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If I buy a Canadian stock on a Canadian exchange( i.e. Toronto ), what are my Canadian and USA tax obligations especially for dividends?

William, it does not matter on which exchange (US or foreign) you buy a foreign stock. They are all treated the same by tax authorities.

Foreign investments are covered by tax treaties between the US and most of the countries around the world, Canada included. As a US citizen, the standard withholding for Canadian corporations is 15% of all dividends or distributions. This amount will automatically be withheld. In most cases, US citizens can claim this amount back on their annual tax returns. But, you cannot recapture that amount from tax deferred to tax exempt accounts. Therefore, you should not buy a dividend paying foreign stock in your IRA or 401K as you will lose the withheld amount every year, right off the top.

Otherwise, the foreign stock is treated exactly as a US one for tax purposes.  

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Steven Taylor


Canadian stocks, including growth and resource companies.

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