General tax information – types of securities, deadlines, other market specifics – Canada
Types of securities eligible in Clearstream Banking
The eligible securities issued in Canada are as follows:
- Government bonds;
- Treasury bills;
- Corporate bonds;
- Equities;
- Trust instruments (capital trust securities and trust units);
- Warrents.
Withholding tax services
Debt securities | Holding restriction? | Withholding tax rate | Relief at | Quick | Standard |
No | 0% - 25% | No | No | No | |
No withholding tax is imposed on interest paid on Canadian debt securities in Clearstream Banking. The only exceptions are in the event that a debt security distributes taxable dividends and in the very rare cases of related non-residents not dealing "at arm's length" with the issuer and for Participating Interest. | |||||
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 clients, 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:
Important note: 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 client, 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 client 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. | |||||
Equities | Holding restriction? | Withholding tax rate | Relief at source | Quick | Standard refund |
No | 25% | ||||
Non-resident tax-exempt entities | Yes | Yes | Yes | ||
Residents of a Double Taxation Treaty (DTT) country who qualify as non-resident per Form NR301 (General) | Yes | Yes | Yes | ||
Resident of a DTT country who qualify as non-resident per Form NR302a (Partnerships) | No | No | Yes | ||
Resident of a DTT country who qualify as non-resident per Form NR303a (Hybrid entities) | No | No | Yes | ||
Canadian residents | No | No | No | ||
Trust instruments | Holding restriction? | Withholding tax rate | Relief at | Quick | Standard |
| No | 25% | ||||
Residents of a Double Taxation Treaty (DTT) country who qualify as non-resident according to Form NR301 (General) | Yes | Yes | Yes | ||
Resident of a DTT country who qualify as non-resident according to Form NR302a (Partnerships) | No | No | Yes | ||
Resident of a DTT country who qualify as non-resident according to Form NR303a (Hybrid entities) | No | No | Yes | ||
Non-resident tax-exempt entities | No | No | Yes | ||
Canadian residents | No | No | No | ||
a. Partnerships (Form NR302) and Hybrid entities (Form NR303) are not considered eligible and must apply to reclaim withholding tax via the standard refund procedure instead.
Swiss intermediaries
Financial intermediaries resident in Switzerland and holding Canadian equities or trust instruments 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 clients who act as Swiss Intermediary for final beneficial owners of Canadian equities and trust instruments.
Applicable default withholding tax rates
The default rates of withholding tax applicable in Clearstream Banking on income paid on Canadian securities are as follows:
- 0% on interest from debt securities.
The only exceptions are in the event that a debt security distributes taxable dividends and in the very rare cases of related non-residents not dealing “at arm’s length” with the issuer and for Participating Interest, in which cases 25% withholding tax is applicable and may be applied upon request from the client.
- 25 % on dividend from equities.
- N.B.: It is the client's responsibility to ensure that final beneficial owners are eligible for the tax rates applied, including the Clearstream Banking default rates. It is the responsibility of the client to comply with this obligation. Neither Clearstream Banking nor its local depository has any direct or indirect liability towards the Canadian authorities in this regard.
Holding restriction
Please refer to the “Holding restriction and Investment regulation” section of the Clearstream Banking Market Profile – Canada.
Capital gains tax
There is no capital gains tax withheld through Clearstream Banking on securities held in Clearstream Banking. Capital gains tax may however be payable on specific gains. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.
Stamp duty
There is no stamp duty withheld through Clearstream Banking on securities held in Clearstream Banking. Stamp duty may however be payable on specific transactions. Clearstream Banking does not assist in this regard. Please consult your tax advisor for further information.
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
Clients warrant the completeness and accuracy of the information they supply to Clearstream Banking.
With respect to tax reclaims in general, clients 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 client'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.
Standard refund:
The estimated time for receiving a standard refund is 18-24 months from the date on which Clearstream Banking receives the certified documents.
Quick refund:
The estimated time for receiving a quick refund is two weeks from the date on which Clearstream Banking receives the request.