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  • Writer's pictureDaniel Gray CPA

Tell me that IRS won't tax USA stock dividends in my Canadian RRSP

First, Happy Holidays to all reading this!

While IRS applies a non-resident 30% withholding tax to dividends paid on U.S. stocks (which under treaty can be reduced to 15%), under treaty, dividends on U.S. stocks held in an RRSP should be tax-free as IRS respects RRSP as an account meant to provide tax-deferred pension or retirement benefits.

No action should be required to receive said treatment itself per se. Action is required to inform the US payer that you’re entitled to such treatment/rate so that the payer applies this automatically received treatment benefit. When a payer fails to eliminate withholding tax that a treaty exempts, the taxpayer must file a tax return in the following calendar year to claim refund of over-withholding.

A Canadian citizen NRA fulfills this by submitting a W-8BEN to payer

A“U.S. person” (which term includes a U.S. resident alien/GCH) fulfills this by submitting W-9 form to payer

Procedural Questions arise for Hybrid Taxpayers:

· “U.S. person”/ Canadian citizen resident of Canada

· Dual status taxpayer (resident and non-resident of USA in same tax year)

I note that IRS W-8BEN instructions state:

Line 2.Enter your country of citizenship. If you are a dual citizen, enter the country where you are both a citizen and a resident at the time you complete this form. If you are not a resident in any country in which you have citizenship, enter the country where you were most recently a resident. However, if you are a U. S. citizen, you should not complete this form even if you hold citizenship in another jurisdiction. Instead, provide Form W-9.

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