How a lot is withholding tax on U.S. dividends?
I’m going to supply a quick 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 lowered charge of withholding tax. For qualifying Canadian residents, the tax might be lowered to fifteen%. In a registered retirement financial savings plan (RRSP), the tax could also be lowered to 0%.
Qualifying to reclaim U.S. withholding tax
To be able to qualify, an investor has to fill out this manner and supply it to their funding agency: Type W-8BEN Certificates of Overseas Standing of Helpful Proprietor for United States Tax Withholding and Reporting (People).
These kinds are usually legitimate till the tip of the third calendar yr 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 analogous registered retirement account are usually free from withholding tax for Canadian residents who’ve accomplished W-8BEN kinds. In non-registered and tax-free financial savings accounts (TFSAs), the lowered 15% charge 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 important.
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 fifteen% withholding tax. If you happen to personal these in your RRSP, they won’t qualify for the 0% withholding tax charge. 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 Change (NYSE). Primarily based on the present quarterly dividend and inventory worth, the annual dividend yield is about 7.15%.