The Canada Revenue Agency (CRA) has introduced a new rule that requires residents of countries with which Canada has a tax treaty to certify that they are resident in that country in order to continue to have non-resident tax withheld from dividends paid by Canada-based corporations at the “tax treaty” rate.

The Convention Between the United States of America and Canada with Respect to Taxes on Income and Capital, first executed in 1980 and updated most recently in 2008, generally reduces withholding on dividends paid by Canada-based corporation to US-based investors to 15 percent, with some qualifications.

This marks a change from the previous CRA view that merely residing in such a country was sufficient to qualify for the treaty tax rate.

Failure to provide the verification the CRA requires will result in withholding on all distributions paid on or after Jan. 1, 2012, at 25 percent as opposed to the 15 percent “tax treaty” rate. So clearly this new rule, issued sometime in mid-2011, is of potentially great consequence for US-based investors who hold dividend-paying Canadian corporations.

Practically speaking, if you’re an investor who holds dividend-paying corporations in accounts with major brokerages such as Fidelity and including niche brokerages such as Pennaluna & Company, it’s unlikely you’ll be affected by this new rule.

Fidelity and Pennnaluna, hold stock for you, the “beneficial owner,” in “street name.” They are more likely than not already in possession of the information and equipped with the means to provide the CRA in Canada the verification it requires.

The CRA has issued its rule, which is available here, and provided a form for “Canadian payers” to submit, which can be found here. (“Canadian payers” in this context refers to Canada-based dividend-paying corporations, which are required to remit the appropriate tax withheld to the CRA. This is accomplished through the Canada-based company’s transfer agent.)

Ambiguity arises, however, because the new rule does not specifically require use or submission of the form. US firms would prefer to maintain current procedures for verification through US-based Depositary Trust Corporation (DTC), for example, that utilizes their own account opening and certification procedures and the documentation resulting therefrom.

When you opened your account with Fidelity or with Pennaluna, you provided a significant amount of identifying information that can be repurposed to satisfy CRA. Fidelity and Pennaluna both clear transactions through Fidelity-owned National Financial Services Inc (NFS), the third-largest securities transaction clearing corporation in the US.

NFS is currently evaluating the new regulation and its requirements. NFS, along with peers through the Securities Industry and Financial Markets Association (SIFMA), a securities industry trade group represents broker/dealers, banks and asset management companies in the US and Hong Kong, have sought clarification of the rule and how it will be able to satisfy it.

US-side firms are also seeking an extension of the Jan. 1, 2012, effective date in order to provide time to craft a single solution usable across US-based firms.

The bottom line is that if you have an existing account, your brokerage probably has enough information and sufficient means to provide the verification the CRA in Canada requires. Of course there may be particular account types or specific CRA requirements that dictate a different registration procedure depending upon discrete circumstances. In the main, however, this should take place with nary a ripple on “beneficial owners” portfolios.

At this point it’s probably not necessary to contact your broker to make sure they’re on top of this issue. Brokerages, transfer agents and clearing houses on the US side of the border are aware of the issue and at this point there’s no reason to question the fact that their interest lies in keeping their US clients happy.

There is a separate group of shareholders for whom this new CRA rule may have different implications: registered shareholders. You’re a registered shareholder if the stock you own is registered in your name on the underlying company’s books, which is kept by the company’s transfer agent, and you’re in physical possession of a certificate that represents your ownership interest. Beneficial owners’ shares are held in what’s called “street name” because their stock is registered in the name of their brokerage firm on the issuer’s books. Such brokerage holds stock in “book entry” form.

Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE), for example, issued a press release last week and notified its shareholders of the impending change, a proactive step it took because of the fact that a significant proportion of its shareholder base is comprised of individual investors as opposed to institutions. According to Penn West:

Registered non-resident shareholders whose names appear on the records of the registrar and transfer agent of Penn West will receive a form directly from Penn West’s transfer agent requesting information to confirm tax treaty eligibility. Until such form is completed and returned to Penn West’s transfer agent, any applicable Tax Treaty Rate will not be applied. To qualify for any applicable Tax Treaty Rate on Penn West’s fourth quarter dividend of $0.27 per share payable on January 13, 2012, registered non-resident shareholders must return such form to Penn West’s transfer agent on or before December 30, 2011.

Non-registered, non-resident shareholders’ eligibility for any applicable Tax Treaty Rate will be determined by each shareholder’s broker and not by Penn West or its transfer agent. Non-registered shares are generally held in a brokerage account and are thus registered in the name of the investor’s broker or a depositary. Certain brokers may require additional information or certifications in order to determine a non-registered shareholder’s eligibility for any applicable Tax Treaty Rate. Non-resident, non-registered shareholders are encouraged to contact their brokers or other tax, legal or financial advisors in the event that they have any questions or concerns in this regard.

Registered shareholders of Penn West stock should complete and remit this form as soon as possible. If you are a registered shareholder of any other Canada-based dividend-paying corporation, whether it was ever a trust or not, complete any such forms if they’ve already been forwarded to you. If you are a registered shareholder of a dividend-paying Canadian corporation and haven’t received such notification as Penn West has provided, it might be a good idea to send an e-mail or phone an investor relations representative at the relevant company.

We’ve contacted the Canada Revenue Agency for clarification of the status of deadline-extension discussions with SIFMA and will provide updates for Canadian Edge subscribers via Flash Alert if necessary and in any case in the December issue, which will be published Friday, Dec. 9.

The Roundup

The biggest of Canada’s Big Six banks are in position, once again, to grab market share as weakened competitors abandon businesses to cope with effects of bad debts, this time concentrated in Europe. Results for the three months ended Oct. 31, the Big Six banks’ fiscal fourth quarter, and the full year confirm that Canada is still home to one of the soundest financial systems in the world. Worries that capital markets operations would be spoiled by turmoil in Europe and mar overall results for all the banks proved unfounded, as domestic real estate lending continued, although net interest margins were generally compressed.

One of the basic pillars of the Canada story is still intact, however, and it’s an important one. Canadian consumers continue to be supported by sufficient income and are plenty optimistic to support loan growth. Strength at home is a good foundation for growth abroad at the expense of retiring European financial behemoths.

Although not totally immune to what’s happening in Europe, core operations for the Big Six remain solid, underpinned by solid fundamentals. Canada’s economy expanded at a 3.5 percent annualized pace in the third quarter, led by the biggest jump in exports since 2004, according to Statistics Canada. Canadian spending on housing rose 2.6 percent, the fastest since the start of last year.

Canadian Imperial Bank of Commerce (TSX: CM, NYSE: CM) led off fourth-quarter and full-year 2011 reporting season for the Big Six last Thursday with net income of CAD794 million (CAD1.89 per share) up from CAD500 million (CAD1.17 per share) a year ago. Quarterly revenue was off 1.6 percent to CAD3.2 billion.

For the year CIBC’s profit was CAD3.1 billion (CAD7.31 per share), up from CAD2.5 billion (CAD5.87 per share) in fiscal 2010.

Earnings excluding one-time items came in at CAD1.87 per share to beat a consensus estimate of CAD1.80. CIBC set aside CAD243 million for bad loans, up from CAD150 million a year earlier. Domestic lending and business banking profit grew 15 percent to CAD580 million from CAD505 million a year ago, on higher revenue in personal and business banking and lower loan losses. Wealth management, including mutual fund sales, posted 20 percent profit growth to CAD65 million, helped by the acquisition of a 41 percent interest in American Century Investments from JPMorgan Chase & Company (NYSE: JPM) in August.

Investment banking generated CAD172 million in net income, which reversed a loss of CAD56 million a year ago due to structured-trading losses and corporate loan hedges. CIBC’s corporate unit, which includes its Caribbean banking operation, posted a CAD23 million loss, on top of a CAD3 million loss a year ago. Overall loan-loss provisions were CAD243 million, up from CAD150 million a year earlier because of CIBC FirstCaribbean and its leveraged finance business in Europe.

CIBC boasts a Big Six-best 14.7 percent tier 1 capital ratio. It’s a hold.

Toronto-Dominion Bank’s (TSX: TD, NYSE: TD) fourth-quarter profit increased 58 percent to CAD1.57 billion, or CAD1.69 per share, a it, too, enjoyed what continues to be a resilient Canadian economy and domestic housing market.

Canadian consumer profit rose 17 percent to CAD905 million because of higher revenue from personal banking and auto lending. US consumer lending earnings jumped 16 percent to CAD328 million. The TD Securities investment-banking unit profit climbed 33 percent to CAD288 million, while wealth management earnings, which includes TD Ameritrade, rose 28 percent to CAD193 million. Earnings for the year were a record CAD5.89 billion. Capital markets income was off, by 25 percent to CAD278 million, but not enough to offset continuing strength elsewhere.

Excluding one-time items TD earned CAD1.77 per share, versus a consensus estimate of CAD1.54 per share. Cash earnings were CAD1.11 per share against analyst expectations of CAD0.97 per share. TD’s tier 1 capital ratio as at Oct. 31 was 13.0 percent. Toronto-Dominion Bank is a hold.

Bank of Nova Scotia’s (TSX: BNS, NYSE: BNS) fourth-quarter profit grew 11 percent, beating expectations on the back of its still-strong domestic operation as well as better traditional banking and wealth management results outside Canada. Scotiabank, Canada’s No. 3 bank in terms of assets, reported earnings of CAD1.24 billion (CAD1.07 per share), up from CAD1.12 billion (CAD1 per share) a year ago. Cash earnings were CAD1.10 per share, beating a consensus estimate of CAD1.08.

Domestic banking net income was CAD460 million, up from CAD441 million a year ago, as higher loan volumes offset lower net-interest margin. Scotiabank’s global wealth management operation turned a CAD250 million profit, up from CAD62 million on the acquisition of DundeeWealth. The international group generated net income of CAD373 million, up from CAD338 million. Capital markets’ profit sagged to CAD230 million from CAD273 million on Europe-driven volatility and fear hurt demand for deal-making services.

Loan-loss provisions were up to CAD272 million from CAD254 million due to more set-asides for international loans, though domestic provisions were lower, an indication that Canada continues to avoid the worst of what ails the world. Non-interest expenses ticked up to CAD2.52 billion from CAD2.18 billion. Bank of Nova Scotia, with a tier 1 capital ratio of 12.2 percent, is a buy under USD60.

Royal Bank of Canada (TSX: RY, NYSE: RY), No. 1 among the Big Six in terms of assets, posted fourth-quarter net income growth of 43 percent to CAD1.6 billion (CAD1.07 per share) from CAD1.12 billion (CAD0.74 per share) during the three months ended Oct. 31, 2010. Revenue for the period was flat at CAD6.08 billion.

Canadian banking profit rose 18 percent to CAD904 million, as home-equity loans, personal and business deposits and business loans grew. Overall loan-loss provisions fell 17 percent.

Wealth-management earnings rose 8 percent to CAD189 million, while insurance profit surged 58 percent to CAD196 million. RBC Capital Markets’ investment-banking operations posted a 25 percent decline in net income to CAD278 million, on lower fixed-income trading due to “challenging” market conditions. Royal Bank is the most exposed of Canada’s banks to Europe because of the magnitude of its capital markets and trading businesses. Trading revenue declined by more than half to CAD279 million.

International banking, which includes Caribbean operations and the RBC Dexia partnership but not the US RBC Bank that’s being sold, generated a profit of CAD12 million, compared with a CAD7 million loss a year earlier.

Fourth-quarter profit excluding one-time items was CAD1.63 billion (CAD1.09 per share), up 19 percent from a year ago. Full-year earnings were CAD4.85 billion (CAD3.19 per share), down from CAD5.22 billion (CAD3.46 per share) in fiscal 2010. Royal Bank’s tier 1 capital ratio as of Oct. 31 was 13.3 percent. Royal Bank of Canada is a hold.

Bank of Montreal (TSX: BMO, NYSE: BMO) reported today that net income for the three months ended Oct. 31 was up 21 percent to CAD897 million (CAD1.34 per share) from CAD739 million (CAD1.24 per share) a year ago. Revenue was up 20 percent to CAD3.88 billion, driven by the acquisition of Wisconsin-based Marshall & Ilsley.

BMO is the first of the Big Six to miss analysts’ forecasts for fourth-quarter earnings, as its CAD1.27 adjusted per-share earnings figure fell short of the CAD1.31 the Street expected. The bank had higher loan-loss provisions than analysts had anticipated, and solid US consumer lending and private banking results weren’t enough to overcome.

Loan-loss provisions rose 15 percent to CAD290 million from CAD253 million a year ago.

Canadian consumer-banking profit rose 1.4 percent to CAD424 million, as volume growth from banking products was hurt by declining net interest margins. The difference between what a bank charges for loans and what it pays in deposits was 2.78 percent, a two-year low.

Profit from US consumer lender BMO Harris Bank more than tripled to CAD156 million on the CAD4.1 billion Marshall & Ilsley deal, which  doubled the US branches and deposits of Chicago-based BMO Harris Bank. The BMO Capital Markets investment-banking business posted net income of CAD149 million, down 30 percent from a year earlier. Trading revenue fell 41 percent to CAD128 million. Revenue from underwriting and advisory fees was CAD76 million, less than half that of a year earlier. BMO’s private-client group, which includes insurance and mutual funds, grew net income 12 percent to CAD144 million.

Bank of Montreal, which reports a tier 1 capital ratio of 12.01 percent as of Oct. 31, 2011, is a hold.

National Bank of Canada (TSX: NA, OTC: NTIOF) will round out reporting season for the Big Six on Dec. 8.

Following is a list of fourth-quarter and full-year reporting dates for Canadian Edge Portfolio Holdings.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Mar. 8, 2012 (estimate)
• Artis REIT (TSX: AX-U, OTC: ARESF)–Mar. 2, 2012 (estimate)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Mar. 19, 2012 (estimate)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Mar. 2, 2012 (estimate)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPUF)–Feb. 16, 2012 (estimate)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Feb. 16, 2012 (estimate)
• Capstone Infrastructure Corp (TSX: CSE, OTC: MCQPF)–Mar. 12, 2012 (estimate)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Feb. 10, 2012 (estimate)
• Colabor Inc (TSX: GCL, OTC: COLFF)–Mar. 8, 2012 (estimate)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Mar. 8, 2012 (estimate)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Feb. 23, 2012 (estimate)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Mar. 1, 2012 (estimate)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Mar. 21, 2012 (estimate)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Mar. 23, 2012 (estimate)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Feb. 10, 2012 (estimate)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Feb. 17, 2012 (estimate)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Mar. 9, 2012 (estimate)
• Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF)–Mar. 9, 2012 (estimate)
• Provident Energy Ltd (TSX: PVE, NYSE: PVX)–Mar. 9, 2012 (estimate)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Feb. 29, 2012 (estimate)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Feb. 29, 2012 (confirmed)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Feb. 8, 2012 (estimate)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Mar. 14, 2012 (estimate)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–Feb. 10, 2012 (estimate)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Feb. 23, 2012 (estimate)
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–Mar. 16, 2012 (estimate)
• Daylight Energy Ltd (TSX: DAY, OTC: DAYYF)–Mar. 1, 2012 (estimate)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–Feb. 24, 2012 (estimate)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Mar. 2, 2012 (estimate)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Mar. 14, 2012 (estimate)
• Penn West Petroleum Ltd (TSX: PWT, NYSE: PWE)–Feb. 23, 2012 (estimate)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Mar. 9, 2012 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Mar. 7, 2012 (estimate)
• Student Transportation Inc (TSX: STB, OTC: STUXF)–Feb. 14, 2012 (estimate)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–Feb. 29, 2012 (estimate)