Investing

Scc.to

  • Last Updated:
  • Dec 23rd, 2012 11:42 pm
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Newbie
Nov 22, 2012
25 posts
1 upvote
Ottawa

Scc.to

Salut, what you guys think of is company, Sears Canada. Any future, or will it become a Kmart like company.

I have another question that doesn't belong here, but am going to ask anyways.

If I buy a US stock that pay dividend..do the dividends get withheld from the TFSA account. Am trying to understand why ppl say don't use your TFSa account for dividend payers...especially if you want to reinvest aka drip.

Happy holidays to all
4 replies
Sr. Member
Mar 19, 2010
918 posts
106 upvotes
Markham
seearching wrote: If I buy a US stock that pay dividend..do the dividends get withheld from the TFSA account.
Yes. Withholding taxes apply to TFSA accounts.
Deal Addict
User avatar
Dec 8, 2010
2564 posts
992 upvotes
How many *younger* people do you know that shop there... vs online? Not really a good candidate for growth.. IMHO.
Newbie
Nov 22, 2012
25 posts
1 upvote
Ottawa
angelok wrote: Yes. Withholding taxes apply to TFSA accounts.
Can you explain by what you mean withholding taxes mean...is the money that will be released to me sometime in the future..ow do it work?

Thank you in advance
Deal Addict
User avatar
Dec 8, 2010
2564 posts
992 upvotes
seearching wrote: Can you explain by what you mean withholding taxes mean...is the money that will be released to me sometime in the future..ow do it work?

Thank you in advance
The US govt withholds 15% of the dividends paid, as tax.

IF you hold this stock in a NON registered account, you can claim it as tax paid on your Canadian return - so you're not double taxed. In a TFSA unfortunately, as it is already tax free, there is nothing to connect it to, and you lose that 15% withheld - there is no related benefit to this tax.

In an RRSP, Canada and the US have an agreement whereby no tax is withheld at all. Obviously it's tax deferred in Canada but that money, the full 100% of the dividend paid, gets the chance to grow tax sheltered.

In short - the money is withheld by a foreign government as it leaves the country. In a TFSA, it's lost. RRSP, it's not withheld at all. Unregistered, you claim it back as tax paid.

Easy?

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