CRH’s move to US listing has shareholder in a spin

I’m a small shareholder in CRH and have received a form from them regarding the change to US listing. I’m a little confused by questions on the form about Foreign Tax Payer Identification and Claim of Tax Treaty benefits. I am sure I am not alone. I assume this is my PPS number and that Ireland has a tax treaty with the US. Is that right?

I should say that CRH / Computershare mention that a help line number will be set up for queries but they will not give out this number until September 25th which is after the form is due to be returned.

Mr B. McC.

The move by Ireland’s largest listed business to a primary listing in the US is a big tipping point for the Irish Stock Exchange and the army of small retail shareholders resident here.

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News last week that Smurfit Kappa is planning a $19 billion (€17.75 billion) merger with US rival WestRock, which will inevitably mean a New York primary listing even if the company remains technically headquartered here, makes the impact even more relevant for Irish investors.

Between them, the two companies account for just shy of 30 per cent of the value of the Irish exchange. CRH alone accounts for more than a fifth of the Irish market’s value. Add in Flutter, which has signalled its intention to take a secondary listing in the US, where the majority of its revenues now come from and which many see as a prelude to a primary listing in a market that is seen as offering stronger valuations for stocks, and you lose 43 per cent of the Irish market.

And a report by the Department of Finance has warned that food ingredients giant Kerry and Glanbia, and insulation materials specialists Kingspan, might go the same way.

This comes as the Minister considers options to preserve the integrity of a local stock exchange that delivers €500 million in tax revenue for the State through the 1 per cent stamp duty charged on transactions – a bone of contention for the industry and private investors.

Outgoing Glanbia chief executive Siobhán Talbot said the Kilkenny-based group was not looking at a US listing “at this point in time”. However, the business has already changed its reporting currency to dollars and most of its revenues come from the US. It generates more than 90 per cent of its earnings in dollars.

All six are top-10 constituents of the Iseq, the Irish market, accounting for 71.25 per cent of the index. If all departed, the only companies of note left on the Irish market would be Ryanair and the two big banks.

The trend appears to be going only one way, so if you are a small scale investor in Irish shares it is certainly worth familiarising yourself with what the move might mean for you.

[ CRH increases dividend on ‘strong’ first-half earnings ahead of US listing ]

Of course, some shareholders are already familiar with the US way of doing things through their ownership of shares in American telecoms group Verizon – part of the legacy of an ill-fated initial investment in Telecom Éireann back in 1999 – but, even there, I am told there are some differences.

Not all US-listed companies are alike, according to Computershare, the share registrar specialists who are managing the switch to the New York market for CRH.

US withholding tax

You’re not the only CRH shareholder to be in touch as they figure out what they need to do. The form you have received is called a W-8BEN form and you need to fill it out to avail of measures contained in the double taxation agreement between Ireland and the United States to ensure that you are not overtaxed on dividends from companies listed in the US.

Until this week, I was clear in my mind that dividend income from US shares was subject to withholding tax at 30 per cent. Filling in the W-8BEN cut this to 15 per cent for Irish tax residents.

That was important, especially for lower-rate income tax payers. When you fill in your annual tax return in Ireland, you will get credit for tax paid on US dividends but if you are only paying tax here at 20 per cent, as many – especially older -taxpayers might be, that is the maximum you can offset against US withholding tax.

Use the W-8BEN form and you are fine as you will only have had 15 per cent of the US dividend withheld and will pay the balance – 5 per cent – to the Irish Revenue. But if you have already had 30 per cent of the dividend retained because you failed to fill out the form, you will still only be allowed 20 per cent – so you will be out of pocket for 10 per cent of every dividend as you will get no refund of the balance form the US. That seems careless.

As I say, until last week, I thought the 30 per cent/15 per cent structure applied to all US dividends, but apparently not. According to the tax experts at Computershare – who are far more competent than I am in this area – it applies only to dividends that are US-sourced.

I understand this to mean from companies that have their legal headquarters in the US. although I stand to be corrected on that. It certainly does apply to Verizon. However, it will not apply to CRH as it has confirmed to the authorities that its dividend will not be US-sourced.

For Irish-resident CRH shareholders, Computershare says dividends will continue to pay net or Irish dividend withholding tax, which is currently 25 per cent. The usual 30/15 per cent US regime will not be relevant.

However, Computershare says that it will be obliged by US tax authorities to apply an additional “backup withholding tax of 24 per cent on dividend payments” unless the W-8BEN is completed and returned to Computershare.

Essentially – god bless the convolutions of the US tax system – this additional tax does not come under Chapter 3 income (subject to the 30/15 per cent regime) but under Form 1099 income. You’ll need to trust me on this, or rather trust Computershare – because it took me the guts of a week to get my head around it.

So what, you say? It means you had better fill in that form. If you do, the backup dividend withholding tax falls to zero and you are just deducted the Irish dividend withholding tax; if you fail to do so, then you will be getting just 51 per cent of your dividend.

While you might be able to recover some of that if you are a 40 per cent income tax payer here, if you are a standard rate tax payer, you will simply get the extra 5 per cent Irish dividend withholding tax back and none of the US surcharge.

Filling the form

Getting back to your other issues with the form provided by Computershare, when it comes to the space for your foreign tax identification number (TIN), what they are looking for is your Irish PPS number. To be fair, the associated instructions sent to me along with the form when I asked for details do state this clearly.

I am told that if you do have a US social security number – dating back perhaps to earlier US employment even under the J1 summer working holiday scheme – it should be included at the line above that where it asks for a US taxpayer identification number, but I suspect this might cause unnecessary complications.

Outside of that, you need only to amend your name and mailing address if it is not correct (leave it alone if it is), supply your permanent address (for most of us the same as the mailing address) and details of your country of citizenship and date of birth.

Then we come to Question 9 and once again I am confused. It comes under Part II of the form which states specifically: “Part II: Claim of Tax Treaty Benefits (for Chapter 3 Benefits Only).”

My understanding, thanks to the patient folk at Computershare, is that the non-US sourced dividend income doesn’t come under Chapter 3 at all. However, I suggest you take the path of least resistance and put Ireland in the box provided for details of which country’s tax agreement are you seeking a reduced withholding tax rate, and leave it at that.

Then sign and date the form and send it back.

[ Q&A: What Irish CRH shareholders may need to know as firm moves main listing to US ]

To complicate matters, there are other versions of the W-8BEN form that require you to specifically state the reduced rate of tax you are seeking to have applied and under what article of the tax treaty. If you’re doing that, you put down zero, and Article 11.

That other version of the form also has a request at line 7 for a reference number. For any ordinary shareholder using that version of the form, just leave that line blank, but you really are better sticking with the simplified form sent to you as a CRH shareholder by Computershare.

By the way, tax benefits aside, the US Inland Revenue Service (IRS) does require foreign investors in US-listed companies – gratingly referred to as “non-resident alien investors” – to complete the W-8BEN form, so don’t put it off.

And while I’m on that subject, it is worth remembering that you will have to resubmit a W-8BEN every three years as long as you remain an investor in US-listed businesses – by December 31st in year three. I take this to mean that the form you fill in now covers you for 2023, 2024 and 2025 and you’ll have to re-file by the end of 2025 for anything up to another three years.

Helpline

Finally, on the issue of the missing helpline, I can fully understand your frustration. Having a helpline that opens to assist shareholders only after the form they want help with has to be returned is less than useful. However, that’s not really the case.

I know the letter you received does state in bold at line 2.6 of the that a dedicated helpline will be available to help shareholders post-September 25th when the actual primary listing moves to New York, but this is under a section that specifically covers issues “following 25 September 2023″.

Previously, at point 2.2 in the section covering issues “prior to 25 September 2023″, Computershare provides details of the contact centre that is currently available to help shareholders who may be confused in filling out their forms.

If you are in the Republic, the number is 01-6968467; if you are up North, you call 0370-7071398. Computershare tells me that both of those numbers will automatically route you through to the company’s US-based team if you are calling after September 25th.

The line is open Monday to Friday (other than bank holidays) from 9am to 5pm, Computershare says. Otherwise, you can email WebCorres@computershare.co.uk with your query or by mail to: Computershare, 3100 Lake Drive, Citywest Business Campus, Dublin 24 D24 AK82.

Once the switch takes place, any paper share certificates in CRH will no longer be valid and the details will instead be held electronically. You will be issued with a holder account number (HAN) that you will need to quote in any future (post- September 25th) dealings with Computershare regarding your holding along with a statement of holding by post shortly after the switch – another reason to make sure your mailing address is up to date.

The existing shareholder reference number (SRN) used to identify your shareholding will not be relevant from that time forward but do hold on to it as it will still be needed if you want to chase up historic shareholding details on Computershare Ireland’s online investor centre.

Some shareholders in CRH, put off by the potential complexities of the change of listing, might want to sell their shares. If so, they need to move quickly as the switch is taking place in less than a fortnight – on September 25th.

The company says that the 2023 interim dividend will be paid on November 22nd this year for shareholders still on the register as of October 20th. It is slightly later than usual but the company says this is to allow time to sort out all the US registration details above.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice