# Buy NRSGY OTC/Pink Sheet Thru TDW



## PuckiTwo (Oct 26, 2011)

I have tried to buy NRSGY (Nestle) in my TDW account which didn't quote any bid/ask price when I put the limit price in. But I could see the bid/ask in my Questrade account. I called TDW, the agent said "the bid/ask for pink sheets does not show on TD's online platform and he doubts that Questrade can. That he needed to get the bid/ask from another desk. 

When I wanted to put the buy order through online TD gave me a message that "my limit order price was above the current asking price" - which it wasn't. It was about 0.25 cts below. I called again and got a TD agent in Montreal who said that I would have to put the order through by telephone, that I could not change the order price online myself, that I could only cancel online and put in a new order by phoning them.

I would like to get information from CMF if this is correct, how other CMFers have bought NSRGY or other OTC/Pink Sheet stks, etc. Is it only TDW?
Thanks for any advice and help. P.


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## humble_pie (Jun 7, 2009)

pucki try this link. If it doesn't work you can reach the generic page by googling otc markets + foreign stocks, or pink sheets + foreign stocks.

http://www.otcmarkets.com/stock/NSRGY/quote

what's happening at TD is normal. Their front line reps don't have access to a different network that's carrying the OTC data - this is carried only by the TD trading control desk (is why the reps have to phone for info.)

it's difficult to trade OTC pink sheets. it occurs to me that you might have an IB account? it might be easier to buy Nestle on a swiss exchange, although you'd have to pay in CHF or maybe euro?

actually, for that matter, wouldn't it be possible to buy Nestle on a swiss exchange at the big green itself, through TD Global Trading? i imagine it would be advisable to do a cost comparison first, though.

sorry if i sound negative. I'm not a big fan of pink sheet foreign stock buying nor of swiss stocks in particular, because of their humungous NR withholding tax at 35%. Wouldn't a nice normal stock with no complications like proctor & gamble or kraft do instead?


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## fatcat (Nov 11, 2009)

i just bought nestle at tdw
just call them and the rep will do the trade for you at 9.99
they don't offer direct access to this market

here is a real time quote: http://www.otcmarkets.com/stock/NSRGY/quote


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## HaroldCrump (Jun 10, 2009)

I see the same on Scotia iTrade platform right now as what you see on TDW i.e. no bid & ask information, although it shows day's range and volume.
You are also right that QT shows a current bid & ask, and it does appear to be in line with where the stock is trading.
I wonder if it has something to do with the fact that QT is an ECN brokerage unlike TDW & iTrade.

My understanding of foreign stocks that trade OTC/Pink (rather than as ADR/S) is the same as what the TDW rep told you i.e. their online platform cannot quote an accurate bid/ask to you.
This is because the brokerage will have to contact the MM for that stock in order to get a bid/ask.
If you do see something online, it is not accurate and if you try to place a limit order, it will not fill (as you found out).
You cannot place a market order because this requires manual execution and brokerages have SLAs around market orders.

I am curious too regarding how Q/T is able to quote a bid/ask that _appears _to be accurate.

Why don't you try and place a limit order on Q/T and see if it fills? :biggrin:
You will be charged ECN fees of course, and I have no idea what they will be.


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> I see the same on Scotia iTrade platform right now as what you see on TDW i.e. no bid & ask information, although it shows day's range and volume.
> You are also right that QT shows a current bid & ask, and it does appear to be in line with where the stock is trading.
> I wonder if it has something to do with the fact that QT is an ECN brokerage unlike TDW & iTrade.
> 
> ...


i believe, but may be incorrect here, is that the reason tdw doesn't allow direct access for trading is that they are concerned about the quality of much of the issues traded on otc and want to help their customers through the process


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## HaroldCrump (Jun 10, 2009)

fatcat said:


> i believe, but may be incorrect here, is that the reason tdw doesn't allow direct access for trading is that they are concerned about the quality of much of the issues traded on otc and want to help their customers through the process


I thought either the brokerage had to maintain an in-house inventory of the stock in question or contact the MM.


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> I thought either the brokerage had to maintain an in-house inventory of the stock in question or contact the MM.


i don't think so (but am not positive) i believe they _could_ allow self-directed trades but choose not to ...


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## HaroldCrump (Jun 10, 2009)

There could also be a difference between US companies that trade on the Pink Sheets vs. shadow symbols of foreign stocks.
I remember trading a couple of OTCBB stocks, and I was able to place limit orders for those through iTrade, and the orders did fill after some time.

I don't know if there is a difference between OTCBB and Pink Sheets regarding how orders placed online are filled.

However, those were US based companies.
I don't know if it makes a difference that Nestle (and others) are merely shadow symbols for the stocks that are trading in foreign exchanges.


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## fatcat (Nov 11, 2009)

HaroldCrump said:


> There could also be a difference between US companies that trade on the Pink Sheets vs. shadow symbols of foreign stocks.
> I remember trading a couple of OTCBB stocks, and I was able to place limit orders for those through iTrade, and the orders did fill after some time.
> 
> I don't know if there is a difference between OTCBB and Pink Sheets regarding how orders placed online are filled.
> ...


you are buying and selling adr's of these companies who list on the pinks because they apparently want to avoid the regulatory and compliance hassles of listing on the bigger well known exchanges ... nestles does it more out of control of their brand than anything else it think


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## HaroldCrump (Jun 10, 2009)

ADRs are different than shadow foreign stocks trading on Pink Sheets.
ADRs are usually listed on the big board (NYSE), not the Pink.

Companies that list via ADRs are subject to the regulatory and compliance "hassles", unlike the stocks on Pink sheets.

Also, listing as an ADR/S is a conscious decision by the company.
However, many foreign stocks have a shadow Pink sheet equivalent regardless of whether the company wants its shares traded in the US or not.

Buying/selling ADRs (of most large companies) should not have the same liquidity issues as Pink sheets.


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## PuckiTwo (Oct 26, 2011)

HP, thks a lot for your help and clarification

1. I checked with TD Global Trading - unfortunately they don't offer trading on Swiss exchange
2. I didn't go for an IB account - should probably change it
3. PG and UL are also on my watch list
3. In regards to the Swiss withholding tax: yes, 35% would be a bit steep - there seem to be two confusing information around: one says 15% withholding tax, the other 35%. I found the following information on the Nestle site:



> when is the Nestle ADR dividend paid? The ADT dividend is paid on average one month after the difidend on the ordinary share. Most ADR holders are US residents are entitled to a favorable withholding tax rate. After the payment of the dividend on the ordinary share, there is an extensive process between citibank (Nestle's ADR depositary bank) and the Swiss Tax Authorities that enables these US residents to benefit from a favorable 15% withholding tax rate. This results in the dalyaed payment of the dividend to ADR holders.


 www.nestle.com/investors/faqs/adrs-faqs

Also on Hoffman-LaRoche site: 


> Note f) Dividends are subject to Swiss withholding tax of 35% at the time of initial payment. For ADR holders, the depositary bank performs a tax reclaim process with the Swiss tax authorities. The actual dividend tax paid depends on the specific tax status of the dividend recipient. For the amount listed in the net dividend column, a 15% tax rate has been assumed plus a dividend, reclaim and payment fee of $0.0235(-2013) or $0.0275 (2014-) per ADR. The tax reclaim process causes a difference in timing between the record date and the ADR pay date


http://www.roche.com/investors/share_information/adr-information.htm

Am I misinterpreting the information? I assume that buying the stk on a US exchange would entitle you to the reduced 15% withholding tax which would not have to be paid if the stk were purchased in a Canadian registered account. Maybe CMFers that hold NSRGY could confirm this.


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## HaroldCrump (Jun 10, 2009)

Okay, so Nestle does have an ADR listed on the Pink Sheets.
I didn't know that.
In that case, fatcat, you are correct that there shouldn't be a need for the brokerage to hold an inventory or contact the MM.
Traders should be able to buy/sell this directly, subject to liquidity.


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## PuckiTwo (Oct 26, 2011)

fatcat/HaroldCrump: thks for the educating discussion:



fatcat said:


> i just bought nestle at tdw just call them and the rep will do the trade for you at 9.99


I saw your post and wondered where you had bought it. Thks for the link, I have put in a phone order.



HaroldCrump said:


> Why don't you try and place a limit order on Q/T and see if it fills? You will be charged ECN fees of course, and I have no idea what they will be.


I might put an order in on Q/T, according to their chatline it shouldn't be a problem. Re: ECN fees: That's what Questrade posts on their website http://www.questrade.com/pricing/exchange_ecn_fees. Does this mean that "Adding shares" = buying and "removing shares" = selling. Does it mean that buying the OTC stk is free but selling isn't. ? 



HaroldCrump said:


> Okay, so Nestle does have an ADR listed on the Pink Sheets.


Maybe this is a stupid comment but if you go into TDW Market & Research it only says "NESTLE SA - OTC Pink". It says nowhere that it is an ADR.


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## fatcat (Nov 11, 2009)

from nestles site:http://www.nestle.com/investors/sharesadrsbonds




> Nestlé S.A. Shares
> The Nestlé S.A. shares are traded at SIX Swiss Exchange "Swiss Blue Chip Segment". The SIX Swiss Exchange has a section dedicated to the Nestlé share.
> 
> The number of registered shares amounts to 3'224'800'000 with a nominal value of CHF 0.10 each. The symbol of the Nestlé share is NESN.VX.
> ...


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## HaroldCrump (Jun 10, 2009)

PuckiTwo said:


> Does this mean that "Adding shares" = buying and "removing shares" = selling.


I believe it refers to liquidity.
You add liquidity by placing limit orders (bid below lowest ask when buying, and ask above highest bid when selling).
You remove liquidity by placing market orders (i.e. go in and scoop by shares at current ask when buying, or sell at highest bid when selling).
That is why there is a fee for removing liquidity.

Q/T passes on the ECN fees to you when you remove liquidity.

_Of course_ adding liquidity is free for you - geez, they ought to be instead paying us for adding liquidity.



> Does it mean that buying the OTC stk is free but selling isn't.


No, both buying and selling will incur the usual trading commission at Q/T (whatever the commission is, at your tier).

What that table means (the way I understood it), is that limit orders are free (buying or selling) as long as they are below ask (when buying) or above bid (when selling).

Only the MNGD and LAMP ATS's are not charging removing liquidity fees.


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## humble_pie (Jun 7, 2009)

pucki i don't think you've necessarily got it quite right about the no-withholding-on-swiss-nestle-dividend-for-canadian-registered-retirement-account.

that's a swiss NR tax, not a US NR tax. 

what are exempt from US withholding taxes for canadian reg'd retirement accounts are dividends from US corporations. Not divs from swiss corps, though.

on another note, Unilever. This is an anglo-dutch hybrid, so i tried to see what happens to its dividend because ADRs on UK companies are *not* subject to british NR tax. There have been several cmf threads about this interesting quirk.

as best i can make out from quick peek at this link, unilever has a dual-type dividend, possibly similar to royal dutch shell. One of the types - the british one - is exempt from NR tax. The other type - the dutch one - is subject to dutch NR tax.

this edgy way of doing things is because both companies are incorporated in both jurisdictions, but the corporate structures seem to be slightly different in each country (?)

http://www.dividendgrowthinvestor.com/2013/03/unilever-ul-dividend-stock-analysis.html


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## fatcat (Nov 11, 2009)

humble_pie said:


> pucki i don't think you've necessarily got it quite right about the no-withholding-on-swiss-nestle-dividend-for-canadian-registered-retirement-account.
> 
> that's a swiss NR tax, not a US NR tax.
> 
> ...


right .. i have the UL version in a taxable account and they don't withhold anything .. though, unilever is now starting to charge a fee of .005 per share per quarter as an offset for costs incurred by offering shares in the usa

i haven't received a nestle divvy since they only pay once a year but i am under the understanding that it should be 15% based on our treaty with the swiss


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## PuckiTwo (Oct 26, 2011)

fatcat said:


> i haven't received a nestle divvy since they only pay once a year but i am under the understanding that it should be 15% based on our treaty with the swiss


fatcat, do you hold Nestle in a registered or non-registered account - and are those 15% retrievable? They wouldn't be retrievable in RRSP?


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## fatcat (Nov 11, 2009)

PuckiTwo said:


> fatcat, do you hold Nestle in a registered or non-registered account - and are those 15% retrievable? They wouldn't be retrievable in RRSP?


non-registered and they are eligible for the dividend tax credit


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## humble_pie (Jun 7, 2009)

fatcat said:


> non-registered and they are eligible for the dividend tax credit


no not quite ... any amounts withheld by a foreign government at a 15% withholding rate or any other withholding rate are eligible as foreign tax credits but never as dividend tax credits in the sense we normally use this expression, ie we normally mean eligible canadian dividend tax credits.

in addition foreign dividend income is unfavourably taxed at 100% as other income or foreign non-business income ... somehow i'm just not seeing the advantage of holding foreign stock (both US & overseas) in non-registered accounts.


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## humble_pie (Jun 7, 2009)

(partly joking) (anyhow not serious) while pursuing on & off the list of british ADRs for my TFSA (US dollar holding but no withholding tax = great britain ADR), i stumbled upon what i thought might be a nifty candidate. Something called National Grid. It even has options (check) 

it's a british power utility with a significant subsidiary in new england & upstate new york (check) each:

the subsidiary is even called Mohawk Power, a name dear to my heart :tiger:

it's yielding north of 5.5% plus the options could push that figure to something north of 7% (check) :biggrin:

but then i ran across an obscure personnage ranting that the company is camouflaging trans-atlantic debt between the parent & mohawk power on its books so it looks like an asset.

hmmn uncheck. I would have to investigate. This is all too much for a poor pie on a hot midweek in july, soon to become the dog days of summer.


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## PuckiTwo (Oct 26, 2011)

Many thks to Harold, fatcat and Humble for the expert information - it makes my head hurt and I will have to digest all of it first.


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## Fain (Oct 11, 2009)

HaroldCrump said:


> Okay, so Nestle does have an ADR listed on the Pink Sheets.
> I didn't know that.
> In that case, fatcat, you are correct that there shouldn't be a need for the brokerage to hold an inventory or contact the MM.
> Traders should be able to buy/sell this directly, subject to liquidity.


Brokerages don't need to hold inventory to trade OTC/Pinks. Order route for Questrade OTC goes to APEX or LAMP(they pay for the order flow) to work the order.


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## PuckiTwo (Oct 26, 2011)

*Witholding taxes on foreign equities other than US*

I am still trying to come to grips with how much withholding tax there really will be charged. Fatcat says 15% and Humble 35%. I contacted TDW and they say* 30%.*



fatcat said:


> i haven't received a nestle divvy since they only pay once a year but i am under the understanding that *it should be 15% *based on our treaty with the swiss





humble_pie said:


> I'm not a big fan of pink sheet foreign stock buying nor of swiss stocks in particular, *because of their humungous NR withholding tax at 35%.*


In the Nestle link in Fatcat's post #14 upthread it says:



> The ADR dividend is paid on average one month after the dividend on the ordinary share. Most ADR holders are US residents and are entitled to a favorable withholding tax rate. After the payment of the dividend on the ordinary share, there is an extensive process between Citibank (Nestlé's ADR depositary bank) and the Swiss Tax Authorities that enables *these US residents to benefit from a favorable 15% withholding tax rate.* This results in the delayed payment of the dividend to ADR holders.


 http://www.nestle.com/investors/faqs/adrs-faqs#buyandsell.

So, wouldn't you think that as the stk is being bought on a US exchange the 15% withholding tax rate applies? Which then, if bought in a non-registered account can be claimed in your next year's tax return? Or would the "favourable 15% tax rate only apply to US residents?


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## fatcat (Nov 11, 2009)

http://www.collectionscanada.gc.ca/...tp://www.fin.gc.ca/news97/data/97-045_1e.html

*Convention between Canada and Switzerland 

For the Avoidance of Double Taxation with Respect to Taxes on Income and on Capital*



> 2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed:
> 
> (a) 5 per cent of the gross amount of the dividends if the beneficial owner is a company that owns at least 10 per cent of the voting stock and of the capital of the company paying the dividends;
> 
> ...


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## PuckiTwo (Oct 26, 2011)

Thks fatcat - that seem to solve it. There have been a number of changes in the double taxation laws, especially in Switzerland that I wasn't certain what really applied. 
Btw, I withdraw my buy order for Nestle for the time being as I had it ordered for my RRSP but as Humble rightly pointed out "exempt in registered accounts are dividends from US corporations". And will re-order for one of our other accounts.


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## humble_pie (Jun 7, 2009)

pucki it's my understanding that switzerland has a general 35% withholding rate on various types of investment income, just as the US of A has a general 30% withholding rate.

in the case of the US, the canada/US tax convention applies, so the 30% rate is reduced by the convention to 15% for resident canadian taxpayers.

cat has, very wonderfully, supplied a link to the full text of the canada/swiss tax convention, apparently signed in 1997. Indeed it does recite that the swiss NR rate on dividends paid to canadian resident taxpayers shall not exceed 15%. I'm keeping a copy of that link, because a few other cmf members have complained in the past that their NR withholding rate on swiss dividends is 35%.

i myself don't have any swiss stocks with dividends to compare. I did note the 2 excerpts that pucki posted upthread, from Nestle & Laroche, about how their dividends get reconfigured down to 15% for their US ADRs.

(pausing for a moment to say that working up the details of different NR withholding policies pursued by different foreign countries vis-a-vis different kinds of registered or non-registered accounts here in canada is totally daunting! it's like a maze ... wander therein at your own risk because soon you'll be trapped in a lot of dead ends.)

another reason why i generally tend to avoid foreign dividends is that they are taxed 100% as other income. Unlike capital gains from all countries & in all currencies, also unlike canadian dividends, there are zero tax breaks for foreign dividends. This daunting aspect does turn me off.

it's true there is usually - although not always - a foreign tax credit to be claimed.

(even as i'm typing this, what passes for poor pie's feverish little brain is having a lightbulb moment over the foreign tax credit. When i recover from the lightning bolt i might try to explain the moment, in order to beg HC or FC for an expert opinion ...)


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## BigMFfan (Feb 23, 2013)

I have owned Nestle in a BMOIL account for several years, and I can confirm that 35% is withheld from every annual dividend payment. I have always claimed this amount as a foreign tax paid credit on my income taxes.


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## humble_pie (Jun 7, 2009)

BigMFfan said:


> I have owned Nestle in a BMOIL account for several years, and I can confirm that 35% is withheld from every annual dividend payment. I have always claimed this amount as a foreign tax paid credit on my income taxes.


yes i've seen a few others in cmf, from time to time, report the same.

would you be thinking, now, of reading the canada/swiss tax convention in fatcat's link upthread & having a go at BMO investorline? the treaty seems to be saying 15% NR for dividends ...

from an experience or 2 i've had of tangling with big bank bureaucracies at a higher level, such a project would demand a truly awesome amount of time & effort. Minimum 2 years. One needs persuasion skills greater than those of most lawyers. For all practical purposes it would be infinitely cheaper to lose the 35% & claim it as a foreign tax credit.

but thankx much for your witness. 

(aside to cat) please be sure to let us know what happens at your brokerage when the annual Nestle dividend rolls in each: 

(to pucki) deeper into the maze each:


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## livewell (Dec 1, 2013)

humble_pie said:


> (partly joking) (anyhow not serious) while pursuing on & off the list of british ADRs for my TFSA (US dollar holding but no withholding tax = great britain ADR), i stumbled upon what i thought might be a nifty candidate. Something called National Grid. It even has options (check)
> 
> it's a british power utility with a significant subsidiary in new england & upstate new york (check) each:
> 
> ...


I have owned NGG (National Grid) for about 3 years as a core holding and have been very happy. I have had ~67% gain and almost 20% dividend increase in those 3 years. Even today its P/E is only 13.3 quite a bit lower than say FTS or CU (Its yield is ~4.8% not 5.5% I think Yahoo/Google give wrong estimate of yield as like most UK stocks they pay only 2 divs per year an interim and final 40%/60% split.) NGG was/is the UK's primary electrical utility and was government owned until it was privatized many years ago, it has diversified/expanded with some electrical and gas utilities in US. I believe a large part of its business is regulated. I see it as a very safe utility and a good play on UK business - the only minor drawback for me is the twice yearly dividend, though a nice big $2.29 per share dividend is due to hit my account any day now.


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## humble_pie (Jun 7, 2009)

livewell said:


> I have owned NGG (National Grid) for about 3 years as a core holding and have been very happy. I have had ~67% gain and almost 20% dividend increase in those 3 years. Even today its P/E is only 13.3 quite a bit lower than say FTS or CU (Its yield is ~4.8% not 5.5% I think Yahoo/Google give wrong estimate of yield as like most UK stocks they pay only 2 divs per year an interim and final 40%/60% split.) NGG was/is the UK's primary electrical utility and was government owned until it was privatized many years ago, it has diversified/expanded with some electrical and gas utilities in US. I believe a large part of its business is regulated. I see it as a very safe utility and a good play on UK business - the only minor drawback for me is the twice yearly dividend, though a nice big $2.29 per share dividend is due to hit my account any day now.


i thought it did look very appealing until i came across the lone ranger who said there's funny business over the debt reporting between the north american books & the UK books.

i'd have to go back to this message, then (shudder) start. reading. the. books. Ooh, là, no fair, it's summertime.

wondering in the meantime if you ever stumbled on anything similar?


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## BigMFfan (Feb 23, 2013)

Novartis dividends are also subject to the same 35%. I imagine the Canada-Switzerland tax convention does not apply in the case of ADR dividends, as these go through the US agent first. From the thread above, it appears Citibank only goes through the tax reduction process for US residents.

I don't mind the deduction, as I've never had a problem getting 100% credit for it for my income taxes. If I just had the Swiss dividends as foreign income, I don't believe I'd get 100% credit for the tax withheld, but because I have a few other countries' stocks in my cash portfolio (with lower or 0% withholding), it works out that I do get to deduct the full amount of all the withholding taxes.


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## humble_pie (Jun 7, 2009)

BigMFfan said:


> Novartis dividends are also subject to the same 35%. I imagine the Canada-Switzerland tax convention does not apply in the case of ADR dividends, as these go through the US agent first. From the thread above, it appears Citibank only goes through the tax reduction process for US residents.




i agree, the canada/swiss tax convention wouldn't apply to the ADRs because what would apply to them would be the USA/swiss convention. Obviously in the case of the Nestle ADR, the US manager seems able to negotiate the lowered 15% NR rate.

i wonder if i might i ask you a question:

if you are being taxed at 35% NR, does this mean:

a) you are holding Nestle swiss shares directly, purchased on a swiss exchange?

or does it mean:

b) you are holding the ADRs but the US-based ADR manager, while achieving a 15% NR for US-based holders of the ADR, is allowing all other holders, including those in canada, to be taxed at a withholding rate of 35%?

i understand if you'd rather not answer. I have a feeling the answer might be section (b) above, in which case pucki & cat might wish to listen up each:


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## BigMFfan (Feb 23, 2013)

definitely b.


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## HaroldCrump (Jun 10, 2009)

BigMFfan said:


> definitely b.


That is my experience as well.
Not with Nestle but with other ADRs, such as Spanish & French.
It seems that the US-based ADR is a flow-through intermediate step, and does not affect the ultimate withholding tax.


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## livewell (Dec 1, 2013)

humble_pie said:


> i thought it did look very appealing until i came across the lone ranger who said there's funny business over the debt reporting between the north american books & the UK books.
> 
> i'd have to go back to this message, then (shudder) start. reading. the. books. Ooh, là, no fair, it's summertime.
> 
> wondering in the meantime if you ever stumbled on anything similar?


 No, its a $50B market cap company, I don't think it likely that an individual can figure out if/how a mega corporation is cooking the books. It is not a criteria I look for in large cap stocks.

On the withholding tax I own or have owned a few ADR's this resource is useful for tax rates by country http://topforeignstocks.com/2011/04/23/withholding-taxes-for-foreign-stock-dividend-payments/

For some ADR stocks they have SCRIP programs that enable you to avoid the tax. I own SAN that being Spanish is subject to 19% tax, their SCRIP program gives you option of taking dividend with tax, taking shares (No tax), or taking shares and having them resold at market price (No tax withholding)


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## humble_pie (Jun 7, 2009)

your history of success with NGG is wonderful. Mille félicitations, thanks for telling us all this.

i will try to find out more info re the booked debt. The nuance that caught my ear was the sincerity i sensed in the individual's message. It didn't seem to be a crank call.

only a large cap could run a multinational operation ... but unlike yourself, i for one think these are the very corporations that can and do angle to get the most out of their multiple offshore systems that don't quite jibe with each other ... ie there are loopholes & these are the big corporations that can afford the lawyers to work the loopholes.

a british ADR - apparently hong kong ADRs as well - that doesn't charge NR taxes means a US dollar holding that can go in a tax-free account without any tax handicap whatsoever, afaik. Whereas dividends on a plain vanilla US stock will be subject to US withholding.


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## fatcat (Nov 11, 2009)

this is really a minefield as others have described it

i just got off the phone with one of the smarter tdw reps who did some research for me and tells me this:

35% is withheld on the usa-adr's because switzerland has no way of knowing where the share owner lives and thus the process is outside of any treaty

however, with tdw (and i don't know about any other brokerages) they will refund the extra 15% of the withholding (making it 20% withholfing rather than 35%) as long as the refund reaches $100

thus you would need to receive a dividend payment of about $700+ which would be enough to get back the 15% extra withheld and bring the witholding amount down to 20% (why 20% instead of 15 i don't know, the treaty appears to say 15)

bottom line, plan on 35% unless you have 350 shares plus of nestle for example

it does still come off a a foreign tax credit (not a dividend tax credit as pie has properly corrected me earlier)

if you do have 350 shares plus at tdw of nestle, tdw says that the refund process is all done painlessly on the phone for no charge


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## humble_pie (Jun 7, 2009)

we remember that nestle & laroche, on their websites discussing NR taxes on their ADRs, as quoted upthread by pucki, dealt with a certain delay by the NYC based ADR managers in paying out the dividends.

this was due, the companies said, to the time it took for the NYC administrators of the ADRs to reconfigure the original dividend with its 35% NR down to a new dividend with a 15% NR.

now here we have cat's story about quirky goings-on at TDDI.

these fragments cause me to suspect - somewhat dimly, i am indeed a dim-witted crumb - that there might even be a way for individual canadian holders of said ADR to also negotiate with nestle in order to work down the NR withheld on their ADR dividends.

but i also suspect that the effort would be so hideously & oppressively cumbersome that no individual in his right mind would dream of attempting it. I suspect that this effort is what TDDI is charging for. I suspect this is why the big green wants to see a minimum amount before they are willing to mess with the problem. Plus i suspect this is why they want 5% of the dividend amount for themselves.

dimly i recall reading a muttering here or there that foreign NR taxes imposed on ADRs can, in fact, be recuperated; but the procedure is so mindnumbingly complicated that individual investors never try.

when it comes to an individual battling with the challenge, it's probably much cheaper to let the 35% stand & claim it as a foreign tax credit.


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## fatcat (Nov 11, 2009)

humble_pie said:


> when it comes to an individual battling with the challenge, it's probably much cheaper to let the 35% stand & claim it as a foreign tax credit.


unless you hold 400 shares i agree completely ... this is one fight i will happily pass by and just take my credit


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## HaroldCrump (Jun 10, 2009)

fatcat said:


> 35% is withheld on the usa-adr's because switzerland has no way of knowing where the share owner lives


Maybe I am misunderstanding something, but in other cases, the company's transfer agent does indeed know the residency status of the beneficial owner.
That is how us Canadians are able to avoid UK taxes when buying British stocks via the US-listed ADR, such as Vodafone, Royal Shell, etc.

Why, in the case of Nestle, does the company's T/A not know the residency status and apply the withholding accordingly?


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## mrPPincer (Nov 21, 2011)

Harold it's been a while since I've looked into this, but if I recall correctly, 
the reason we have no W/H tax on US-based british ADRs is because of the tax treaty that the US has with UK, (and also because UK does not tax divies from the shareholders, but instead takes the taxes directly from the company via a process called dividend imputation).


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## humble_pie (Jun 7, 2009)

HC i don't think that transfer agents "know" the country of residence of a share's UBO, certainly not for shares held in street. Only the broker has that information.

also i don't think it's easy to get a foreign dividend chopped down from 35% to 15% or 20%. I think it's a humungous amount of fossilized bureaucracy, including sworn statements from a broker that UBO "X" is indeed the owner of so many shares held in street, etc.

i think i may have a dim recollection of once reading - from a national of a foreign country who was then living in the US or canada & he held a lot of shares from a company HQ'd in his homeland - that his effort to whittle down the NR withholding tax included trips to the consulate of his birth country, armed with certified paperwork. But in the end nothing worked & he ended up paying the NR tax like everybody else.

idk what is so great about nestle that somebody would choose this dividend chop? wouldn't it make more sense to hold proctor & gamble or british unilever (same sector & types of companies) in an rrsp & be done with the dividend problem?


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## PuckiTwo (Oct 26, 2011)

*Claim of Swiss Withholding Tax*



humble_pie said:


> ....... that there might even be a way for individual canadian holders of said ADR to also negotiate with nestle in order to work down the NR withheld on their ADR dividends. .....but i also suspect that the effort would be so hideously & oppressively cumbersome that no individual in his right mind would dream of attempting it.


I dug a bit deeper and found this:

1. On a European Money Forum an Austrian Novartis/Nestle investor listed a step-by-step-procedure how to get part (20%) of the Swiss withholding tax on Swiss stks/AdRs back. I thought first that this maybe only an agreement between EU countries but apparently is not so. 

2. Nestle explains on its website http://www.nestle.com/investors/faqs#withholdingtax and gives a link to the Swiss Tax Authorities

3. Here is the link to the Swiss Tax Authorities, the link is in German BUT the site text is in English!!! http://www.estv.admin.ch/verrechnungssteuer/dienstleistungen/00253/00626/index.html?lang=en

4. Scroll down the page and you will find "Canada eng." in the last 1/3 part of the list of countries with which the Swiss have agreements. You can download from there an English-language form with which you can reclaim the Swiss withholding taxes. You need "Snapform Viewer" in order to download the form (link provided on page). 

5. And here is the Claim form Switzerland - Canada :http://www.estv.admin.ch/verrechnun...O2Yuq2Z6gpJCDdH9_g2ym162epYbg2c_JjKbNoKSn6A--. Form is also in English with detailed instructions.

NOTE: The Swiss government website in point 3. mentions that the process could take several months. The Austrian investor on the Eu-Finance Forum said that this is true and it could take 3-8 months but the money will always be sent (Swiss thoroughness) 
Another tip he gave was to let 2-3 years of dividends come together so that the effort is more worthwhile. 

Yeah, it may be cumbersome but think of all the fun you will have. This may not be a procedure for people who keep only a small amount of Swiss stocks but if anybody owns more than one company - why not. GL

Edit: Apparently you can reclaim also in Spain - for people who own SAN.


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## BigMFfan (Feb 23, 2013)

For someone who is able to claim the full amount of any foreign taxes paid, there really is no reason to get the withheld tax back from Switzerland. It seems to me you'd just have to adjust your tax forms to show a lower tax credit and pay any amount you received to the CRA.


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