Investing

Are Canadian Dividends Taxed ?

  • Last Updated:
  • Nov 12th, 2020 5:45 pm
[OP]
Jr. Member
Mar 17, 2015
180 posts
48 upvotes
North York, ON

Are Canadian Dividends Taxed ?

Hello my fellow Canadians!

I hope you are doing well and utilizing this time to further develop and grow your portfolio. I am a fellow Newbie who just started investing using Questtrade platform. I was wondering if any of the Canadians Dividends taxed ? or ever will be taxed ?
21 replies
Deal Addict
Jul 12, 2008
3003 posts
906 upvotes
GTA
There is eligible and non eligible dividends as well some companies pay out income and not dividends.

All income from a public company is taxed one way or the other unless you have it in a tax sheltered account. Be more specific if you want a specific answer.
[OP]
Jr. Member
Mar 17, 2015
180 posts
48 upvotes
North York, ON
badmus wrote: There is eligible and non eligible dividends as well some companies pay out income and not dividends.

All income from a public company is taxed one way or the other unless you have it in a tax sheltered account. Be more specific if you want a specific answer.
I have opened a TFSA account through quest trade where I am only picking stocks listed on TSX such as Canadian Tire, Enbridge, TD....... The dividends that I will be receiving will I be taxed on it ?
Deal Addict
Nov 9, 2013
4023 posts
3832 upvotes
Edmonton, AB
It all depends on what account you hold them in.

In a non-registered account they are taxed.

In a registered account (i.e. TFSA) they are not taxed.
Keep calm and go long
[OP]
Jr. Member
Mar 17, 2015
180 posts
48 upvotes
North York, ON
treva84 wrote: It all depends on what account you hold them in.

In a non-registered account they are taxed.

In a registered account (i.e. TFSA) they are not taxed.
What do you mean by a non-registered account? ALso what about US stocks ?
Deal Addict
Nov 9, 2013
4023 posts
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Edmonton, AB
Cocoboy1993 wrote: What do you mean by a non-registered account? ALso what about US stocks ?
As in an account that's not a TFSA, RRSP or RESP.

US divs are not taxed in RRSP. There is withholding taxes you have to pay in TFSA for US Divs. They would be also be taxed in a non reg account.
Keep calm and go long
Member
Jul 4, 2018
371 posts
292 upvotes
Non registered: all Canada and USA stocks taxed
Rrsp : both Canada and USA not taxed
TFSA : Canada not taxed, USA 15% tax with hold
Deal Addict
User avatar
Feb 1, 2012
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Thunder Bay, ON
US and foreign divs get taxed in a non reg account at your marginal tax rate for other income. But then you can claim a non-refundable tax credit for those taxes paid. There is a limit on the percent claimable, and you must have other taxes against which to claim the credit. The principle is avoiding double taxation.

This explains it: https://www.taxtips.ca/filing/foreigntaxcredit.htm
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Deal Addict
Aug 18, 2003
1279 posts
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YVR
Lavaris1 wrote:

TFSA : Canada not taxed, USA 15% tax with hold
I read somewhere you can submit a form/request for CRA to reduce your taxes by the 15% held..true?
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[OP]
Jr. Member
Mar 17, 2015
180 posts
48 upvotes
North York, ON
Thanks guys!, I guess I will just continue to pick and invest in safest and the most valuable TSX stocks!
Sr. Member
May 2, 2010
503 posts
369 upvotes
GTA
How do you pay the USA 15% withholding tax?
Deal Addict
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Aug 7, 2010
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Charles wrote: I read somewhere you can submit a form/request for CRA to reduce your taxes by the 15% held..true?
By default US tax withholding is 30% on dividends and interests. By submitting form W-8BEN to the financial institution where your investments are (not CRA), the tax withholding is reduced to 15% on dividends and 10% on interests.
Last edited by komodor on May 6th, 2020 3:08 pm, edited 2 times in total.
Deal Fanatic
Nov 24, 2013
6199 posts
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Kingston, ON
Cartman86 wrote: How do you pay the USA 15% withholding tax?
It’s a withholding tax. It’s withheld by the US company from the dividends you receive and sent to the IRS. You don’t have to pay it separately.
Deal Addict
Aug 18, 2003
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https://business.financialpost.com/pers ... end-stocks

If you hold U.S. stocks in a non-registered, taxable account, there are U.S. withholding taxes that apply to any dividends earned. The default withholding tax on your U.S. dividends is 30%.

The Canada Revenue Agency will only let you claim half of this withholding tax on your tax return, or 15%, because that’s the amount agreed to in the Canada-U.S. Income Tax Treaty.

That treaty does allow Canadian investors to file what’s called a W-8BEN form to declare their Canadian residency and their eligibility for the lower 15% tax rate on U.S. dividends. So check your tax slips – while they’re handy this month – and make sure you’re paying the 15% rate.

Up to 15% of the U.S. tax you pay on dividends can be claimed on your Canadian tax return as a foreign tax credit so that, in theory, you are not subject to double-taxation. Your Canadian tax payable should be reduced by any U.S. tax you’ve already paid. If you haven’t filed your W-8BEN form to be eligible for the reduced withholding tax rate, the excess tax over 15% needs to be recovered from the IRS, which may or may not be worth the time and cost.
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Deal Addict
Aug 18, 2003
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Mike15 wrote: It’s a withholding tax. It’s withheld by the US company from the dividends you receive and sent to the IRS. You don’t have to pay it separately.
you won't be able to claim 15% as a credit on your tax return?
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Aug 7, 2010
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Charles wrote:
Up to 15% of the U.S. tax you pay on dividends can be claimed on your Canadian tax return as a foreign tax credit so that, in theory, you are not subject to double-taxation. Your Canadian tax payable should be reduced by any U.S. tax you’ve already paid. If you haven’t filed your W-8BEN form to be eligible for the reduced withholding tax rate, the excess tax over 15% needs to be recovered from the IRS, which may or may not be worth the time and cost.
Charles wrote: you won't be able to claim 15% as a credit on your tax return?
You just answered your own question in your previous post !!!
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Feb 1, 2012
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Charles wrote: you won't be able to claim 15% as a credit on your tax return?
US & foreign dividends will be in T3 Box 25 – Foreign non-business income. You will pay tax on this income at your marginal rate for other income.

Foreign withholding taxes on dividends will be in T3 Box 34 – Foreign non-business income tax paid. You will receive a non-refundable tax credit for this amount up to a maximum of 15% of the box 25 amount.

Here is the W-8BEN form on the IRS site. Note however you don't send it to the IRS. Your broker is responsible for withholding the FWT so contact them or check their website to determine how to send it to them. Note with some brokers you may have completed the required info when you opened the account, so you may not need to send it to them.
https://www.irs.gov/pub/irs-pdf/fw8ben.pdf
https://www.irs.gov/instructions/iw8ben
I solemnly swear, to never assume I have an inkling at which direction the market will head, and to never make any investments based on a timing strategy.
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Aug 18, 2003
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Deepwater wrote: US & foreign dividends will be in T3 Box 25 – Foreign non-business income. You will pay tax on this income at your marginal rate for other income.

Foreign withholding taxes on dividends will be in T3 Box 34 – Foreign non-business income tax paid. You will receive a non-refundable tax credit for this amount up to a maximum of 15% of the box 25 amount.

Here is the W-8BEN form on the IRS site. Note however you don't send it to the IRS. Your broker is responsible for withholding the FWT so contact them or check their website to determine how to send it to them. Note with some brokers you may have completed the required info when you opened the account, so you may not need to send it to them.
https://www.irs.gov/pub/irs-pdf/fw8ben.pdf
https://www.irs.gov/instructions/iw8ben
thanks again
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Deal Addict
Jul 5, 2008
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You can get a credit for the 15%/30% paid in a cash acct but the deduction in a TFSA is non-recoverable and essentially reduces the divi percentage. The divi's received in an RRSP will eventually be taxed at standard income rate with no divi credit but aren't reduced at the time they are received.

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