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Important Legal Information
The Depository Trust Company (“DTC”) does not represent or warrant the accuracy, adequacy, timeliness, in part
on information obtained from third parties and not independently verified by DTC and which is provided as is.
The Information contained in this communication is not intended to be a substitute for obtaining tax advice from
an appropriate professional advisor. In providing this communication, DTC shall not be liable for (1) any loss
resulting directly or indirectly from mistakes, errors, omissions, interruptions, delays or defects in such
communication, and (2) any special, consequential, exemplary, incidental or punitive damages.
To ensure compliance with Internal Revenue Service Circular 230, you are hereby notified that: (a) any discussion
of federal tax issues contained or referred to herein is not intended or written to be used, and cannot be used, for
the purpose of avoiding penalties that may be imposed under the Internal Revenue Code; and (b) as a matter of
policy, DTC does not provide tax, legal or accounting advice; accordingly, you should consult your own tax, legal
and accounting advisor before engaging in any transaction.
Frequently Asked Questions
Q What is the tax relief via EDS opportunity for Canada?
A The Elective Dividend Service (EDS) provides relief at source on Canadian sourced income to
U.S. residents and certain other payees. It is available to beneficial owners who are non-residents
of the U.S. who are resident in treaty jurisdictions and are entitled to the same rate of Canadian
withholding tax as the rate specified in the U.S. – Canada tax treaty. It is also available to
Registered Canadian securities dealers with a Memorandum of Understanding (MOU) with the
Canada Revenue Agency (CRA), and registered Canadian pension plans and Canadian registered
charities that are registered and are listed on the CRA Website. See further details below.
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Q What are the tax withholding rates?
A
Rate Status Dividend Distributions Mutual Fund Trust
Distributions
25% Unfavorable/
Non-Treaty
Non Treaty Residents or
beneficial owners that are not
properly documented
Non Treaty Residents or
beneficial owners that are
not properly documented
15% Favorable Properly documented U.S.
residents, non-U.S. residents in
treaty jurisdictions allowing for
15% withholding rate
Properly documented U.S.
residents, non-U.S.
residents in treaty
jurisdictions allowing for
15% withholding rate
0% Exempt U.S. charities, U.S. Pensions,
Canadian securities dealers,
Canadian pension plans and
Government Agencies with valid
CRA identification numbers
provided in a Letter of
Exemption received from the
CRA. Canadian registered
charities and U.S. IRAs
U.S. charities, Canadian
securities dealers and
Canadian pension plans
with valid CRA
identification numbers
provided in a Letter of
Exemption received from
the CRA and Canadian
registered charities.
Q What documentation is required to make an election at the favorable rate of
withholding (15%) on Canadian sourced income?
A To make an Elective Dividend Service (“EDS”) tax election on Canadian sourced dividends and
trust distributions, Participants must have recent and sufficient information to establish the identity
of the beneficial owner, whether the beneficial owner is resident in a country with which Canada
has a tax treaty and whether the beneficial owner is eligible for treaty benefits on the income being
paid. The payee's name and address may no longer be the only information required to establish
that treaty benefits apply. The CRA has published the forms NR301, NR302 and NR303 for non-
residents to provide this information. Participants are urged to refer to Information Circular 76-12
and the pending updates to the Information Circular which can be found on the CRA’s website at
http://www.cra-arc.gc.ca.
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Q Are there any exceptions to the documentation process?
A The payer may choose to apply reduced withholding tax without obtaining the forms or equivalent
information regarding beneficial ownership, country of residence, and eligibility for treaty benefits
if all of the following are true.
You know that:
• The payee is an individual, or
• The payee is an estate of a United States resident that is managed and controlled from the
United States.
• You have a complete permanent address on file that is not a post office box or care-of
address.
• You have no reason to suspect the information is inaccurate or misleading.
• You have procedures in place so that changes in the payee’s information (for example, a
change of address or contact information that includes a change in country, or returned mail)
will result in a review of the withholding tax rate.
For additional exemptions regarding IRAs and Pensions, please see below.
Q Are Individual Retirement Accounts (“IRAs”) required to complete form NR301 for
the exempt rate of withholding on Canadian source income?
A No, the NR301 is not required for exemption. IRAs and other retirement arrangements operate
exclusively to administer or provide pension, retirement or employee benefits may receive
dividend income exempt from Canadian withholding tax. Please refer to the Canadian TaxInfo for
the types of IRAs that are eligible for tax exempt relief benefits via EDS. The CRA does not
require a unique CRA identification number to elect 100% of a dividend for an IRA account
(traditional or Roth). To facilitate EDS processing, Participants must enter the identifier “IRA001”
when electing the tax-exempt rate for the aggregate shares beneficially owned by IRAs.
Supporting documentation for traditional or Roth IRAs includes hard-copy or electronic images of
each IRA’s Internal Revenue Service (“IRS”) approved Trust Account and Custodial Account
documents (including the IRS’s approval thereof, if not on IRS Forms 5305 and 5305A) and the
IRA’s record date position with respect to that Canadian security.
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Q How do Registered Canadian Charities elect for the exempt rate?
A Before electing, Participants must confirm that the Canadian charity is listed on the CRA website
http://www.cra-arc.gc.ca/chrts-gvng/lstngs/menu-eng.html and the charity status indicates
‘registered’. To facilitate EDS processing, Participants must enter the identifier “CRC001” when
electing the tax-exempt rate for the aggregate shares beneficially owned by registered Canadian
charities each time the EDS system prompts the user for a CRA identification number.
Q What is required to make an election at the exempt rate of withholding on Canadian
source income?
A For position elected at the exempt rate of withholding, Participants are required to specify the CRA
identification number assigned to the beneficial owner in the Letter of Exemption from the CRA.
The CRA identification number is assigned by the Canadian Revenue Agency (CRA) to authorized
persons or organizations that are exempt from Canadian withholding taxes. For more information
on obtaining a Letter of Exemption, please refer to Publication T4016, “Exempt U.S.
Organizations – Under Article XXI of the Canada – United States Tax Convention,” available on
the CRA website http://www.cra-arc.gc.ca
. If you only receive the CRA identification number
from the non-resident, you must verify the expiry date by checking Guide T4016.
Q Would an IRS form W9 or W8 meet the documentation requirements and are
military Army Post Office (“APO”) addresses eligible for the exception to the
documentation requirements?
A The IRS forms W9 and W8 are not sufficient because they do not address beneficial ownership,
residency, and eligibility for treaty benefits. Accounts that do not have a physical address but have
a military APO address are eligible for 15%. Treat a military APO address for US military
personnel as an address in the US rather than as a post office box. Treat military addresses for
military personnel from other countries as addresses in the country they are from, as long as you
can identify the country.
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Q How do I obtain tax relief on Canadian sourced income if I missed relief at source
via EDS? Do I need a declaration form?
A Participants are able to obtain tax relief after the income distribution either by a quick refund
through DTC or by lodging a long form reclaim directly with the CRA. If an individual is applying
for a refund on the long form, the NR301 declaration form is not required as the NR7-R has been
revised to include certification of eligibility for treaty benefits in accordance with the Limitation of
Benefits (“LOB”) provisions. Please refer to Important Notice # 0816-12 for an outline of the two
procedures. It will take approximately 6 to 8 weeks for a refund to be received through the quick
refund process.
The link for the notice is:
http:// www.dtcc.com/downloads/legal/imp_notices/2012/dtc/div/0816-12.pdf
Q Is it possible to receive payment in Canadian dollars on Canadian sourced income
events?
A Yes, Participants who have signed up for Canadian dollar settlement can elect to receive Canadian
dollars or a mix of US and Canadian dollars on distributions that are announced in Canadian
dollars.
Additionally, these Participants can elect to receive Canadian dollars from redemptions (including
full call), maturities (excluding municipal event types), and reorganizations (including rights,
warrants, voluntaries, and mandatory events) that are announced in Canadian dollars.
For further inquiries, please contact
Internationaltax&[email protected]
