Personal Finance

W-8BEN form (US equities)..

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  • Feb 23rd, 2021 12:10 pm
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[OP]
Member
Oct 21, 2007
405 posts
50 upvotes
Halifax

W-8BEN form (US equities)..

Hi all, I have apparently made a rookie investing mistake and held US equities in my TFSA account (Exxon, woohoo!).

So my understanding now is that I may owe money to IRS based on my gains/dividends? And I was told to fill out this form that may keep me from owing said money.

I've downloaded the form from Investors edge website, printed and filled out. How do I submit it, who do I give it to?? I think the instructions say 'withholding agent'. Is that CIBC? Take it to a branch?

Thanks for any help, I really appreciate it!!
3 replies
Deal Addict
Jan 21, 2018
4370 posts
4423 upvotes
Vancouver
Any financial institution in the U.S. that pays you money that may be considered income, such as dividends, interest, or capital gains from investments, is responsible for making sure that it is reported and taxes are paid on it. For U.S. residents they ask for a W-9 form with your U.S. TIN or EIN number, and report that income to the IRS (similar to a T5 interest income slip going to the CRA in Canada). For foreign residents, those who live in another country outside the U.S., the institution is required to withhold a fixed percentage tax at source, and you must file a tax return with the IRS to get some or all of it back.

But fortunately there is an exception: if the foreign resident lives in a country that has a tax treaty with the U.S. (for example, Canada), they can supply a W-8BEN form with their foreign tax ID (your SIN or business number for Canada), and they do not have to withhold tax. The principle between countries with a tax treaty is that you only have to pay income tax once at the higher rate of the two countries, and you will normally file and report the income in your home country. The financial institution that receives your W-8BEN form in the U.S. needs it to justify why they are not withholding tax at source. In theory they are still required to report the income to the tax authorities, but in practice the information may not make it to the CRA.
Deal Addict
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Feb 1, 2012
1494 posts
2099 upvotes
Thunder Bay, ON
You submit the W-8BEN to your banker or broker. I'm with TDDI and there is an address to send it to. Not sure if a CIBC branch would accept it, or if you would need to send it to an Investors Edge office or location.

Then there is what the W-8BEN does. The US taxes dividends paid to non-residents at 30%. The withholding agent is your bank or broker, that must withhold the tax and remit it to the IRS. There is a tax treaty between US and Canada that reduces that tax rate from 30% to 15%. Submitting the W-8BEN is what indicates to your broker to withhold tax at 15% instead of 30%.

Then there is another aspect to the tax treaty that sets the withholding tax to 0% on retirement accounts like RRSPs, RRIFs, LIRAs etc. TFSA is not considered a retirement account, which is why it is recommended to hold US stocks in an RRSP rather than TFSA. But US stocks must be traded on a US exchange like NYSE or NASDAQ. US Stocks like AAPL or EXXON, or US ETFs like VTI or ITOT trade on US exchanges. ETFs like VUN or XUU that hold US stocks but trade on the TSX do not qualify for the withholding tax exemption, even if they are held in an RRSP.

You don't owe money to the IRS. Your broker would have deducted it and submitted it on your behalf. On your statements you will see something like:
EXXON Dividend $100
Non-resident tax withheld $15

If you go to www.canadiancouchpotato.com and search for "withhold" you will find lots of info.
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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