Foreign Shares in collective safe custody: Relief at source and Quick refund on Russian DRs – Update

11.12.2015

Note: This announcement, originally published on 13 May 2015 and updated on 21 May 2015, 28 May 2015, 10 June 2015, 12 June 2015, 24 June 2015, 26 June 2015, 30 June 2015, 3 July 2015, 9 July 2015, 29 July 2015, 31 July 2015, 8 August 2015, 28 August 2015, 7 September 2015, 24 September 2015, 6 October 2015 and 24 November 2015, was further updated to add new deadlines for ISIN US55315J1025.

Clearstream Banking1 informs customers about the possibility for a relief at source or quick refund on the Russian Depository Receipt (DR) in collective safe custody for below mentioned ISINs.

The Federal Law #366-FZ,  dated 24 November 2014, “on changes to the part two of the Tax Code of Russian Federation and some other federal laws of Russian Federation”  and Federal Law #376-FZ,  dated 24 November 2014,“on changes to the Tax Code of Russian Federation” introduced, inter alia, the abolition of the 30% “punitive” tax rate for the non-disclosed positions. As from 1 January 2015, with respect to non-disclosed securities, withholding agents apply the standard tax rate of 15% by default.

However, the disclosure requirements stated by the Russian securities markets legislation are still in force (as such requirements have not been abolished). Consequently, the DR agents continue to request the aggregate disclosure of the positions to be taxed at 15% statutory tax rate.

General information regarding withholding tax and disclosure procedures for Russian DRs are available in Announcements A14027 from 25 February 2014, A14124 from 29 September 2014, A14154 from 28 November 2014 and A15082 from 16 April 2015.

Tax procedure for relief at source or quick refund

In order to benefit from relief at source or quick refund on income from Russian DRs, customers will need to ensure that we receive the following documents before the respective deadline of the ISIN listed in the table below.

Note: Customers applying for 15% statutory rate are encouraged to disclose the country and status of the final beneficial owners. Furthermore, customers that provided in the past the One-Time Certificate for DRs with Russian underlying securities with BOX 1.b. or 2 ticked and requesting the 15% tax rate application by default (standing instruction) should inform Clearstream Banking via SWIFT message before the next applicable event (by the deadlines prescribed in the tax notification) if they want to cancel the standing instruction and remain undisclosed for the future dividend payments. In the event of non-receipt of such confirmation, Clearstream Banking will continue to disclose the entire position of the respective customer based on the information included in the One-Time Certificate.

One-Time Certificate for DRs with Russian underlying Securities

The One-Time Certificate (see version attached below) must be submitted by all customers, regardless of the residency and status of the beneficial owners, before the first trade in Russian DRs or at the latest before the first impacted income payment date and must state that the customer holds the securities, either via:

Box 1 – Standing instruction: Exclusively for one single beneficial owner (which may be the customer or his underlying client) eligible for reduced tax rates. By ticking Box 1, a reduced tax rate is applied by default at source on all further interest payments. The customer must, in order to comply with the reporting obligations, complete the beneficial owner’s data as described in the One-Time Certificate and authorise Clearstream Banking to forward these details together with the total holding to the Russian authorities (through the depository and agents) for each income payment made to the customer’s account.

Or via

Box 2 – Standing instruction: On behalf of several beneficial owners (including the customer, when applicable), being exclusively either legal entities or individuals and:

  • Residents of the same country and applying for the same tax rate (double taxation treaty (DTT) rate or 15% statutory rate);
  • Russian Unit Investment trusts2;
  • Vnesheconombank (VEB)2;
  • Other Russian residents;
  • Supranational organisations recognised by the Russian legislation2.

By ticking Box 2, the requested reduced rate of tax is applied by default at source on all further income payments. The customer must, in order to comply with the reporting obligations, complete the beneficial owners’ data as described in the One-Time Certificate and authorise Clearstream Banking to forward these details together with the total holding to the Russian authorities (through the depository and agents) for each income payment made to the customer’s account.

Box 3 – Instruction per payment: On behalf of several beneficial owners that are residents of different countries and eligible for reduced rates of tax as above but also on behalf of beneficial owners that are not willing to disclose their holdings and country of residence. In addition to the One-Time Certificate, the customer is required to submit, before each income payment, a Breakdown of Holdings as explained below.

One-Time Certificates that have more than one box ticked are not valid and will be rejected.

Breakdown of Holdings

If Box 3 was ticked in the One-Time Certificate, a Breakdown of Holdings must be provided, before each impacted income event, via SWIFT MT599 or CreationOnline free-format message indicating:

  • ISIN;
  • Payment date;
  • Customer’s Clearstream Banking account number;
  • Customer’s total holding;
  • Per country of residence and legal status of beneficial owner:
    • Country of residence;
    • DTT or Russian law details (article, paragraph, sub-paragraph);
    • Legal status (individual/legal entity);
    • Total holding;
    • Tax rate to apply;
    • Total holding that remains undisclosed.

All these declared positions must be accurate on the relevant record date indicated in below table at 19:00 CET, meaning that no further transactions are allowed after the submission of the Breakdown of Holdings. If there is a discrepancy between the declared positions and the customer’s total holding visible in Clearstream Banking's books, the application for tax exemption will be rejected and, consequently, the maximum tax rate of 15% will be applied.

Furthermore, if Box 3 of the One-Time Certificate is ticked and we receive no Breakdown of Holdings by the prescribed deadline, the customer’s total holding will be considered as being undisclosed and, as a consequence, the maximum standard tax rate will be applied.

In addition, if a One-time Certificate with box 1 or 2 ticked is submitted for a relief at source/quick refund application, customers are obliged to send in addition a SWIFT MT599 or CreationOnline free-format message indicating the ISIN and payment date for which the standing instruction must be applied.

Deadlines and fees

In order to benefit from a relief at source/quick refund from Russian DRs, customers must ensure that Clearstream Banking receives the above-described documents for the below-mentioned ISINs by the indicated deadlines:

ISIN

Name

Record Date

Relief at source deadline

Quick refund deadline

US55315J1025

ADR MMC NORILSK NICKE

30.12.2015 with an interim period until 31.12.2015

05.01.2016     10:00 CET

12.02.2016        10:00 CET

US80585Y3080

ADR SBERBANK ROSII

15.06.2015

16.06.2015

24.07.2015

US36829G1076

ADR GAZPROM NEFYANYA KOMPANIYA

22.06.2015

20.06.2015

24.07.2015

US6708312052

ADR OAO TATNEFT

15.07.2015 with an interim period until 16.07.2015

16.07.2015

21.08.2015

US36829G1076ADR GAZPROM NEFYANYA KOMPANIYA (1DR/5SHS)16.10.2015 with an interim period until 19.10.201520.10.2015
10:00 CET		16.11.2015
10:00 CET
US0654531021ADR BANK VOZROZHDENIYE (SEC REG 1SHS)11.06.201512.06.2015
10:00 CET		22.07.2015   
10.00 CET
US4662941057ADR FEDERAL HYDROGENER REG 1ADR/100 SHS07.07.201507.07.2015    
10:00 CET		10.08.2015
10:00 CET
US0373763087ADR OAO MOSENERGO REG (1ADR/50SHS)25.06.201529.06.2015
10:00 CET		31.07.2015
10:00 CET
US6778621044ADR LUKOIL (JSC OIL CO) (4SHS-LEV 1 UNRESTR)14.07.2015 with an interim period until 15.07.201516.07.2015
10:00 CET		17.08.2015
10:00 CET
US7785291078ADR ROSTELECOM (6 SHS) (SEC)02.07.2015

06.07.2015
18:00 CET

13.08.2015
10:00 CET

US6074091090ADR MOBILE TEL PJSC REG (1ADR/2SHS)14.10.2015

15.10.2015
10:00 CET

13.11.2015
10:00 CET

US3682872078ADR GAZPROM OAO REG 1 ADR / 2 SHS16.07.2015 with an interim period until 17.07.201517.07.2015
10:00 CET		26.08.2015
10:00 CET
US3133541025GDR FEDERAL GRID CO 144A REG16.07.2015 with an interim period until 17.07.201517.07.2015
10:00 CET		19.08.2015
10:00 CET
US8688611057DR JSC SURGUTNEFTEGAZ(100 PREF SHS)(SEC)16.07.201517.07.2015
10:00 CET		26.08.2015
10:00 CET
US8688612048ADR SURGUTNEFTEGAZ REG 1DR/10SHS16.07.201517.07.2015
10:00 CET		26.08.2015
10:00 CET
US67011U2087GDR NOVOROSSIYSK CSPP REGS REG13.07.201514.07.2015
10:00 CET		21.08.2015
10:00 CET
US69343P1057ADR PSJC LUKOIL REG24.12.2015 with an interim until 28.12.201529.12.2015
10:00 CET		05.02.2016
10:00 CET

A depository service charge of USD 0.005 per ADR will apply for relief at source and for quick refund and potentially an external minimum service charge per beneficial owner of USD 25.00 may apply.

Relief at source / Quick refund Matrix

Standard rate (15%) for non-disclosed holdings or for any disclosed non-DTT country or DTT country granting a 15% DTT rate

Russian 13% for Russian residents (legal entities and individuals)

DTT 12% for eligible residents from Finland

DTT 10% for eligible residents from Albania, Armenia, Azerbaijan, Belgium, Botswana, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Greece, Hungary, India, Iran, Ireland, Israel, Italy, Kazakhstan, Democratic People's Republic of Korea, Republic of Korea, Kyrgyzstan, Latvia, Lebanon, Lithuania, Macedonia, Mexico, Moldova, Mongolia, Morocco, Namibia, Norway, Poland, Singapore, Slovakia, Slovenia, Tajikistan, Turkey, Turkmenistan, United Kingdom, United States of America, Uzbekistan

DTT 5% for eligible residents from Kuwait, Qatar, Saudi Arabia

Exempt 0% for Russian Unit Investment trusts, VEB or supranational organisations recognised by the Russian legislation.

The Russian authorities may audit disclosed shares for up to three years after a dividend payment.

Requests for further information may be expected to be made for supporting documentation, including but not limited to an original certificate of residency (COR) containing specific language regarding a DTT (if applicable) between the country of residence and the Russia. These forms may also need to be apostilled. There is a 90-day period to provide audit documentation to the authorities with the possibility for 90-day extension. The Russian authorities reserve the right to request additional information/forms as they deem necessary.

Note: The standard refund process with the Russian Tax Authorities is extremely complex and time-consuming and this procedure will not be offered or supported by Clearstream Banking. As a consequence, we strongly suggest that customers apply for a relief at source/quick refund in order to obtain the reduced tax rates. Furthermore, the DR agent has not yet confirmed that the standard refund service will be offered.

Customer's legal liabilities

By using the relief at source or quick refund service, the customer has obligations and liabilities as follows:

  • The customer will indemnify and hold Clearstream Banking harmless to any loss, liability or expense sustained by Clearstream Banking as a result of any act done in reliance upon the customer's certification or as a result of the inaccuracy of the information contained in the certification. The customer's liability under this indemnity includes, but is not limited to, reimbursement to the relevant tax authorities, issuer, paying agent, ADR depositary, or any other person or entity for under-withheld tax, or for the erroneous payment of a treaty benefit at source, for foreign exchange fees, for interest on under-withheld funds, and for administrative costs.
  • The customer will be obligated to supply to the source country's tax authority and the beneficial owner's home country tax authority which may be the U.S. Internal Revenue Service (IRS), or another appropriate authority, the supporting documentation.
  • Clearstream Banking  will debit the customer's cash account for any debit of Clearstream Banking accounts made at DTC in response to the request of the relevant tax authorities, the paying agent, or ADR depositary for the amount of the tax relief received at source and related costs.
  • At the request of the relevant tax authorities, any customer that uses the tax relief service but fails to comply with the procedures may be prohibited from using EDS service to obtain favourable rate for future distributions.

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1. This Announcement is published by 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.

2. Subject to DR agent confirmation. Furthermore, the name and holding of each entity eligible for tax exemption must be provided for each relief at source/quick refund application.

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