U.S. ITIN Requirements for PTPs

Canadian residents who own shares of a U.S. publicly traded partnership (PTP) in their Canadian investment account may be asked by their brokerage to obtain a U.S. individual tax identification number (ITIN). This article discusses the IRS ITIN process to follow when a Canadian resident owns units of a U.S. PTP.

The Broker And The Withholding tax

All publicly traded investments in Canadian brokerage are in the nominee’s name: While you have the beneficial ownership of the investments in your account at the brokerage, the brokerage is the registered owner (the nominee).

The brokerage must withhold and remit the tax on distributions (37%) and upon the sale (10%) of a PTP to the IRS and provide the beneficial owner with a U.S. form 1042-S.

Form 1042-S is used to report withholding taxes on investments held by non-U.S. persons, so providing an ITIN is not required. However, you may be entitled to a reduced withholding if you provide an ITIN to the broker.

IRS ITIN Application Requirements

An ITIN may be applied for using IRS form W-7 and providing original identification confirming you are a non-U.S. person. To avoid sending your original identification to the IRS, you can use the services of a Certifying Acceptance Agent to assist with the W-7 application and certification of your identification.

As a non-resident partner of a PTP, you must include a copy of the portion of the partnership agreement displaying the partnership’s employer identification number (EIN) and showing that you’re a partner in the partnership conducting business in the United States (Exception 1a).

If you hold the PTP units in a brokerage account, you cannot obtain documentation confirming you are a partner. In this case, you must wait for the brokerage to issue the 1042-S after the end of the tax year, and you can submit your W-7 application with a U.S. 1040NR tax return.

Most Canadians holding U.S. PTPs will not qualify to apply for an ITIN in advance and must wait until they receive a 1042-S and attach the ITIN application to the U.S. 1040NR tax return.

Dean Paley

A graduate of Simon Fraser University, Dean started and operated an independent painting company while perusing a degree at SFU. After graduating from Simon Fraser, Dean entered the Certified General Accountants Program of Professional studies where he obtained the professional CGA designation. After a number of successful years as the head of finance for the Canadian operations in a global financial services firm, Dean moved into a marketing role and established and launched a tax, estate and financial planning support department and service to advisors and clients. During this time Dean successfully obtained the Certified Financial Planner (CFP) designation. Dean has been a member of the Canadian Forces Reserve spanning three decades serving in the Royal Westminster Regiment (B.C.), the Military Police and later as a commissioned officer in the Cadet Instructors Cadre in Hamilton Ontario. Dean Paley CGA CFP has been interviewed and quoted in major media such as the National Post, Financial Post, Toronto Star, Canadian Business, Money Sense and Investment Executive. Dean is married to his lovely wife Deborah and has four lovely children.