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Email this1:35 pm
March 17, 2018
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There's a new proposed US foreign tax bill that will increase withholdings of dividends from US corporations for Canadians ( and other countries' citizens ) .
If it passes, Canadians will probably be better off avoiding US held securities.
https://www.cnbc.com/2025/05/30/us-set-to-weaponize-taxes-on-foreign-investors-via-section-899.html
2:45 pm
January 12, 2019
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.
It's Waaay too early to get our Knickers-In-A-Knot ❗
Even if that bill does gets passed (and it's Not a given), it's only intended for the perceived 'Bad Countries', which Canada hopefully won't qualify as.
Have a Snickers, an' wait an' see. 
- Dean
" Live Long, Healthy ... And Prosper! "
3:10 pm
October 27, 2013
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It has already passed the House by the slimmest of margins (one vote I think) but it will face a bigger challenge in the Senate. It runs counter to Trump's objective of attracting foreign capital to the USA because which foreigners will invest if they cannot re-repatriate their capital, such as dividends and remittances, without punitive taxes. This law, if passed, would violate/abrogate tax treaties with a host of nations.
Canada is in the bulls-eye currently due to the DST (Digital Services Tax) which is one of the targets of the Trump administration.
7:28 pm
March 17, 2018
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AltaRed said
It has already passed the House by the slimmest of margins (one vote I think) but it will face a bigger challenge in the Senate. It runs counter to Trump's objective of attracting foreign capital to the USA because which foreigners will invest if they cannot re-repatriate their capital, such as dividends and remittances, without punitive taxes. This law, if passed, would violate/abrogate tax treaties with a host of nations.Canada is in the bulls-eye currently due to the DST (Digital Services Tax) which is one of the targets of the Trump administration.
It's Section 899 of the "One Big Beautiful Act" which also includes other controversial sections like introducing stricter requirements for accessing Medicaid, and possibly increasing the debt by 3-4 trillion dollars, so there will likely be quite a few amendments before it will pass.
2:50 am
November 18, 2017
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Witholding tax itself is not a tax increase - you just have to wait a bit longer to get the witholding refunded.
Has anyone heard that the actual tax rates or calculation will change?
RetirEd
4:40 am
April 27, 2017
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RetirEd said
Witholding tax itself is not a tax increase - you just have to wait a bit longer to get the witholding refunded.Has anyone heard that the actual tax rates or calculation will change?
Right now you get a refund in your non-registered account. This is based on a tax treaty with the US. US remits money to Canada and that’s why CRA refunds your 15% withholding tax. The proposed bill does not involve US remitting withheld taxes to the targeted countries.
Also, the bill might impact investments within RRSPs. I don’t know how it will work but seems likely. There are no refunds for withholding taxes charged on investments within RRSP.
No idea if the bill will pass though. And if it does, US companies may further increase buybacks and minimize dividends to reduce the impact.
6:24 am
March 15, 2019
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1) The current standard U.S. non-treaty withholding tax rate is 30% now. Who knows what this president might do? He might raise the rate to 100%.
2) I suppose Canada could raise our withholding tax on dividends paid by Canadian corporations to U.S. residents.
6:33 am
April 27, 2017
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COIN said
2) I suppose Canada could raise our withholding tax on dividends paid by Canadian corporations to U.S. residents.
Won’t happen. US companies will be hurt to some extent but are hard for investors to ignore. Canada is a different story. We don’t attract enough investments even without the extra taxes.
7:18 am
October 27, 2013
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Raising withholding taxes is a discouragement for foreign investment particularly if that country does not have much of an attraction to invest in to begin with. As Mordko suggests, the damage will be far more severe if Canada retaliated since most Americans especially really do not care much about investing in Canada whereas almost no one cannot afford to not own US domiciled assets.
It is pure speculation at this point just what the Senate will do (as compared to the House bill) but in its current form, it will be highly damaging to foreign investors in US domiciled assets from countries such as Canada. It would abrogate the tax treaty changing withholding from 15% to as high as 50% in 5% increments (as I understand it) over time. Right now, anything up to 15% withholding is covered in Canada by a foreign tax credit (FTC) and maybe a bit more depending on how the math in the T2209 works out in one's favour or not. Whether Canada would offset the effect for Canadian investors in US domiciled assets by 'upping' the formula remains to be seen BUT in any effect, the FTC cannot be more than one's Canadian tax bill in any event.
As also suggested, the bill could also ignore (abrogate) the tax treaty for recognition of retirement accounts such as RRSPs and RRIFs, creating non-retrievable withholding tax for US assets held in such accounts, just as occurs today for TFSAs (not recognized by the USA as retirement accounts). Imagine permanent loss of a 50% withholding tax on recurring investment income in one's registered accounts. We would likely need to abandon US domiciled assets in our registered accounts, change them to growth assets to mitigate recurring investment income, or suck it up.
For those with huge unrealized cap gains in non-registered accounts, one cannot easily take the decision to sell US domiciled assets, or Canadian domiciled assets with a high US content such as an ETF based on the S&P500, without incurring huge cap gains taxes. In any event, we do not yet have any idea what the US Senate will do, or what the Canadian government would do with amendments to the ITA to mitigate the impact somewhat, or what Ottawa might do to appease the orange man to mitigate the worst effects.
As already suggested, all we can do at this point is to follow the soap opera and see how it plays out. Much will be written by a lot of folk, including accounting firms, on this matter as it plays out.
7:29 am
October 27, 2013
Online
I might also add the so called remittance tax component could be very damaging to those Canadians who have retirement accounts such as 401(k)s and Roth IRAs in the USA due to former ex-pat employment. Time will tell but I suspect Canada cannot (will not) let this go unchallenged, or unmitigated, in some way. Dropping or suspending the DST may need to be on the negotiating table.
12:24 pm
December 7, 2023
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Questions:
To make it understand easily, what is the impact of U.S. foreign tax bill ? For example, S&P 500 Index or US stock market will plummet? US bond yield will be decreased?
What is the impact to Canadian investors?
3:39 pm
January 12, 2019
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.
The last paragraph in that ⬆ linked article, is Very Good Advice ❗
- Dean
" Live Long, Healthy ... And Prosper! "
4:16 pm
October 27, 2013
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I agree there is no need to panic BUT it is always good to be aware of what may be going on.
7:25 pm
November 18, 2017
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Trump admires Putin.
Putin's approach to Ukraine (and the rest of the world is) "I want this and I'm taking it and I'm bigger than you so kiss this."
That's the approach Trump has copied. He's said it, explicitly and boorishly, to Zelinskyy's face in public. He's doing it to the US constitution, and to US allies too. It's going to take a lot of co-operation between their targets to make the bullies think again.
I think the (temporary) US acceptance of the validity of the existing Mexico-Canada-US free trade treaty is encouraging. But even that is being attacked by the "emergency" invocation and the 2026 renegotiation deadline.
But the least destructive way out would probably be for US legislators to stand up for their own laws and principles.
RetirEd
10:35 am
March 17, 2018
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Nice summary today of this potential bill at Garth Turner's website https://www.greaterfool.ca/
3:01 pm
October 27, 2013
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That article is far too simplistic and not quite correct. The US does not recognize a TFSA as a retirement account so withholding taxes do occur for US domiciled holdings in TFSAs with no recovery possible.
Similarly, if one holds Canadian domiciled trusts, e.g. ETFs like ZSP and mutual funds, in their RSP, withholding taxes do occur and are not recoverable. That all said, with yields so low in the broad US market, 15% or 50% is not the end of the world on a current S&P500 yield of ~1%.
3:56 pm
December 7, 2023
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This article was old but it provided very good information.
https://ca.rbcwealthmanagement.com/documents/1647873/0/Tax+Implications+of+Investing+in+the+United+States.pdf
Source: RBC
Tax implications of investing in the United States
Withholding and income tax considerations for the Canadian investor
8:15 pm
April 6, 2013
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mordko said
Right now you get a refund in your non-registered account. This is based on a tax treaty with the US. US remits money to Canada and that’s why CRA refunds your 15% withholding tax. The proposed bill does not involve US remitting withheld taxes to the targeted countries.
There's no remitting by US or refund from Canada.
US keeps the 15% withholding as payment for the US taxes. In the Canada-US tax treaty, Article X says those taxes won't be more than 15%.
Under Canadian tax rules, the 15% withheld will be credited against Canadian taxes on US income. There's no refund if the Canadian taxes on the US imcome turn out to be less than the 15% withheld. That 15% withheld cannot be credited against Canadian taxes on other income.
6:11 pm
March 15, 2019
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mordko said
Won’t happen. US companies will be hurt to some extent but are hard for investors to ignore. Canada is a different story. We don’t attract enough investments even without the extra taxes.
Canada acting alone probably won't make a difference but what if most or all foreign countries do the same?
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