Canadian Unitholders

The following information provides a general explanation of the Canadian and U.S. tax treatment of holding units of American Hotel Income Properties REIT LP.

Eligibility For Canadian Tax-deferred Plans

An AHIP unit is a qualified investment for RRSPs, deferred profit sharing plans, RRIFs, registered education savings plans, registered disability savings plans and TFSAs.

Communication of Tax Information:

After the end of AHIP's taxation year, income for Canadian tax purposes is determined and allocated to all unitholders that are in turn required to report such income in their respective tax returns.  The allocation of income for Canadian tax purposes is communicated to Canadian unitholders using Form T5013.  

Canadian unitholders should receive a Form T5013 from their broker. AHIP uses the CDS Innovations facility to provide information to brokers so that they can produce T5013 Forms. If you have any questions about your Form T5013, please contact your broker or investment advisor. If units are held in a registered account, no tax slips will be issued.  

The following file is provided for information purposes only: 2019 CDS File

AHIP Distributions:

The income AHIP earns includes dividends and interest paid by its subsidiaries in the U.S.  Such dividends are treated as foreign source dividends.  Therefore, AHIP's distributions are not considered "Eligible Dividends" for Canadian tax purposes.

U.S. Withholding Tax

For investors holding AHIP units in non-registered accounts:
As required under relevant tax rules, U.S. withholding tax is deducted from monthly distributions and remitted for taxable unitholders to the Internal Revenue Service in the United States based on management’s estimates of ordinary dividends distributed by AHIP’s U.S. subsidiaries. A unitholder's U.S. final tax liability is determined after year-end based on the actual breakdown of ordinary dividends for U.S. tax purposes.  Such breakdown will be posted once year-end tax information becomes available.  Where tax withheld from monthly distributions exceeds a unitholder's actual U.S. tax liability, such excess should be refundable.  Unitholders should consult with their brokers on the refund of such excess under the "collective refund mechanism".

 
I. The information included in the above CDS posting does not include US tax withheld by brokers in respect of their clients who are unitholders of AHIP. 

a) AHIP does not have the relevant information to complete Box 171 of T5013 (and Box 17 of R15).  Unitholders should contact their brokers for copies of T5013 (and R15) or for any questions related to these forms.

b) Brokers should report in Box 171 of T5013 (and box 16 of R15) "foreign tax paid on non-business income" the Canadian dollar equivalent of the amount of U.S. tax liability, which is determined by multiplying "gross income" in Box 2 and "tax rate" in Box 3b pursuant to Form 1042-S Foreign Person's U.S. Source Income Subject to Withholding (the copy with income code 06 in Box 1 for ordinary dividends for U.S. tax purposes).

c) Brokers are required by the United States' Internal Revenue Services to report U.S. tax withheld, if any, in respect of each unitholder on Form 1042-S and issue Form 1042-S to unitholders in a timely manner, upon request by unitholders.

II. U.S. withholding tax, if any, reported in Box 171 of Form T5013 relates solely to “foreign dividend and interest income” related to Box 135 of Form T5013.

Foreign-source income Corresponding U.S. withholding tax
Foreign dividend and interest income See Box 171 of Form T5013
Foreign capital gains (losses) Nil

III. The following summarizes the US withholding tax rates generally applicable to unitholders:

Summary of Applicable U.S. Withholding Rate on Ordinary REIT Dividends
Investor Type Rate of U.S. Withholding Tax Access to Canadian Foreign Tax Credit Deductions?
Canadian Individual 1,3 15% Yes
Canadian RRSP 1 0% N/A
Canadian TFSA 3,4 15% N/A
Canadian Corporation 1,3,5 15% Yes
U.S Investor 0% 6 N/A
Non-North American Investor Various 7 N/A
  1. Assumes a Canadian Unitholder is a Canadian resident eligible for all the benefits of the Canada/US Treaty.
  2. Subject to the general rules and limitations in the Income Tax Act governing foreign tax credits and foreign tax deductions and investor-level circumstances, including, among other things, sufficient US source income or tax otherwise payable.
  3. If investor is a more than 10% Unitholder or if the investor does not provide their broker with the appropriate IRS W-8 form, the US withholding tax rate will generally be 30%.
  4. Assumes the TFSA is a disregarded entity and the beneficiary or annuitant of the TFSA is a Canadian individual or Canadian corporation entitled to all the benefits of the Canada/US Treaty.
  5. Assumes US REIT is diversified at the time of the REIT distribution. Very generally, a REIT is diversified if the gross value of no single interest in real property held by the REIT exceeds 10% of the gross value of the REIT’s total interest in real property.
  6. Unitholders who are US persons generally are not subject to US withholding tax as long as they provide their broker with the appropriate IRS form (e.g., W-9) and US tax identification number indicating their status as US persons.
  7. The rate of US withholding applicable to non-North American Unitholders depends on whether there is a tax treaty between the US and the Unitholder’s country of tax residence, the reduced treaty withholding rate pursuant to such treaty (if any), and whether the Unitholder is eligible for the benefits of such treaty. Non-North American Unitholders should consult their tax advisors concerning the US withholding rate applicable to them.

IV. The income AHIP earns from its underlying subsidiary is US-source dividends paid by such subsidiary. Such dividends are subject to U.S. withholding tax. As AHIP is a “flow-through” entity for Canadian and U.S. income tax purposes, a portion of the income may be subject to U.S. withholding taxes (including back-up withholding tax). The rate of withholding varies depending on, amongst other factors, a unitholder’s country of tax residence, type of ownership account, and whether a unitholder provided his/her broker with the appropriate Internal Revenue Service (“IRS”) Form (for example, Form W-8BEN, W-ECI, W-8EXP, W-8IMY or W-9). The type of documentation for U.S. withholding tax purposes will differ depending on a unitholder’s tax profile for U.S. tax purposes. We encourage unitholders to submit the appropriate IRS Form to their broker so their account can be certified and the most appropriate rates of withholding can be applied to distributions.

How do I claim my U.S. foreign tax credit on my Canadian Income Tax Return?

Each unitholders' share of ordinary dividend for U.S. tax purposes as well as the amount of U.S. tax withheld, if any, will be reported on Form 1042-S (Foreign Person's U.S. Source Income Subject to Withholding), which unitholders receive from their respective brokers.  AHIP is not a withholding agent and therefore does not provide Form 1042-S to unitholders.  Unitholders should consult their brokers for copies of Form 1042-S or for any questions related to Form 1042-S.

 For assistance in calculating the portion of U.S. withholding tax relevant to determining your foreign tax credit, please see:  AHIP Withholding Tax Calculations