DTC TaxRelief^sm enables qualifying beneficial owners to obtain tax relief "at-source" or via quick conditional refund on certain cross-border income payments as a result of tax relief arrangements set up with issuers, agents or the tax authorities of various countries.

Overview

When dividends and interest are paid on foreign securities, foreign tax is generally withheld from the payment by the paying agent at a tax rate known as the statutory, or maximum, rate and paid to the foreign taxing authority. In many cases investors are resident for tax purposes in countries that have tax treaties with the security's country of issuance. For specific types of investors, these treaties often allow for a favorable rate of withholding, less than the statutory rate. In other cases, certain investor types may be entitled to a favorable rate of withholding based on a source country’s domestic legislation.

DTC TaxRelief^sm enables qualifying beneficial owners to obtain tax relief "at-source" or via quick conditional refund on certain cross-border income payments as a result of tax relief arrangements set up with issuers, agents or the tax authorities of various countries based on bi-lateral tax treaties or source-country domestic legislation.

Obtaining benefits at-source means investors receive the income payment on pay date less the most favorable rate of tax available to them, rather than being taxed at the highest rate and having to file a post-payable tax reclaim to get back the amount overwithheld. TaxRelief offers an efficient alternative to filing manually intensive, costly, and error-prone reclaim forms.

TaxRelief supports international DTC-eligible security types including American Depositary Receipts ("ADRs"), global shares, equities and fixed income securities for which arrangements have been set up with either the respective countries' tax authorities, agents or issuers.

Who Can Use the Service

Virtually all non-U.S. issuers may offer TaxRelief for their securities that are eligible at DTC and for which a tax relief opportunity exists.

All DTC Participants may use TaxRelief to obtain favorable rates of withholding on their non-U.S. holdings eligible for the service.

Benefits

• Holders receive income payments net of the most favorable rates of tax to which they are entitled. Issuers also benefit because this makes their issue more attractive to investors, and Participants benefit because it enables them to obtain monies for their customers that might otherwise be forfeited due to the complexity and cost of filing tax reclaims
• Electronically notifies holders of tax relief opportunities
• Improves return on investment
• Increases speed and accuracy in securing tax relief and eliminates the need for paper-based reclaims
• Reduces or eliminates foreign exchange risk by removing the lag time between dividend payment and receipt of tax reclaim proceeds
• Creates a secure electronic record of tax relief elections
• Reduces or eliminates the possibility of payment of a single dividend occurring with two separate payments made in two different tax years – e.g. the income payment is received in one year and the return of overwithheld tax in another - which can cause home country tax reporting and payment problems for the beneficial owner and its custodian
• Saves money by eliminating the need to finance delayed reclaim proceeds
• Enables better, more informed investment decisions, as investors and investment advisors can calculate returns based on treaty and reduced domestic law withholding tax rates

How the Service Works

When DTC is informed by the issuer or its agent that a tax relief opportunity exists on an upcoming income payment, DTC notifies Participants. The DTC announcement includes the timeline for electing for tax relief and the various tax relief entitlements for different investor types.

Elections for tax relief are submitted electronically to DTC to receive income payments exempt from foreign tax, at a reduced rate of withholding, or at the statutory tax rate. The TaxRelief window opens on the day after record date and remains open for a number of days thereafter, during which Participants may view, enter, modify or delete certifications up to the security's instruction cutoff date.

For relief-at-source payments, Participants and their customers receive in one transaction simultaneous payment of the income and the associated tax relief. For accelerated refunds, Participants receive their customer’s tax relief entitlement subsequent to the initial dividend payment through DTC’s cash settlement system.

DTC also provides DTC TaxInfo^sm (TaxInfo) as a source for international tax withholding and relief entitlement information. Participants can easily access DTC TaxInfo directly from within the TaxRelief function.

For More Information

To learn more about TaxRelief, take a look at our Product Guide (see "User Documentation" below), or contact your Relationship Manager at (800) 422-0582 or the International Tax Product Management Group via e-mail at GlobalTaxServices@dtcc.com or phone at 212-855-2702.

TaxRelief does not constitute tax advice and is not intended to be a substitute for obtaining tax advice from an appropriate professional advisor.