Money Does the 15% withholding tax on U.S. dividends apply to capital gains too?

23:51  19 may  2017
23:51  19 may  2017 Source:   MoneySense

Home Capital draws $250M more from emergency fund

  Home Capital draws $250M more from emergency fund TORONTO - Home Capital Group says it has drawn down a further $250 million this week from its emergency line of credit to repay deposit notes due Wednesday. That leaves the Toronto-based mortgage company (TSX:HCG) with $350 million left from a $2 billion line of credit provided by the Healthcare of Ontario Pension Plan late last month. The pension plan provided the loan after Home Capital's customers began to drain their high-interest savings accounts. That leaves the Toronto-based mortgage company (TSX:HCG) with $350 million left from a $2 billion line of credit provided by the Healthcare of Ontario Pension Plan late last month.

Use the withholding tables in Publication 15 (Circular E), Employer' s Tax Guide. If you find you are having too much tax withheld because you did not claim all the withholding allowances you are Includes a net capital gain or qualified dividends , use Worksheet 2-7 to figure the tax to enter here. •

through withholding , or do not pay enough tax that way, you might have to pay esti-mated tax . It also does not apply if your spouse is a U . S . citizen or resident and you have chosen to be treated as a 2011 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet.

Click here to see more personal finance questions answered. © Used with permission of / © Rogers Media Inc. 2017. Click here to see more personal finance questions answered. Wall Street: (Cultura Travel/WALTER ZERLA) © Used with permission of / © Rogers Media Inc. 2017. (Cultura Travel/WALTER ZERLA)

Q: In February MoneySense published an article that discusses taxation for dividend generated by U.S. stocks held by a Canadian resident. In that article states: “The treaty requires 15% tax withholding on dividends and 10% tax withholding on interest. So if you own a U.S. stock, as a Canadian resident, there will be 15% withholding tax on any dividends earned. If you own a U.S. bond, as a Canadian resident, there will be 10% withholding tax on any interest earned.”

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ƒ U .K. companies and pension funds may qualify for exemption from. Japanese withholding tax on dividends from certain Japanese investments Capital Gains The relief under the capital gains article is primarily of interest to U .K. investors as the U .K. does not generally tax foreign resident

For tax years beginning after 2007, the exemption from withholding on certain inter-est-related dividends and short-term capital gain dividends paid by a mutual fund or other regu-lated investment company will no longer apply .

In line with that, I have a few questions for you regarding holding U.S. stocks directly through a self-managed TFSA. Does the 15% withholding tax also apply to capital gains? That is, selling a U.S. stock at a higher price that what you paid for it initially? Secondly, for the withholding charges, is the investor the one reporting to the IRS or would that be done directly by the investment management company? And finally, when is the tax withheld: when the stock is sold or at the end of the fiscal year?

—Ezequiel

A: In regards to your first question Ezequiel, the 15% treaty rate only applies to dividends paid from U.S. corporations. Capital gains on the sale of investments other than real property are not taxed when the recipient is a non-resident, non-citizen of the U.S.—as long as that person has not been in the U.S. for 183 days or more during the tax year. Without a proper withholding document on file with the payer of the income, dividends and capital gains can be withheld at 30%. The fact that the dividend is paid inside of a tax-deferred account like a TFSA or RESP makes no difference to the 15% withholding on U.S. dividends.

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Interest, dividends , capital gains and foreign currency gain or loss generally are excluded from the definition of UBTI, unless they are derived from debt-financed property. This tax also is collected by way of withholding . Additionally, although it is counter-intuitive, this tax applies to U . S .-source

through withholding , or do not pay enough tax that way, you might have to pay esti-mated tax . It also does not apply if your spouse is a U . S . citizen or resident and you have chosen to be treated as a 2011 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet.

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Generally, your investment manager withholds the 15% tax. In turn you receive a credit on your Canadian tax return, since the dividend is also taxable on your T1 General. If the tax is not withheld prior to you receiving the dividend, you need to file a tax return with the IRS to report the income, claim the treaty rate at 15% and pay the tax owed.

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  Home Capital's problems contained: Bank of Canada's Poloz Home Capital Group's problems are contained but the sharp gains in Canadian home prices and their possible impact on the financial system are a primary concern for the Bank of Canada, Governor Stephen Poloz said in an interview with the Globe and Mail newspaper. define("homepageFinanceIndices", ["c.deferred"], function () { var quotesInArticleFormCode = "PRMQAP"; var config = {}; config.indexdetailsurl = "/en-ca/money/indexdetails"; config.stockdetailsurl = "/en-ca/money/stockdetails"; config.funddetailsurl = "/en-ca/money/funddetails"; config.etfdetailsurl = "/en-ca/money/etfdetails"; config.

505. 15 Income tax withheld and estimated to be withheld during 2012 (including income tax withholding on The regular in-come tax rates for individuals do not apply to a net capital gain . 2012 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet.

Use the withholding tables in Publication 15 (Circular E), Employer' s Tax Guide. If you find you are having too much tax withheld because you did not claim all the withholding allowances you are Includes a net capital gain or qualified dividends , use Worksheet 2-7 to figure the tax to enter here. •

The fact that the dividend is paid inside of a tax-deferred account like a TFSA or RESP makes no difference to the 15% withholding on U.S. dividends. Generally, your investment manager withholds the 15% tax and you would receive a credit on your Canadian tax return since the dividend is also taxable on your T1 General. If the tax is not withheld prior to you receiving the dividend, you need to file a tax return with the IRS to report the income, claim the treaty rate at 15% and pay the tax owed.

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505. 15 Income tax withheld and estimated to be withheld during 2012 (including income tax withholding on The regular in-come tax rates for individuals do not apply to a net capital gain . 2012 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet.

through withholding , or do not pay enough tax that way, you might have to pay esti-mated tax . It also does not apply if your spouse is a U . S . citizen or resident and you have chosen to be treated as a 2011 Estimated Tax Worksheet—Line 6 Qualified Dividends and Capital Gain Tax Worksheet.

In regards to your second question, generally, your investment manager withholds the 15% tax and you would receive a credit on your Canadian tax return since the dividend is also taxable on your T1 General. If the tax is not withheld prior to you receiving the dividend, you need to file a tax return with the IRS to report the income, and claim the treaty rate at 15% and pay the tax owed.

Cleo Hamel is a senior tax expert with American Expat Taxes in Calgary

Ask a Tax Expert: Leave your question for Cleo Hamel »

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‘Classic contrarian opportunity’: Investors snap up Home Capital shares amid turmoil .
Kingsferry will be among the investors watching closely as Home Capital reports its first-quarter earnings on Thursday after market close .The company will be facing tough questions as it has been mired in liquidity problems and a crisis of confidence since the OSC filed formal allegations on April 19 against Home Capital, and three of its current and former executives.The securities regulator has accused them of misleading shareholders after the discovery of falsified information in its mortgage broker channel, and the subsequent firing of 45 brokers in 2014 and 2015.

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