In its role as a U.S. tax withholding agent, DTC provides users with access to the U.S. Tax Withholding service.
DTC notifies participants of taxable events on their securities held at the depository and informs participants of the “election window” during which they must send withholding rate instructions to the depository. The election window generally extends from one day after the record date (“record date +1”) to one day before the payable date (“payable date -1”). Record date is the date established by the security issuer that determines which shareholders are entitled to dividend payments.
DTC generally pays dividends, interest, or other distributions to participants on the payable date, net of appropriate withholding tax in accordance with participants’ instructions.
DTC follows the escrow procedure for distributions subject to Section 302 of the Internal Revenue Code.
As part of the service, DTC prepares settlement statements that reflect the gross distribution amounts and tax amounts withheld at each designated rate. Additionally, DTC remits the withheld tax to the IRS on a timely basis to prepare and deliver year-end 1042-S tax forms to participants.
Please note: The information contained herein regarding the DTC U.S. Tax Withholding Service is not tax advice and is not intended to be a substitute for obtaining tax advice from an appropriate professional adviser. You should consult your own tax advisor regarding the applicability of any federal, state, local and non-U.S.tax laws.