New US Withholding Tax

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Hey there! I’ve been holding positions in Brookfield Renewable Partners LP and Granite Real Estate Investment Trust. Wealthsimple just sent me an email warning about a new 10% US withholding tax that these shares will be subject to.
https://help.wealthsimple.com/hc/en-ca/articles/11075214113179
This seems very strange, since these are both Canadian companies. But if this is legit, would it be worth looking into something else in these asset classes?

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Asked on December 12, 2022 4:22 pm
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Hey there - so it seems like BEP.UN, BIP.UN and GRT.UN are not impacted by this issue.

Here is a formal reply from Granite:

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Due to the way Granite holds its US assets, Canadian residents are subject to US withholding on its US sourced dividends. A portion of the distributions received from Granite REIT are sourced from US dividends. This relates specifically to 1446(a) withholdings on distributions. 1446(f) withholdings, relate to the withholding on the sale of partnership interests by non-residents, which includes Canadians.

We have determined that Granite Real Estate Investment Trust, being considered a partnership for US tax purposes, is considered to be a Publicly Traded Partnership (“PTP”) per 1446(f) of the Code, and does not have any Effectively Connected Income (“ECI”). As such, Granite provides a Qualified Notice to CDS/DTCC each month with its standard 1446(a) Qualified Notice. Please see attached the Qualified Notice for the month of December 2022. In addition, the Qualified Notice will be posted to our website every month at the following link: https://granitereit.com/monthly-qualified-notice/. This should satisfy the requirements that withholding taxes should not be required on the transfer of the stapled units of Granite Real Estate Investment Trust when they are sold by investors.

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Brookfield issues a similar Qualified notice and much like Granite should satisfy the requirements to avoid the withholding taxes on units sold by investors. This from their website:

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Am I subject to U.S. tax withholding under IRC Section 1446(f) on the disposition of Brookfield Renewable Partner units?

We do not expect non-U.S. investors to be subject to U.S. tax withholding under IRC Section 1446(f) on the disposition of their units. Brookfield Renewable Partners has not been and does not expect to be engaged in a U.S. trade or business within the meaning of Treas. Reg. Sec. 1.1446(f)-4(b)(3)(ii)(A)(2). Brookfield Renewable Partners intends to issue qualified notices in accordance with Treas. Reg. Sec. 1.1446(f)-4(b)(3)(iii) as applicable.

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So all in all, should be all good.

Mat

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Posted by Mathieu Litalien
Answered on December 12, 2022 5:37 pm
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Same question for me and would we be in the clear with BEP C and BIP C on the TSX? Thank you!

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Posted by Stephen Marshall
Answered on December 12, 2022 5:19 pm
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I posted the same thing twice and I don't know how to delete it...

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Posted by Stephen Marshall
Answered on December 12, 2022 5:19 pm