Effective April 19, 2011 the Canada Revenue Agency ("CRA") issued three new forms to assist Canadian payers in determining whether it is appropriate to apply a reduced rate of Part XIII withholding tax on payments made to non-residents.
The three new forms are as follows:
1) NR301 - Declaration of Eligibility for Benefits under a Tax Treaty for a Non-Resident Taxpayer
2) NR302 - Declaration of Eligibility for Benefits under a Tax Treaty for a Partnership with Non-Resident Partners
3) NR303 - Declaration of Eligibility for Benefits under a Tax Treaty for a Hybrid Entity
In early December 2011, Valiant took the initiative to: analyze its security holder database to determine which accounts would be impacted by the changes; sent out the applicable forms to these registered holders that did not meet the list of exceptions; and effective January 1, 2012 applied any applicable reduced rate of withholding tax upon return of the duly completed forms.
Going forward Valiant will send the new forms to all new foreign registered security holders that are affected by the changes (i.e. excluding those that the CRA consider as exceptions) and will apply the reduced rate of withholding tax applicable to the country of residence upon return of any duly completed forms to us.
Valiant’s bulletin on the matter can be found at: https://maxweb.cwt.ca/images/valiant/jan2012/article3.pdf
Recently, the CRA has extended the transitional period for acquiring the documentation supporting a reduced rate of non-resident withholding tax to December 31, 2012.
Registered non-Canadian resident shareholders whose names appear on the records of Valiant, Parkland's registrar and transfer agent, will receive a form directly from Valiant requesting information to confirm that they are eligible for tax treaty benefits. Failure to return a completed form to Valiant will result in Valiant withholding tax at the statutory rate of 25% on any payments to registered non-Canadian resident shareholders.
Non-registered, non-Canadian resident shareholders' eligibility for any applicable Reduced Treaty Rate will be determined by each such shareholder's broker and not by Parkland or Valiant. Non-registered shares are generally held in a brokerage account and are thus registered in the name of the investor's broker or a depositary. Certain brokers may require additional information or certifications in order to determine a non-registered non-Canadian resident shareholder's eligibility for any applicable Reduced Treaty Rate. Non-registered, non-Canadian resident shareholders are encouraged to contact their brokers or other tax, legal or financial advisors in the event that they have any questions or concerns in this regard.
Parkland encourages shareholders to seek advice from their respective broker or tax, legal or financial advisor for additional information relating to the status of their residency for tax purposes.