If you are a Canadian who owns US dividend stocks or US-listed ETFs, the amount that lands in your account is not always the amount the company announced. The difference is withholding tax, and which account you hold the shares in decides how much of it you lose.
What gets withheld
The United States withholds tax on dividends paid to non-residents. Under the Canada-US tax treaty, the usual rate for Canadian residents is 15% of the dividend. It is taken before the money reaches you, so the cash you receive is the net amount. The 15% assumes your broker has a valid W-8BEN form on file for you; without one, the default rate can be 30%.
A made-up example: a US stock pays $100 in dividends. With 15% withheld, $85 arrives.
Why the account matters
| Account | Typical treatment of US dividends |
|---|---|
| RRSP, RRIF, LIRA, LIF | Treaty exemption applies, so no US withholding |
| TFSA | 15% is withheld, and it cannot be claimed back |
| Non-registered | 15% is withheld, and you may be able to claim a foreign tax credit on your Canadian return |
Rules for other registered accounts differ, and tax rules change, so check with your broker or a tax professional for your own situation. This page explains the general idea, not tax advice.
Does the fund you hold matter?
Yes. Owning a US stock directly, a US-listed ETF, and a Canadian-listed ETF that holds US stocks can each be treated differently, because withholding can apply at different levels. If this matters to you, compare the specific funds you own.
Tracking income after withholding
- Record the dividend you actually received, not the gross amount announced. For non-registered accounts, also keep the gross dividend and the tax withheld, because your tax return reports the gross amount and any foreign tax credit is based on the tax withheld.
- Keep a note of which account each payment landed in, since the same stock can lose 15% in one account and nothing in another.
- When you project future income, apply the same rate by account type, or your estimate will run high.
Nimblewit doesn't calculate or file your taxes. Its expected-income calendar estimates the cash you would receive: for US-listed holdings it takes off 15% US withholding, except in RRSP, Spousal RRSP, LIRA, RRIF, Spousal RRIF and LIF accounts, and it assumes the treaty rate. Dividends you import from your statements are recorded as they were paid.