US investors holding Canadian stocks can get a favorable dividend withholding tax rate due to the treaty between the two countries. The actual withholding rate for stocks held in taxable accounts is 25%. Due to the treaty, this tax rate is reduced to 15%. However in order to receive this lower US investors have to file the NR301 form – Declaration of Eligibility for Benefits under a Tax Treaty for a Non-resident Taxpayer with the Canada Revenue Agency (CRA). I wrote about this new requirement back in 2012.
One more thing to note about this requirement. In order to continue to receive the reduced tax rate this form must be filed with the CRA every three years. Otherwise the investor will be charged the regular rate. So if you filed this form in 2012, it is due this year. Check with your broker on exactly when you last filed this form.
Canada does not deduct dividend withholding taxes on stocks held in retirement accounts such as Roth IRA, Traditional IRA, 401K, etc. So this form requirement does not apply to those situations.
For the complete details on the “NR301 Declaration of eligibility for benefits (reduced tax) under a tax treaty for a non-resident person” form and the requirements go to the CRA website. The form in fillable pdf format can be downloaded for submission to your broker.
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Author: Query (IP: 72.28.80.125, 72.28.80.125)
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Comment:
Does this form need to be filed? I thought it was just kept in case CRA asks you to support that you were being diligent in confirming a payee’s eligibility for reduced withholding rates under a treaty.
Hi
Your comment got deleted by mistake. So I have re-pasted it above.
Anyway yes this form needs to be filled according to my research and my broker. Otherwise you won’t get the reduced rate. Every few years my broker sends me the form to refile. So I did it. Check with your broker or CRA to make sure.
Hope this helps.
-David
“Canada does not deduct withholding tax on stocks held in IRA..” Does this apply to REITS also? TY
Nope. It does not apply to REITs as far as I know. Thanks.
If this is true then why does Principal, with whom my company has my 401K invested through, insist upon collecting Canadian Federal Income taxes on my Canadian stock holdings that I hold in my Principal 401K account. I have asked them and they indicate that I need to consult a tax professional as I don’t know what I’m talking about as the tax is collected by Canada and they can’t do anything about it.
Hmm.Principal is wrong.It thinks you are uninformed on these things. I will download the CRA form and other details and call them again.Since you mention you hold the stocks in your 401K, they cannot be taxed anyway since it is a qualified retirement account. My holdings in IRA accounts do not get any Canadian tax deducted by my provider. So you can call to resolve this issue. They should not deduct taxes especially on a 401K. Try to get a manager or someone higher up to solve this.Customer service people won’t know these things.
Hope this helps.
-David
I have the same issue as Martin. I hold the stocks/etf in my ROTH account. My provider is TD and they told me to consult a tax professional as well. Which provider or brokerage firm you have an account with? I am thinking about transferring my securities to new provider.
Thanks.
I would do some research online and find a different provider if you are not satisfied with TD. Unfortunately brokerages leave it to individual investors to deal with such situations.