Can I reclaim the withholding tax on my U.S. stocks?
Claiming U.S. withholding tax is only possible in recognized tax-deferred registered accounts and non-registered accounts. The U.S. only recognizes an RRSP and not an RESP or TFSA. Therefore, for a registered account, it is only possible for RRSP account and any foreign taxes in an RESP and TFSA cannot be recovered. Outside a registered account, you can claim withholding taxes on your Schedule 1 or Form W8 for U.S. dividends, which ensures you don’t pay tax on the same income in both Canada and the foreign jurisdiction.
- Inside an RRSP there is no need to report anything for foreign taxes paid, and there is no immediate recovery of the tax, either.
- Foreign taxes paid in an RRSP will reduce the amounts of money available for distribution to you on retirement.
- Foreign investments in RPPs, PRPPs, RRSPs, RRIFs, RESPs, RDSPs, or TFSAs do not have to be reported on a T1135 Foreign Income Verification Statement.
“RRSPs are exempt from U.S. withholding taxes but RESPs and TFSAs are not. This is because the U.S. does not recognize them as tax-deferred registered accounts.”