Clearstream Banking on Xact Web Portal (under “Tax” and “US tax query”).
Important deadline for Clearstream Banking customers acting as final beneficial owners
By default, no 1042-S reporting is issued to Clearstream Banking customers that have opened an account for their own assets, as the U.S. source income paid to such account is reported on the basis of pools to the U.S. Internal Revenue Service.
Should the Clearstream Banking customer (acting for its own assets) want to receive a 1042-S for a specific calendar year, a request should be sent to Clearstream Banking before the deadline on 15 February2 of the year following the calendar year for which the 1042-S is requested.
Such request should be sent via SWIFT MT599 free-format message or Xact Web Portal to the attention of Clearstream Services S.A., Tax Processing Luxembourg and specify:
- The subject: 1042-S request for own assets account - calendar year N3;
- The relevant account number(s) (please mention all own assets accounts for which the request is made on the same SWIFT);
- If the request is sent after the above-mentioned deadline, the following statement should also be added on the SWIFT template: “as our request is sent after the deadline set by [Clearstream Banking S.A. / Clearstream Banking AG], we acknowledge that [Clearstream Banking S.A. / Clearstream Banking AG] may not be able to treat our request prior to the 1042-s reporting deadlines set by the IRS for calendar year [N]. As a result, [Clearstream Banking S.A. / Clearstream Banking AG] may debit our account or otherwise reclaim from us and we will pay [Clearstream Banking S.A. / Clearstream Banking AG] on demand any amount of penalties charged by the IRS and resulting from such late request of issuance of Form 1042-s in our name”.
Account segregation requirements
Clearstream Banking customers must mandatorily segregate on dedicated accounts:
- U.S. source debt securities/equities that are Clearstream Banking customers’ own assets
- U.S. source debt securities/equities that Clearstream Banking customers hold on behalf of U.S. specified persons for which a 1099 reporting is required
In order to benefit from tax relief at source or refund from Clearstream Banking on U.S. source interests or dividends payments, Clearstream Banking customers will have to ensure that Clearstream Banking receives the accurate documentation by the deadlines specified below.
Relief at source – Tax instructions
2 BD before the PD, 10:00 CET
Relief at source – Tax certificates
10 BD before the PD, 10:00 CET
Refund from Clearstream Banking
31 December of the year in which the income payment was made4,5
1. Should the security be a grandfathered obligation, the default tax rate is 30% non-resident alien tax
2. Should the 15 February not be a business day, the deadline would be on the first business day after the 15 February of the year following the calendar year for which the 1042-S is requested.
3. N being defined as the calendar for which the specific 1042-S reporting is requested.
4. Tax refunds are processed in the order received by Clearstream Banking and only when there are sufficient funds in Clearstream Banking internal tax account.
5. Clearstream Banking may grant few additional days after the 31 December of the year in which the income was paid. Such extended deadline would be published to Clearstream Banking customers in a dedicated announcement and will always be set before Clearstream Banking’s deadline to pay the last tax deposit for the impacted calendar year to the IRS (according to IRS instructions)