U.S. withholding tax in an RRSP for Canadians

How a lot is withholding tax on U.S. dividends?

I’m going to offer a short abstract of U.S. withholding tax on investments, Wanda, earlier than addressing Enterprise Merchandise Companions (EPD) particularly.

First, U.S. shares are usually topic to 30% withholding tax on dividends for non-residents. Many international locations, together with Canada, have tax treaties with the U.S. to make sure a decreased fee of withholding tax. For qualifying Canadian residents, the tax could be decreased to 15%. In a registered retirement financial savings plan (RRSP), the tax could also be decreased to 0%. 

Qualifying to reclaim U.S. withholding tax

In an effort to qualify, an investor has to fill out this way and supply it to their funding agency: Type W-8BEN Certificates of International Standing of Helpful Proprietor for United States Tax Withholding and Reporting (People). 

These types are usually legitimate till the tip of the third calendar 12 months after signing, so it must be re-signed each three years.

U.S. inventory dividends paid into an RRSP, registered retirement revenue fund (RRIF) or an identical registered retirement account are usually free from withholding tax for Canadian residents who’ve accomplished W-8BEN types. In non-registered and tax-free financial savings accounts (TFSAs), the decreased 15% fee usually applies. 

If extra tax is withheld, it may be recovered by submitting a U.S. tax return. Nevertheless, the time and price could also be greater than the potential refund except the withholding tax is critical.

An necessary level is that Canadian mutual funds and exchange-traded funds (ETFs) that personal U.S. shares are thought-about Canadian investments and topic to 15% withholding tax. In the event you personal these in your RRSP, they won’t qualify for the 0% withholding tax fee. It’s because the mutual fund or ETF is taken into account the shareholder of the U.S. shares, not you or your RRSP. 

EDP dividends for Canadians

In your case, Wanda, you personal shares of Enterprise Merchandise Companions, which is a grasp restricted partnership buying and selling on the New York Inventory Alternate (NYSE). Based mostly on the present quarterly dividend and inventory worth, the annual dividend yield is about 7.15%.