# Softbank / Royal Dutch Shell and withholding Tax



## Drauss (Nov 29, 2016)

Hey guys
Although i am new here.
I have done a lot of reading before posting this.
So please bear with me ...

I know that RRSP shields you from capital gain/loss/dividend for Canadian and US companies 
Whereas TFSA does gets you expose to US income tax on dividend.

Here is my concern.
I bought Softbank in my TFSA, than moved it to RRSP when i heard about US dividend. My main reason for investing is not so much due to its dividend (it has very low yield), but rather future growth through its aquisition of ARMS Holdings and hopeful spinoff of Sprints. 

Given that this is Japanese company, trading through some sort ADR/pink sheet, does RRSP shields me from that ?
i don't really mind paying tax on a 1% yield (which is nothing). Really don't mind; my key concern is doing excessive paperwork in the tax season for being taxed on a 1% yield.


My reading of this forum have confirmed that because this is NOT a US company, Tax convention and thus my RRSP does not shield me from dividend. So my question is :
- Is the tax being withhold from the source; as in i don't have to do any paperwork ?
- or do i get the full dividend and than have to pay tax to Japanese (US) government 

if former than I am good, if the latter, that is just waste of time
thank you for your time


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## Drauss (Nov 29, 2016)

*Royal Dutch Shell*

my second question is simpler
planning to get Dutch Shell B-class shares through RRSP.

Will the UK tax on dividend hit me at the source before getting the dividend (therefore no paperwork, which i wouldn't mind)
Or will get the full dividend, but than have to pay some sort of tax (therefore doing paperwork for UK Gov.)

many thanks for enlightening me


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## Eclectic12 (Oct 20, 2010)

Drauss said:


> ... So my question is :
> - Is the tax being withhold from the source; as in i don't have to do any paperwork ?
> - or do i get the full dividend and than have to pay tax to Japanese (US) government
> 
> ...


All the articles I have seen, including the ones say the tax will be withheld at source. Canada and the US do it this way .... and when you think about it, having the paying company withhold it is the only way to be sure it will be sent in.

If you want to be sure, likely a call to your broker will confirm this.


Cheers


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## Eclectic12 (Oct 20, 2010)

Drauss said:


> my second question is simpler ...
> Will the UK tax on dividend hit me at the source before getting the dividend (therefore no paperwork, which i wouldn't mind)
> Or will get the full dividend, but than have to pay some sort of tax (therefore doing paperwork for UK Gov.) ...


If sounds like you are buying the shares directly. If UK withholding tax is applied to the RRSP, then likely the UK government will require it to be sent in by Dutch Shell.

The question is whether the UK Canada tax treaty reduces or eliminates the UK withholding tax for an RRSP. If it does, the administrative question is whether the broker has correctly sent in any required paperwork. It is good to verify these things as I have seen posts where the broker missed the required US paperwork so that instead of being exempt from the US withholding tax for holding US shares directly, the poster was being charged.


Cheers


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## Spudd (Oct 11, 2011)

There won't be any paperwork. 

Eclectic12's good additional point is that for the US, there's a form called the W8-BEN that you need to fill out with your broker, that allows them to withhold less tax from you than if you don't fill it out. It would be a good idea to see if your broker has this form on file for you. Probably, they asked you to fill it out when you opened the account, and they do have it - but better safe than sorry.


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## Eclectic12 (Oct 20, 2010)

^^^

To add a bit of detail, the W8-BEN is the US form to register that one is a resident of a country that has a tax treaty with the US and are claiming what is granted. 

As I understand it, filing the form for a Canadian resident means the US 30% withholding tax on dividends is reduced to 15% and the RRSP is exempted. One has to be careful to verify the cash paid are truly dividends. Some have bought what they thought was a US stock that paid dividends to later discover the stock was a master partnership, which has a higher 40% US withholding tax and no tax treaty reduction.

In a similar manner, US residents can file the paperwork claim similar tax treaty benefits for the Canadian NR withholding tax.

In a taxable account, Canada's NR tax of 25% is reduced down to 15%.
http://www.bce.ca/investors/shareholder-info/tax-aspects#foreign 

In an IRA or 401(k), Canada's NR tax is exempted.
http://www.fool.com/how-to-invest/p...o-avoid-foreign-dividend-withholding-tax.aspx


Cheers


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## Drauss (Nov 29, 2016)

thanks guys

I called the bank and indeed i already had that form filled.
Ask her about buying RDS.B in RRSP; she said there is non-resident tax of a sort. I am guessing RDS will send the tax directly to the UK Gov as was suggested here and that I will receive the net proceeds (no paperwork to do during tax season). But couldn't answer if there is a potential Canadian tax on top of that nor couldn't confirm the UK tax rate on dividends.

Trying to test her knowledge. I asked what if if buy XOM in RRSP. Tax Convention should protect me 100% on the dividends.
She got confused.

At this point, I will take the plunge buy RDS.B, given the OPEC outcome and its high-yield at current share prices.
I will report back in some months when I get the proceeds on the dividends.

My logic to buy RDS (as oppose to other majors) is primarily due to its acquisition of the high-growth natural gas producer BG Group. I like that RDS is doing a pivot of a sort from an oil dominated toward more gas. And the fact that share price will remain suppress for sometime due to the debt incurred to buy BG Group (therefore more time for me to buy more).


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## Eclectic12 (Oct 20, 2010)

Drauss said:


> .... I called the bank and indeed i already had that form filled.


Good news ....




Drauss said:


> .... Ask her about buying RDS.B in RRSP; she said there is non-resident tax of a sort. I am guessing RDS will send the tax directly to the UK Gov as was suggested here and that I will receive the net proceeds (no paperwork to do during tax season).


Anything else would be a nightmare to collect versus taking their slice before the $$$ leave the country ... so I would be shocked if anything else happened.
There's also the incentive that if it is the source company's responsibility, that should mean there are assets in the home country for any penalties, should the rules be ignored.

I haven't dug far enough to find confirmation details from a UK official site.




Drauss said:


> .... But couldn't answer if there is a potential Canadian tax on top of that nor couldn't confirm the UK tax rate on dividends.


Weird ... there typical two sources of Canadian tax for an RRSP that I am aware of. The tax for over-contributions of more than $2K and when one withdraws, the withdrawn amount is added to one's income for that tax year. The tax on withdrawal covers all of the Canadian requirements, where the stock was sold and cash was withdrawn.

Should one decide withdraw the stock instead of selling the stock then withdrawing cash, then a FMV would be established for the "taxed as income" part, a cost base set based on FMV and going forward, there would be Canadian tax for cash payments plus capital gains tax or loss credit for when the stock was sold. 

As for the Canada - UK tax treaty rate, several sources say 15%.


More later ...


Cheers


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## Eclectic12 (Oct 20, 2010)

The Canada - UK tax treaty available at:
http://www.fin.gc.ca/treaties-conventions/UK_-eng.asp

Under Article 10 *Dividends*, section 2 appears to limit the UK withholding tax to


> not exceed 15 per cent of the gross amount of the dividends.


.


Cheers


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## My Own Advisor (Sep 24, 2012)

With RDS.B - no withholding tax.

http://canadianmoneyforum.com/archive/index.php/t-79106.html

http://canadianmoneyforum.com/archive/index.php/t-46145.html


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## humble_pie (Jun 7, 2009)

My Own Advisor said:


> With RDS.B - no withholding tax.
> 
> http://canadianmoneyforum.com/archive/index.php/t-79106.html
> 
> http://canadianmoneyforum.com/archive/index.php/t-46145.html




advisor i was hoping you'd appear since you've posted several times how you hold RDS dot B & the forum has many threads all dealing with the pleasant fact that the UK, generally speaking, imposes no withholding tax on dividends paid to foreigners.

here is a website with a list of british ADRs trading on US exchanges with no NR tax on their dividends:

http://topforeignstocks.com/foreign-adrs-list/the-full-list-of-british-adrs/

royal dutch shell is an unusual company in that its head office is divided between the UK (RDS.B) & the netherlands (RDS.A.) Dividends on RDS.A are subject to dutch withholding tax. I haven't checked recently but usually the dot B ADRs trade higher because of the no-NR-tax bonus.

another pleasant feature is that the US has decided not to impose an NR withholding tax of its own on ADR dividends, at least not on those paid to canadians. This means that RDS dot B have neither UK nor US withholding tax, can safely be held in TFSA as a US dollar-denominated security with no NR tax.

recently, some ADR providers - these are all big new york city banks - have begun charging noticeably high "fees" on ADR dividends. Most brokers are passing these fees on to investor clients. IMHO this is a downer.

.


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## Drauss (Nov 29, 2016)

Just an update on this thread that I started a while back

After owning both Royal Dutch Shell and Softbank, I can confirm that the former has not withholding tax (I get the full thing) while the latter had withholding tax.


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