US Tax Information

Shareholders are advised to consult their tax advisors regarding questions relating to the tax treatment of ARC Resources dividends and the computation of the adjusted cost base of their investment.

ARC Resources anticipates that its dividends paid to U.S. individual investors will be considered “qualified dividends”, eligible for the reduced tax rate of 15%.   ARC Resources does not anticipate any portion of the dividend to be a non-taxable return of capital.  Dividends paid by ARC Resources will be communicated to shareholders via a Form 1099 DIV (or a substitute form) prepared by their brokers or other intermediary. ARC Resources is not required to furnish shareholders with Form 1099-DIV.

Shareholders that hold their common shares of ARC Resources in a taxable U.S. account will to be subject to Canadian withholding tax. The Canadian withholding tax should be creditable, subject to numerous limitations, for U.S. income tax purposes in the year in which the withholding taxes are withheld. Canadian withholding tax should not apply to dividends with respect to shareholders that hold their common shares of ARC Resources in a qualified retirement plan such as an IRA. If the amount of Canadian withholding tax withheld is not the appropriate amount, please contact your broker or other intermediary as they are responsible for withholding the appropriate amount of tax.

Investors are required to reduce the cost base of their holdings by the amount of the non-taxable return of capital paid up to the December 15th, 2010 distribution from ARC Energy Trust.  ARC Resources does not anticipate any return of capital portion with respect to its dividends, therefore, there should be no adjusted cost base reductions required for dividends paid by ARC Resources.

New Canadian Withholding Rules – Information Required

Dividends paid to non-residents of Canada are subject to Canadian withholding tax. The withholding tax rate is 25%; however, this rate is reduced by many of Canada’s income tax treaties with other countries.  For example, the Canada – U.S. Income Tax Treaty generally reduces the withholding rate on dividends to 15%.  In order to be entitled to the reduced withholding tax rate, the beneficial owner of the dividend payment must be a resident of a country that has such a reduced rate in its income tax treaty with Canada. The address of the recipient of the payment was previously sufficient to establish entitlement to the reduced withholding rate under an applicable treaty.  However, for any payments after December 31, 2011, additional information must be provided by the recipient in order to be entitled to the reduced withholding rate.  If the additional information is not provided, any payments after December 31, 2011 will be subject to the 25% withholding rate.

The information required can be provided using one of the new forms issued by the Canada Revenue Agency (CRA) in 2011.  While these forms are not mandatory, the information provided on such forms is necessary for determining whether the reduced withholding rate will apply or not.  The equivalent information can be provided in a letter or other format.  A completed form will expire on the earlier of a change in eligibility for treaty benefits and three years from the year the form is signed and dated.  Completed forms should be provided to your broker (or other intermediary) or Computershare.

The new forms issued by the CRA are:

Form NR301 — ”Declaration of Eligibility for Benefits under a tax treaty for a Non-Resident Taxpayer”;
Form NR302 — “Declaration of Eligibility for Benefits under a tax treaty for a Partnership with Non-Resident Partners”; and
Form NR303 — “Declaration of Eligibility for Benefits under a tax treaty for a Hybrid Entity”.

If the amount of Canadian withholding tax withheld is not the appropriate amount, please contact your broker or other intermediary as they are responsible for withholding the appropriate amount of tax.

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