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About U.S. Tax Withholding Service
US Tax Withholding
Service is an
automated service
that enables non-U.S.
financial institutions
holding US securities
at the depository
to comply with
US non-resident
alien (NRA) withholding
tax rules. In
addition, the
service can help
participants maintain
the lowest possible
US withholding
rates for their
customers. Through
the service, the
depository becomes
a participant's
withholding agent,
and assists the
participant in
complying with
United States
Internal Revenue
Service (IRS)
1441 regulations
governing NRA
tax withholding.
Who can use this service
The service is available
to the depository's
direct non-U.S.
participants,
including central
securities depositories
(CSDs) and other
non-U.S. Financial
institutions that
obtain Qualified
Intermediary (QI)
status from the
IRS. Non-U.S.
subsidiaries of
US participants
may also use the
service, provided
they have obtained
QI status. Non-U.S.
Financial institutions
located in countries
where QI status
is not available
may use the service
on a restricted
basis.*
How the service works
As a US tax withholding
agent, the depository
will:
- Provide users
of the service
with access
to the US
Tax Withholding
menu item
on the EDS
function
- Notify participants of taxable events
- Inform participants of the "election window" during which they must send withholding rate instructions to the depository; the election window generally extends from one day after the record date ("record date +1") to one day before the payable date ("payable date -1")
- Pay dividends or interest to participants on the payable date, net of appropriate withholding tax in accordance with participants' instructions
- Prepare settlement statements that will reflect the gross dividend amount, tax amounts withheld at each designated rate and net dividends paid
- Remit tax funds to the IRS on a weekly schedule
- Prepare and send the appropriate year-end 1042-S tax forms to participants
Benefits
This service relieves participants from having to coordinate a range of tax withholding, payment and reporting processes. Key benefits include:
- Fully automates the process of making elections at various tax rate pools via the Elective Dividend Service (EDS) function on the Participant Terminal System (PTS) - the service eliminates the need to set up separate accounts by tax rate pools, as all elections are effected on an omnibus basis at the time of the income payment announcement
- Covers eligible tax rates for all countries and types of income payments
- Allows participants to take advantage of IRS rules that permit accounts maintained at registered clearing agencies to commingle customer and proprietary assets for tax election purposes
- Eliminates the need to name a third-party withholding agent
- Expedites availability of income payment funds
- Provides toggle capability to other depository income-related functions, such as the Dividend Announcement Service and DTC TaxInfo
- Makes tax reporting information available on new Computer-to-Computer Facility (CCF) files, including the enhanced Dividend Announcement File
- Enables users to provide election instructions via both CCF and PTS
For more information
To learn more about the
US Tax Withholding
Service, contact
your Relationship
Manager, e-mail
us at globaltaxservices@dtcc.com
or call the International
Tax Product Management
Group at 212-855-2700
or 44 207 444
0000.
* For
Non-Qualified
Intermediaries(NQIs),
tax will be withheld
at the maximum
statutory rate
(30%), and NQIs
may be prohibited
from holding in
their accounts
instruments that
pay income subject
to tax rates higher
than 30%. To find
out about the
requirements to
become and IRS-designated
Qualified Intermediary,
participants can
visit www.irs.ustreas.gov/bus_info/qi/.
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