New Requirements for Investment Clubs that Own Canadian Securities
Posted by: Doug Gerlach 4/10/2013 9:41:07 PM

Investment clubs that hold stocks of Canadian companies may be asked by their brokerage firms to complete a form provided by the Canadian Revenue Agency. Here's what you should do.

The Canada Revenue Agency recently changed their requirements regarding withholding for non-Canadian-based partnerships that hold Canadian stocks. Brokerage firms as agent/nominees for these clubs must document the withholding status of U.S.-based partnerships, and so have been sending a form from the Canada Revenue Agency to qualifying clubs for them to complete.

The form is NR-302, "Declaration of Eligibility for Benefits Under a Tax Treaty for a Partnership with Non-Resident Partners." To complete the form, fill out fields 1 through 3 with the partnership's name, mailing address, and U.S. tax identification number. In #5, specify "Dividends" and "15%" for both the Effective Rate of Withholding and the Treaty Exemption Percentage. See the following example:

Sign and date the form at the bottom and return this form to your brokerage as they specify.

If your club is an LLC or other entity, then it must use Form NR303.

Additionally, each partner in the club must also complete Form NR301 and the completed Forms NR301 must be maintained in the club's permanent records.

Note: The above example can only be used if all of your members are residents of the U.S. for tax purposes. If this isn't the case, consult the CRA website for further information.