What are "Tax Relief Fees" on American Depositary Receipt (ADR) dividends?

Question

I noticed that a "Tax Relief Fee" is usually deducted from ADR dividends. Consider AXA ADR's (OTC: AXAHY) 2020 cash dividend announcement, which includes a "Tax Relief Fee" of $0.005 per share:

Also consider Sony ADR's (NYSE: SNE) 2020 semi-annual dividend announcement:

So here we have a clue:

Tax Relief at Source Processing Fee is for Tax Certification Filing

But what does this mean exactly? In particular, I would like to know:

• Who charges this fee? Is it the ADR's depositary bank, or the Depository Trust Company (DTC)?
• What is this fee used for? What is "Tax Certification Filing"?
• Notice that in the case of the Sony ADR, the "Tax Relief Fee" decreases as the tax rate increases. Why?

Answer 1

There's no charge at the maximum tax rate withheld at the source because there was no service rendered. These programs are in place by tax treaty with many countries to allow multiple tax withholding layers when a will allow it. A tax relief fee is charged to defray the cost of having a source country agent file the paperwork necessary when each dividend is paid. In general the nation where income comes from can tax that income and relief available where the source will tax it at a lower rate. These programs are most applicable for charities, operating entities and ex-pats filing tax returns in multiple nations, etc. I haven't heard of any program for tax relief at the source applying to a typical USA resident US national investing in a foreign company's stock buy buying ADRs.

The individual investor's relief is normally found on Form 1116 or Schedule A. The Form 1116 tax credit is limited by the individual's effective the tax rate paid in the US. Some of the higher tax rate countries like Switzerland (35%) exceed the effective tax rate for almost all US taxpayers. Knowing if tax is withheld at the source and the rate and the investor's own effective tax rate makes it possible to determine if tax withheld at the source would have the effect of reducing the yield, and if so by how much.