Canada: Tax documentation requirements for the relief at source process in regards to dividend distributions with options
Effective
1 June 2015
further to our Announcement A15090, dated 30 April 2015, revised on 26 May 2015, concerning the enhancement to the current processing of dividend distributions with options, customers are hereby informed of the impact in regards to the tax certification requirements applicable to such dividend distributions announced on or after 1 June 2015.1
Dividend distributions with options
Availability of relief at source
Relief at source is available to beneficial owners as follows:
- For Canadian equities:
- Residents of a Double Taxation Treaty (DTT) country for dividend income who qualify as non-resident per CRA Form NR301; and
- Tax-exempt entities granted exempt status by the CRA; or
- For Canadian trust units:
- Residents of a DTT country for trust income who qualify as non-resident per Form NR301.
Important note:
Only beneficial owners that qualify as non-resident per Form NR301 will be eligible to claim DTT relief at source through Clearstream Banking2 Partnerships (NR302) and Hybrid Entities (NR303) are not considered eligible and must apply for a refund via the standard refund procedure instead.
Documentation requirements
To obtain relief or exemption at source from withholding tax on Canadian dividend distributions with options, customers must submit to Clearstream Banking, before our stated deadlines, the following tax documentation:
For residents of a DTT country who qualify as non-resident as per Form NR301:
- A One-time certificate for Canadian Equities and Trust Units (Own Assets, Clients Assets or Own and Clients Assets).
If clients elect to have a standing instruction in place with regards to the tax rate, then this tax rate will automatically be applied on both the cash and stock election. - A Per-Payment “Breakdown of Holdings” (when applicable) delivered via the BO upload function available under Applications on the Clearstream Banking website.
In the Breakdown of Holdings, clients must complete all mandatory fields, including the fields, specifying the tax rate to be applied on the portion for the stock/cash election.3
Important note:
The tax instruction does not replace the corporate actions instruction with regards to the election of cash or shares. Such instruction is still required to be sent separately for the corporate event.
- A CRA Form NR301, as follows:
- For customers holding proprietary assets
An original Form NR301, signed by the customer as final beneficial owner qualifying for DTT relief per Form NR301, must be submitted to Clearstream directly. - For customers acting as intermediary
An original Form NR301, signed by the final beneficial owner qualifying for DTT relief (as per Form NR301), must be submitted to and retained by the customer, who must provide it promptly to Clearstream Banking upon request at any time.
The customer must exercise due diligence with respect to the information provided on this form and must verify whether the information is sufficient to claim DTT relief on behalf of the final beneficial owner.
- For customers holding proprietary assets
Form NR301 is valid for three years from the end of the calendar year in which it is signed and dated by the final beneficial owner, unless there is a change in the taxpayer’s eligibility for treaty benefit, in which case a new form must be provided immediately.
Note: Form NR301 must be dated before the first relevant dividend payment.
In addition, for pension plans, which are exempt as per DTT;
- A letter from the pension plan declaring that it is operated exclusively to provide pension or retirement benefits and that qualifies for exemption on dividend income under the specified article of the relevant country treaty with Canada; and
- A letter from the local country tax authority confirming the tax status of the pension or retirement plan.
For tax-exempt entities granted exempt status by the CRA
- A One-Time Certificate for Canadian Equities and Trust Units (Own Assets, Clients Assets or Own and Clients Assets).
If clients elect to have a standing instruction in place with regards to the tax rate, then this tax rate will automatically be applied on both the cash and stock election; - A Certificate of Tax Exemption (the certificate must include the “tax exempt registration number”); and
- A Per-Payment “Breakdown of Holdings” (when applicable) delivered via the BO upload function available under Applications on the Clearstream Banking website.
Clients must complete, in the Breakdown of Holdings, all mandatory fields, including the fields specifying the tax rate to be applied on the portion for the stock/cash election.2
Important note:
The tax instruction does not replace the corporate actions instruction with regards to the election of cash or shares. Such instructions are still required to be sent separately for the corporate event.
And, upon request for all:
- A List of Beneficial Owners;
- A CRA Form NR 301;
- A Certificate of Residence; and
- Any other tax documentation required from time to time.
Deadlines for receipt of the required documentation by Clearstream Banking
Document | For Relief at source |
One-Time Certificate – Canadian Equities and Trust Units (Own Assets, Clients Assets or Own and Clients Assets) | Three business days before the first dividend payment date by 10:00 CET. |
Breakdown of Holdings (provided via Clearstream Banking's BO upload function on our web) | Three business days before the dividend payment date by 10:00 CET. |
CRA Form NR301 | Own assets Three business days before the first dividend payment date by 10:00 CET. Client assets Upon request. |
Certificate of Tax Exemption | Three business days before the dividend payment date by 10:00 CET. |
A letter from the pension plan | Three business days before the dividend payment date by 10:00 CET. |
A letter from the local country tax authority confirming the tax status of the pension or retirement plan | Three business days before the dividend payment date by 10:00 CET. |
Certificate of Residence | Upon request. |
List of Beneficial Owners | Upon request. |
Eligible beneficial owners for whom the customer does not provide the required documentation before the relevant Clearstream Banking deadline will not be able to obtain relief at source and will consequently be taxed at the maximum withholding tax rate of 25%.
Ordinary dividend distributions
The tax process and tax certification requirements applicable for the relief at source for ordinary dividend distributions remains as today with the exception of the Per-Payment Breakdown of Holding, which (when applicable) must, as of 1 June 2015, be delivered via the BO upload function available under Applications on the Clearstream Banking website.
Instructions provided via SWIFT or CreationOnline will no longer be accepted.
Quick and Standard refund
Quick or standard refund is available to eligible beneficial owners who did not benefit from the relief at source process for both ordinary dividend distributions and dividend distributions with options. Further information regarding the quick and standard refund process is available via Market Taxation Guide - Canada.
Further information
For further information, please contact the Clearstream Banking Tax Help Desk or Clearstream Banking Client Services or your Relationship Officer.
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1. Applicable for events processed via Creation only.
2. Clearstream Banking refers collectively to Clearstream Banking AG, registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany and registered in Register B of the Amtsgericht Frankfurt am Main, Germany under number HRB 7500, and Clearstream Banking S.A., registered office at 42, avenue John F. Kennedy, L-1855 Luxembourg, and registered with the Luxembourg Trade and Companies Register under number B-9248.
3. The Breakdown of Holdings template available on our website has been updated to reflect the tax instruction requirements applicable for dividend distributions with options.