U.S.A.: New free-format tax instructions requirements and related additional fee
In accordance with Clearstream Banking’s1 governing documents, Clearstream Banking would like to inform customers that effective:
immediately
a new SWIFT template must be used by customers whenever sending free-format tax instructions (MT568 or MT599) for U.S. taxable income payments to Clearstream Banking.
Background
In order to benefit from U.S. tax relief at source, tax refunds, and yearly tax reporting services, customers must provide Clearstream Banking with an IRS form (W-8 or W-9 form) and a One-Time Certificate detailing, amongst other things, the customer’s status and account structure. Depending on the account structure selected in the One-Time Certificate, customers may have chosen to send per-payment SWIFT messages to Clearstream Banking.
If such a SWIFT message is sent in free-format, some formatting rules must be implemented to improve operational efficiency and limit the risk of having a tax instruction rejected or wrongly applied by Clearstream Banking.
Impact on customers
Clearstream Banking’s customers who send their tax instructions on U.S taxable events via a free-format SWIFT message must adapt their SWIFT template and use the new requirements outlined below.
As of 1 September 2020, customers who send valid free-format tax instructions, but do not comply with the requirements outlined below will be charged an additional fee. This fee will be indicated in the Clearstream Banking Fee Schedule.
The new requirements are as follows:
1. Customers should include only one tax instruction per SWIFT message. One tax instruction consists of:
- One U.S. taxable event (that is, one ISIN or common code and one payment date);
- One customer account number at Clearstream Banking;
- One tax rate to be applied to a specific quantity of positions in the targeted ISIN/common code.
2. Customers should specify all the following data in each SWIFT message:
- Function:
- New or Cancel. If Cancel, please specify the reference of the SWIFT message to cancel;
- Country of taxation: U.S.;
- Customer account number at Clearstream Banking;
- Corporate Action Reference ID;
- Security code: ISIN or common code (the common code is recommended if the security is not deposited in the home market);
- Payment date (optional);
- Quantity instructed;
- Tax rate to apply to the quantity instructed
- If 30% tax rate: Chapter 3 or Chapter 4;
- Depending on the account structure selected, any other relevant information or breakdown enabling correct 1042-S or 1099 reporting.
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. Clearstream Banking refers collectively to 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, and Clearstream Banking AG (for Clearstream Banking AG customers using Creation Accounts), registered office at 61, Mergenthalerallee, 65760 Eschborn, Germany, and registered in Register B of the Amtsgericht Frankfurt am Main, Germany, under number HRB 7500.