Drip Cap Gains are taxed at the year of the distribution/purchase.
Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer
FOREIGN TAX WITHHELD - Each person on the brokerage account has to fill out this form.
http://www.cra-arc.gc.ca/E/pbg/tf/nr301/nr301-fill-10e.pdf
At TD Ameritrade, it's important to us that we keep you informed of any new
regulations that may impact your account. We want you to know that effective
January 1, 2013, the Canada Revenue Agency (CRA) implemented new requirements
for receiving reduced tax withholding on Canadian-sourced income payments.
Our records of your holdings indicate that you may be affected by this change,
so we want you to know what to do to avoid possible additional tax withholding
on those payments.
About the new requirement:
- Previously, your name and address information in our files allowed us to
apply a reduced withholding rate to your Canadian-sourced income payments.
- Under the new regulations, however, we will need to have a Canadian
non-resident tax form(s) on file in order for you to be eligible for the reduced
rate.
According to the CRA, Canadian dividend-payers are required to have
…recent and sufficient information to establish the identity of the beneficial owner for the purpose of the application of treaty benefits, whether they are resident in a particular country with which Canada has a tax treaty and whether they are eligible for treaty benefits under the tax treaty on the income being paid.
CRA Form NR301, “Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer,” details the information the CRA is seeking. Form NR301 is available here. The new rule does not specifically require use or submission of the form in all cases. It simply requires the Canadian dividend payer to have sufficient information, based on the criteria set forth in Form NR301, to support eligibility.
The information requested on Form NR301 includes:
- Legal name of non-resident taxpayer;
- Mailing address;
- Foreign tax identification number (for US residents this is your Social Security number);
- Recipient type and Canadian tax number if you have one (you simply indicate whether you or the entity upon whose behalf your providing certification is an “Individual” or “Corporation” or a “Trust” along with the relevant Canadian identification number);
- Country of residence for treaty purposes;
- Type of income for which the non-resident taxpayer is making the declaration (“Interest, dividends, and/or royalties,” the relevant selection for our purposes, or “Trust income” or “Other,” with instructions to specify “income type”).
- A signature by the non-resident taxpayer or an authorized person of “certification and undertaking.”
According to the CRA, if the verification it seeks hadn’t been received by Jan. 1, 2013, it will withhold from dividends paid to US owners of shares in Canada-based companies at a rate of 25 percent rather than 15 percent, as is contemplated by the Convention Between the United States of America and Canada with Respect to Taxes on Income and Capital, or the US-Canada tax treaty, and accompanying conventions and explanatory notes.
You may have been asked by your brokerage to fill out and submit CRA Form NR301. On the other hand, many brokerages likely provided certification based on information they already possessed through your existing account information.
“Registered shareholders”–the stock you own is registered in your name on the underlying company’s books, which is kept by the company’s transfer agent, and you’re in physical possession of a certificate that represents your ownership interest–will likely have to complete forms for submission to your respective underlying companies’ transfer agent.
By now you should have received forms directly from transfer agents for all the underlying companies you own requesting information to confirm your tax treaty eligibility. If you haven’t already done so, registered shareholders should complete and remit these forms as soon as possible.
If you’re a registered shareholder of any Canada-based dividend-paying corporation, whether it was ever a trust or not, complete any such forms if they’ve already been forwarded to you.
If you are a registered shareholder of a dividend-paying Canadian corporation and haven’t received notification from it, it might be a good idea to send an e-mail or phone an investor relations representative at the relevant company.
- Please note: Unless we receive the appropriate documentation, we will need to
withhold the full statutory tax rate of 25% on your Canadian-sourced income.
To ensure you receive the appropriate tax withholding, we urge you to act
promptly.
- Note: If you have an account with more than one account holder, such as a
Joint Account, each account holder must complete a separate form.
What you need to do to avoid additional tax withholding:
1. Choose the appropriate form for your particular circumstances, as
different forms apply to different situations. Please consult with your tax
advisor to determine which form to use. The forms include:
- NR301 – Declaration of Eligibility for Benefits under a Tax Treaty for a
Non-resident Taxpayer.
- NR302 – Declaration of Eligibility for Benefits under a Tax Treaty for a
Partnership with Non-Resident Partners.
- NR303 – Declaration of Eligibility for Benefits under a Tax Treaty for a
Hybrid Entity.
You can also find these forms, along with the answers to frequently asked
questions, on the CRA's website.
2. Complete the applicable form in full and return it to us as soon as
possible in order to begin receiving beneficial tax treatment.
IMPORTANT: To ensure that we apply the form to the correct account, please be
sure to enclose a completed copy of our cover sheet with
the form.
Please mail the form and the cover sheet to us at:
TD Ameritrade
Attention: Corporate Actions
1005 North Ameritrade Place
Bellevue, NE 68005-4245
Or fax it to us at: 866-468-6268
Foreign-stock-dividend - http://seekingalpha.com/article/1029261-your-foreign-stock-dividend-yield-may-be-less-than-you-think
From Blogger: If you claim the foreign tax withheld
as a tax credit on your 1040 by filing form 1116, each dollar of foreign tax
withheld reduces your US federal income tax liability by one dollar. So, in
effect, each tax withholding payment amounts to a partial payment on your income
tax liability. It's really no different from the estimated tax payments many of
us are required to pay quarterly.
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