Withholding on Foreign Dividends in IRA Account


D

D.F.

The dividends on Canadian stocks are withheld for Canada at
a 15% rate. The withholding is 10% for UK stock dividends.
These amounts can then be claimed as a US tax credit for
stocks held in a taxable account.

I assume that if I buy those stock in an IRA, the tax
withholding would still happen, but there is then no US tax
credit. Are my assumptions correct?

Thanks.
 
A

Arthur Kamlet

D.F. said:
The dividends on Canadian stocks are withheld for Canada at
a 15% rate. The withholding is 10% for UK stock dividends.
These amounts can then be claimed as a US tax credit for
stocks held in a taxable account.

I assume that if I buy those stock in an IRA, the tax
withholding would still happen, but there is then no US tax
credit. Are my assumptions correct?
Correct.

__
Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
 
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G

Gary Goodman

(e-mail address removed) says...
The dividends on Canadian stocks are withheld for Canada at
a 15% rate. The withholding is 10% for UK stock dividends.
These amounts can then be claimed as a US tax credit for
stocks held in a taxable account.

I assume that if I buy those stock in an IRA, the tax
withholding would still happen, but there is then no US tax
credit. Are my assumptions correct?
Yes, you are correct. You pay the taxes to the foreign
governments and get no benefit on your US tax return.

Gary
 
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I don't believe these answers to be correct. The US-Canadian tax treaty exempts taxation bilaterally on retirement accounts. If you have suffered tax withholding within a US IRA account on a Canadian investment, it is only because your financial institution is not doing their job correctly. US depositories have procedures set up to stop withholding at source, such that taxation does not occur on retirement investments. The financial institution has to inform the depository how many of shares held at the depository are taxable vs Non-taxable ERISA investments at record date of the dividend. If any financial institution does not have the ability to do this, or is negligent in this duty, then they have the responsibility as Custodian and nominee of the shares to file to recover any tax paid on behalf of the ERISA account holder. Discuss & correct my thinking?
 

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