Canada: Relief at source for foreign shares in collective safe custody

This announcement reflects the dividend events, taking place in 2020, distributed from Canadian shares in collective safe custody and includes the Clearstream Banking¹ procedure for obtaining relief at source.

Tax procedure for relief at source

Dividends paid from Canadian equities are currently subject to withholding tax at a standard rate of 25%. Relief at source is available for the following types of beneficial owners:

Non-residents of a double taxation treaty country (DTT) where the applicable rates of Canadian withholding tax are the same as the rates specified in the Canada – United States Tax Treaty (that is, 15%) and who qualify as a non-resident as per the requirements stated in the Canadian Revenue Agency (CRA) Form NR301; or
Beneficial owners eligible for exemption under the relevant Canadian domestic law.

Documentation requirements

For the purpose of obtaining relief at source on Canadian dividend distributions, customers will need to ensure that the following documents are provided to Clearstream Banking before the respective deadline:

A One-time Certificate for Canadian Equities and Trust Units
The One-Time certificate is to be provided once and is valid until revoked;
A CRA Form 301, if applicable, signed by the customer as beneficial owner (only required from customers holding proprietary assets and requesting DTT relief); and
A certificate of exemption, if applicable, issued by the CRA and proving the eligibility of the beneficial owner for exemption under the relevant Canadian domestic law.

The certificate of exemption must in addition specify the CRA identification number (sometimes referred to as the “control number”) of the beneficial owner.
A per-payment instruction with the tax rates to apply on payment date.

The per-payment instruction must be submitted per each tax rate required via SWIFT (formatted MT565 or Xact Web Portal message (for full formatting requirements, please refer to the Customer Handbook or Announcement D18075)).

The instruction must include:

Customer account number;
ISIN code;
Corporate event ID;
Total holding;
Tax rate (to be specified in field 92a for SWIFT users or in the tax rate field for Xact users); and
Number of shares for which a reduced tax rate applies.

The following additional information is required in the per-payment instruction, when instructing for beneficial owners that are eligible for full tax exemption (0%):

Full name of the beneficial owner (to be specified in the beneficial owner details of the SWIFT message).

In addition to the above, the following supporting documentation must be provided by customers immediately upon request:

A CRA Form 301 signed by the beneficial owner (for customers acting as intermediary and requesting DTT relief for underlying beneficial owners);
A list of beneficial owners in the format prescribed by Clearstream Banking;
A proof of tax residence for beneficial owners eligible to obtain a reduced rate of withholding tax at source in accordance with a DTT between their country of residence and Canada;
Any other tax documentation required from time to time.

All required documentation (except for the per-payment instruction) must be sent to the following address:

Clearstream Operations Prague s.r.o.
Attn: PTR - Tax Reclaim Services
Futurama Business Park Building B
Sokolovska 662/136b CZ-18600 Prague 8
Czech Republic

Important note:

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 DTCC or any other agent has any direct or indirect liability towards the Canadian authorities in this regard.

If Clearstream Banking is informed after the tax instruction / certification deadline indicated below, that a beneficial owner has obtained a relief at source to which he is not entitled (for example due to incorrect entitlement, data, certification etc.), Clearstream Banking will not assist in withholding the tax or paying it to the respective tax authorities.

Deadlines

In order to benefit from a relief at source from Canadian dividend distributions, customers must ensure that Clearstream Banking receives the above-described documents by the deadline indicated in the customer notification sent per income event.

Clearstream Banking will not take any responsibility in respect of any losses, claims, penalties, taxes and interest thereon due to no action taken by the customer regarding the above-mentioned matter or due to receipt of documents after the indicated deadline.

In order to avoid any delays or loss of documentation, Clearstream Banking customers are strongly encouraged to submit tax documentation by special courier or registered mail.

Default action

Customers are informed that if Clearstream Banking does not receive the certification prior to the prescribed deadline, it will apply the maximum default rate of withholding tax for the applicable dividend payment.

Quick and standard refund

Quick and standard refund are not available through Clearstream Banking, but eligible beneficial owners can request a tax refund directly via the Canadian tax authorities. Clearstream Banking does not assist in this regard.

Customer's legal liabilities

By using the relief at source 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, 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 DTCC in response to the request of the relevant tax authorities, the paying agent, or 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.