General U.S., Canadian and Australian Tax Summary
The following discussion is intended to provide a general explanation of the U.S., Canadian and Australian tax treatment of holding Brookfield Infrastructure Partners units. For a more detailed and comprehensive discussion of the U.S. and Canadian tax treatment please refer to Brookfield Infrastructure Partners' most recent annual report on form 20-F.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular holder of Brookfield Infrastructure Partners units, and no representation with respect to the U.S., Canadian and Australian income tax consequences to any particular holder is made. Consequently, holders of Brookfield Infrastructure Partners units are advised to consult their own tax advisors with respect to their particular circumstances.
Characterization of Brookfield Infrastructure Partners for Tax Purposes
Brookfield Infrastructure Partners L.P. is a Bermuda based limited partnership that is treated as a partnership for U.S. and Canadian tax purposes. Brookfield Infrastructure Partners is not a corporation or a trust. Brookfield Infrastructure Partners is a publicly traded partnership that does not earn active business income. Instead, Brookfield Infrastructure Partners earns interest and dividends from subsidiary corporations in various jurisdictions that carry on infrastructure businesses.
Brookfield Infrastructure Partners units qualify for IRA accounts. Brookfield Infrastructure Partners is a qualified investment for RRSPs, deferred profit sharing plans, RRIFs, registered education savings plans, registered disability savings plans and TFSAs.
Brookfield Infrastructure Partners is characterized as a corporate limited partnership for Australian income tax purposes. This broadly means Brookfield Infrastructure Partners is treated as a company for Australian income tax purposes.
Partnership ID Numbers
Brookfield Infrastructure Partners' U.S. tax identification number is 98-0544123 and its Canadian tax identification number is 83812 9450RZ0001. Brookfield Infrastructure Partners does not have an Australian tax identification number.
Flow-Through Nature of Brookfield Infrastructure Partners
As a partnership, Brookfield Infrastructure Partners is a so-called "flow through" for U.S. and Canadian tax purposes. That is, Brookfield Infrastructure Partners is not subject to tax, instead its income, (determined under U.S. tax rules using the U.S. dollar as its functional currency and under Canadian tax rules using the Canadian dollar as its functional currency) is subject to tax in the hands of its unitholders.
Income for U.S. and Canadian tax purposes is unlikely to be equal because of (i) the different currencies used to compute the taxable income for each jurisdiction and (ii) the difference in the tax rules of the two countries applicable to the income and expenses of Brookfield Infrastructure Partners and its subsidiaries for a particular taxation year. Also, taxable income may be less than the distributions for a particular period due to returns of capital paid by Brookfield Infrastructure Partners in that period. Brookfield Infrastructure Partner's taxable income will be comprised of various types of income and expenses and may include such items as interest income, foreign source dividends, local source dividends, eligible and qualified dividends, and short-term and long term capital gains.
For Australian income tax purposes , Brookfield Infrastructure Partners is treated as a corporation (i.e, not a "flow-through") and consequently distributions are expected to be unfranked dividends to Australian tax resident unitholders.
Communication of Tax Information
After the end of Brookfield Infrastructure Partner's taxation year (December 31), the U.S. and Canadian taxable income of Brookfield Infrastructure Partners is determined and allocated to all unitholders that are in turn required to report such income in their respective tax returns. The allocation of U.S. taxable income is communicated using Schedule K-1 (not a Form 1099). The allocation of Canadian taxable income is communicated using Form T5013 (not a Form T5).
All unitholders should receive a Schedule K-1 from Brookfield Infrastructure Partners. We are required to use reasonable efforts to send a Schedule K-1 to all unitholders (not just U.S. residents). Consequently, Canadian unitholders may receive a Schedule K-1 in addition to Form T5013. In general, Canadian and Australian resident unitholders may disregard the Schedule K-1 (unless for example, they are a U.S. citizen).
Canadian registered holders of Brookfield Infrastructure Partners units will receive a T5013 directly from Brookfield Infrastructure Partners. All other Canadian unitholders should receive a T5013 from their Canadian broker. Brookfield Infrastructure Partners voluntarily provides Forms T5013 to assist Canadian unitholders with the accurate reporting of taxable income associated with the ownership of Brookfield Infrastructure Partners units.
Brookfield Infrastructure Partners will not be issuing any Australian tax forms. We would generally expect Australian tax resident unitholders to treat Brookfield Infrastructure Partners' distributions as unfranked dividends unless otherwise advised.
If you are a U.S. holder or a Canadian resident registered holder and did not receive your Schedule K-1 or Form T5013, respectively, for the previous taxation year please contact us at
1-866-949-2771 or at www.taxpackagesupport.com/brookfield.
Relationship of Taxable Income to Distributions
The computation of Brookfield Infrastructure Partners' annual U.S. and Canadian taxable income for a particular taxation year is independent of (i) the annual accounting income of Brookfield Infrastructure Partners; (ii) the annual cash generated by Brookfield Infrastructure Partners and (iii) the annual distributions. As an investor in Brookfield Infrastructure Partners, holders are required to pay tax on their proportionate share of Brookfield Infrastructure Partners' taxable income. The U.S. and Canadian taxable income of Brookfield Infrastructure Partners is determined using U.S. and Canadian tax rules and will vary from year to year depending on the nature of the income of Brookfield Infrastructure Partners and its subsidiaries for the particular taxation year. This does not apply to Australian resident unitholders.
Tax Treatment of Distributions
Distributions received by Brookfield Infrastructure Partners' unitholders are not directly taxable in and of themselves. Distributions received reduce the tax cost of Brookfield Infrastructure Partners units. The distributions Brookfield Infrastructure Partners pays do not have a particular character or composition. This does not apply to Australian resident unithlders.
Withholding Tax Treatment of Distributions
The income Brookfield Infrastructure Partners earns from underlying subsidiaries includes dividends and interest paid by subsidiaries in jurisdictions that levy withholding tax. Since Brookfield Infrastructure Partners is a "flow-through" for U.S. and Canadian income tax purposes, a portion of the income may be subject to withholding taxes levied by jurisdictions such as Canada and the U.S. (including back-up withholding tax). The rate of withholding varies, amongst other factors, depending on a holder’s country of tax residence, type of ownership account, and whether holders have provided their broker (or Brookfield Infrastructure Partners’s transfer agent in the case of registered unitholders) with the appropriate Internal Revenue Service (“IRS”) Form (Form W-8BEN, W-ECI, W-8EXP, W-8IMY or W-9) and Canada Revenue Agency (“CRA”) Form (Form NR301). The type of documentation for U.S. withholding tax purposes will differ depending on a holder’s tax profile for U.S. tax purposes. We encourage holders to submit the appropriate IRS Form and CRA Form to their broker (or Brookfield Infrastructure Partners’s transfer agent in the case of registered unitholders) so their account can be (and will continue to be) certified and the most appropriate rates of withholding can be applied to distributions.
Computation of Tax Cost
For U.S. and Canadian residents, in general, a unitholder's tax cost of his/her Brookfield Infrastructure Partners units should equal the sum of (i) the amount paid to acquire the units and (ii) the net taxable income allocated to the unitholder, minus the cash distributions received.1
The schedules distributed with Schedule K-1 compute the tax cost of Brookfield Infrastructure Partners units for U.S. residents.
For Canadian residents, the tax cost of units is determined in Canadian dollars so all three components should be determined in Canadian dollars. Brookfield Infrastructure Partners does not have sufficient information to track the tax cost of units for each individual holder. Depending upon the particular taxation year, the T5013 will report various sources of income and expenses in a number of boxes on the form. The net taxable income allocated is the sum of the various income and expenses. Unitholders are obligated to accurately compute the tax cost of their Brookfield Infrastructure Partners units.
For Australian residents, the tax cost of units is the amount paid for Brookfield Infrastructure Partners units plus any incidental costs incurred to acquire them. As Brookfield Infrastructure Partners is treated as a corporation its distributions will be fully taxable and do not affect the tax cost of a Brookfield Infrastructure Partners unit.
Other Tax Matters
Effectively Connected Income (ECI)
Brookfield Infrastructure Partners has not and is not expected to generate effectively connected income (ECI). Brookfield Infrastructure Partners' U.S. operations are carried out through its wholly owned U.S. resident subsidiary, Brookfield Infrastructure Corporation.
Unrelated Business Taxable Income (UBTI)
Brookfield Infrastructure L.P. currently has access to a revolving credit facility that it does not anticpate using. If the credit facility were utilized by Brookfield Infrastructure L.P. it may generate UBTI. Debt financed UBTI has not been and is not expected to be a material portion of Brookfield Infrastructure Partners' income. UBTI is relevant to U.S. tax exempt entities.
Foreign Investment Real Property Tax Act (FIRPTA)
Non-U.S investors that own 5% or less of Brookfield Infrastructure Partners publicly traded units should not be subject to FIRPTA taxation on a disposition of their units. Investors that own more than 5% of Brookfield Infrastructure Partners publicly traded units may be subject to FIRPTA taxation on a disposition of their units.
Regulated Investment Corporations (RICs)
The 25% limitation imposed on the ownership of master limited partnerships (“MLPs”, technically “qualifying PTPs”) by regulated investment corporations (RICs) has not been relevant to units of Brookfield Infrastructure Partners since Brookfield Infrastructure Partners is not a MLP (not a “qualifying PTP”) as defined for U.S. tax purposes because more than 90% of its gross income on an annual basis has been investment income. It is anticipated that more than 90% of Brookfield Infrastructure Partners’ income on an annual basis will continue to be investment income.
Specified Foreign Property
For the purpose of reporting foreign property by Canadian investors, pursuant to section 233.3 of the Canadian Income Tax Act, Brookfield Infrastructure Partners is not a specified foreign property and therefore does not need to be reported on Form T1135 Foreign Income Verification Statement.
Tax Questions and Answers
Q. Why do I receive a 1099 as well as a K-1 and what is the significance of each?
A. Generally, you should receive Form 1099-INT and/or Form 1099-DIV from your broker in respect of units of our partnership. Form 1099-INT is used to report interest income and Form 1099-DIV is used to report dividend income. Schedule K-1 (prepared by us) is used to report income and expenses earned/incurred by a partnership and also provides additional information such as the amount of distributions paid to a unitholder. Historically, our income for U.S. tax purposes has included interest and dividends earned from subsidiaries of the partnership. Even though the interest and dividend income is reported on Schedule K-1 that we issue, brokers are nonetheless required to also report the interest and dividend income on Forms 1099-INT and 1099-DIV. The Forms 1099-INT and 1099-DIV prepared by your broker will include information on any foreign withholding taxes that they withheld so that you may claim a credit and/or deduction on your tax return, if eligible. Because the withholding tax process is administered by the brokerage community rather than by us, taxes withheld are only reported on Forms 1099-INT and 1099-DIV (and not on Schedule K-1). Do not report the 1099-DIV and 1099-INT amounts in your tax return as those amounts are already included in the Schedule K-1.
Q. Why haven’t I received a K-1?
A: Generally, our unitholders own their units in “nominee form” through brokerages and we rely on information acquired from brokers and/or clearing houses to prepare the Schedule K-1. We are not always able to acquire information for all unitholders and accordingly some unitholders may not receive a Schedule K-1 for a particular year despite our best efforts to do so. If you do not receive a K-1 and require one, please contact Tax Package Support at 1-866-949-2771 or at www.taxpackagesupport.com/brookfield and they will assist you.
Q: I believe my K-1 is incorrect.
A: We rely on information provided by brokers and/or clearing houses to prepare Schedule K-1s. In limited cases the information provided to us may be incomplete and/or inaccurate. In the event you believe your Schedule K-1 is incorrect, please contact Tax Package Support at 1-866-949-2771 or at www.taxpackagesupport.com/brookfield and an amended Schedule K1 will be issued.
Q: How can I obtain a tax credit for foreign taxes withheld?
A: The Forms 1099-INT and 1099-DIV prepared by your broker will include information on any foreign withholding taxes that were withheld by your broker so that you may claim them, if eligible, in your tax return as a credit and/or deduction. Because the withholding tax process is administered by the brokerage community rather than us, taxes withheld are only reported on Forms 1099-INT and 1099-DIV (and not on Schedule K-1).
Q: My tax software requires a NAICS number for Brookfield Infrastructure. What is it?
A: Some Canadian tax return software requires the input of a NAICS code even though an NAICS code is not reported on Form T5013. Therefore, please select the NAICS code you deem most appropriate. The NAICS should not impact the amount of taxes owing.
Q: I haven’t received my T5013. Can you send a replacement form?
A: Generally, T5013 forms are prepared and distributed by brokers based on information we provide on or before the end of February, following the end of each taxation year, to CDS Innovations which is typically for publicly traded securities. The statutory filing/mailing requirement for Form T5013 is the end of March. Typically, brokers will prepare and distribute the Form T5013 in late March.
Q: Who applies the withholding tax? Why don’t I receive the full distribution amount?
A: Generally, our unitholders own their units in “nominee form” through brokers (also known as “beneficial” holders). Consequently, the brokers are responsible for withholding taxes as only they possess the requisite information about the unitholder that is necessary to calculate the appropriate amount to withhold as is typical for publicly traded securities. Because the withholding tax process is administered by the brokerage community rather than us, taxes withheld are only reported on Forms 1099-INT and 1099-DIV (and not on Schedule K-1).
Q: Can I e-file my tax return?
A: Yes, the Form T5013 you receive should include all information that is required by law for you to e-file your Canadian personal tax return.
Q: Are units considered foreign property for the purposes of the Canadian Revenue Agency T-1135 Form – Foreign Income Verification Statement?
Q: Does Brookfield Infrastructure Partners have a Quebec Tax ID Number?
A: Brookfield Infrastructure Partners does not have a Quebec number because it is non-resident of Quebec.
1The U.S. dollar distributions must be converted to Canadian dollar before reducing the tax cost of Brookfield Infrastructure Partners units for Canadian tax purposes. Brookfield Infrastructure Partners does not prescribe a particular foreign exchange rate that unitholders should use to make such conversions. Unitholders and/or their brokers would generally be expected to use the conversion rate on the date of receipt of the distribution.
Note: The information provided on this website does not constitute tax advice and is not intended to be a substitute for tax planning. Investors are encouraged to consult their tax advisors concerning the income tax consequences particular to their receipt, ownership and disposition of units, as well as any consequences under the laws of any other taxing jurisdiction.