Receiving Canadian dividends?

Here’s some important news for you as of Jan 1, 2013.

It appears the Canadian Government has further stepped up the chase for tax dollars. Below you can find a notification one of my clients has received from his bank in Europe. From what I can read, the standard withholding tax rate on dividends will be 25% as of Jan 1, 2013. However, since Thailand has a bilateral tax treaty with Canada, the rate would rather be 15%, i.e. the current preferential rate. Here is the relevant text from the tax treaty:

“2. Dividends paid by a company which is a resident of Canada to a resident of Thailand who is the beneficial owner of the dividends, may be taxed in Canada in accordance with the laws of Canada but the tax so charged shall not exceed 15 per cent of the gross amount of the dividends. The provisions of this paragraph shall not affect the taxation of the company on the profits out of which the dividends are paid.”

Here is the sample notification:

Subject : Important notification regarding Canadian incorporated investments ================================================================
Information for clients holding Canadian investments. New documentation requirements
Dear Client, We are contacting you as you hold Canadian incorporated investments with us.
The Canadian Tax Authority, the Canada Revenue Agency (CRA), has begun to implement new requirements to the amount and type of information that non-Canadian resident taxpayers must provide in order to continue to receive Canadian-source income such as dividends at preferential tax treaty rates.
Distributions to non-residents of Canadian source incomes are subject to withholding taxes at a rate of 25%. However, the Canadian withholding tax rate may be reduced to a lower rate where Canada and the foreign jurisdiction where you reside have entered into a bilateral tax treaty, provided the investor is entitled to benefits under such treaty.
What you need to do now?
If you would like to continue to benefit from the lower rate of withholding tax for Canadian source income, simply click on the following link, read, print, complete and sign the document before sending back to us at: [the bank name and address].
Download the Declaration of eligibility for benefits under a tax treaty for a non-Canadian resident taxpayer: Note that for a joint account, all applicants need to complete and sign the document.
What happens if I do not return the document?
If we do not receive the correctly completed document, any future Canadian source income will be taxed at 25% from 1st January 2013, as required by the Canadian Revenue Agency. The reduced rate can only be re-applied from the point the form is received by us.

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