Canadian trust instruments – Relief at source – Eligibility, documentation, deadlines
Withholding tax
Standard rate of withholding tax: | 25% | Holding requirements / restrictions: | No |
The standard rate of withholding tax on dividends (cash and non-cash distributions) from Canadian trust instruments is 25% in Clearstream Banking.
However, most trust instrument distributions are subject to reclassification and, once the issuer has published a reclassification, beneficial owners may request tax corrections accordingly.
The actual tax to be withheld on trust instrument distributions may therefore be processed as follows:
Distribution on payment date:
The Canadian trust instrument will be subject to 25% withholding tax on the full distribution payment in Clearstream Banking.
Relief at source from withholding tax on the original payment distribution from Canadian trust instruments is available through Clearstream Banking for beneficial owners that are resident in a country that has a Double Taxation Treaty (DTT) with Canada and who qualify as non-resident according to Form NR301 (General).
Reclassified components:
Trust instrument distributions are subject to reclassification normally by the end of March. If the issuer publishes a reclassification, the final distribution to the beneficial owner may contain one or more of the following components:
- Trust Income: subject to DTT (provided that the DTT has a clause that reduces the trust income);
- Return of Capital: Taxed at either 15% or 0%, depending on whether the issue satisfies certain conditions;
- Capital Gains: taxed at either 15% or 0%, depending on whether the issue satisfies certain conditions.
The reclassified components are not officially communicated to clients and it is up to the beneficial owner to monitor them via the Canadian Depository for Securities (CDS) and issuers’ websites.
Withholding taxes on the final reclassified trust instrument distribution cannot be adjusted via relief at source or quick refund via Clearstream Banking but adjustments can be reclaimed by the beneficial owner via the standard refund procedure.
Important note:
It is the full responsibility of the 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.
Eligible beneficial owners
Beneficial owners are eligible for relief at source from withholding tax on income from Canadian trust instruments as follows:
| Eligible beneficial owners | Rate applicable at source |
| Resident of a DTT country (non-resident according to Form NR301) a | Tax treaty or 25%, whichever is lower |
a. Partnerships (NR302) and Hybrid Entities (NR303) are not considered eligible and any reclaim applications must be made via the standard refund procedure.
Clients acting as Swiss intermediary for final beneficial owners of Canadian trust instruments can also obtain relief at source via Clearstream Banking.
Documentation requirements
For the purpose of obtaining relief at source of withholding tax on income from Canadian trust instruments, the documentation requirements are as follows:
Resident of a DTT country (non-resident according to Form NR301)
- One-Time Certificate – Canadian Equities and Trust Instruments;
- Per-Payment Instruction (when applicable);
- CRA Form NR301, as follows:
- For clients holding proprietary assets: An original Form NR301, signed by the client as final beneficial owner qualifying for DTT relief according to Form NR301, must be submitted to Clearstream Banking directly.
- For clients acting as intermediary: An original Form NR301, signed by the final beneficial owner qualifying for DTT relief according to Form NR301, must be submitted to and retained by the client, who must provide it promptly to Clearstream Banking upon request at any time.
The client 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.
And, upon request:
- List of Beneficial Owners – Canadian Equities and Trust Instruments;
- CRA Form NR301 (from clients acting as intermediary);
- Certificate of Residence;
- Any other tax documentation as required from time to time.
Swiss intermediary banks
- One-Time Certificate – Canadian Equities and Trust Instruments - Swiss Intermediary;
- Per-Payment Instruction.
Form descriptions are presented according to the procedures available for relief and/or reclaim of withholding tax on income from Canadian trust instruments.
Deadlines for receipt of documents
Documentation for relief at source from withholding tax on dividends from Canadian trust instruments must be received by Clearstream Banking by the following dates:
| Document | Deadline for receipt by Clearstream Banking |
One-Time Certificate – Canadian Equities and Trust Instruments (various versions) | Three business days before the first dividend payment date by 10:00 CET |
Per Payment Instruction | 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 Residence | Upon request |
List of Beneficial Owners – Canadian Securities | Upon request |
Positions for which clients have not submitted the requested documentation before the prescribed deadline will be taxed, through Clearstream Banking, at the maximum applicable rate.