How to reclaim US withholding tax within Canadian RESP

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goldstone
Posts: 35
Joined: Wed May 29, 2019 11:27 am

How to reclaim US withholding tax within Canadian RESP

Post by goldstone »

My daughter emigrated from Canada to the USA a couple of years ago. She has an RESP for her children in Canada and retained it so as not to have to repay the government grant portion of the fund. She sold the Canadian ETFs that were in the fund and replaced them with US ETFs so that there would be no PFIC issue.

When dividends are paid on the US ETFs there is a withholding tax deduction of 30%. We imagine that this is because the treaty rate of 15% does not apply to registered accounts. Of course the dividends are also taxable on her annual US tax filing.

We are struggling to understand how much of the withheld tax can be reclaimed and how to do this.
1. Can the full 30% be claimed as a pre payment of US taxes ?
2. Can the full 30% be claimed as a FTC, even though it is actually a US tax ?
3. Can only 15% be claimed as a FTC as this is the treaty rate between the US and Canada ?

Many thanks for any guidance on this puzzle.
nelsona
Posts: 18413
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: How to reclaim US withholding tax within Canadian RESP

Post by nelsona »

The taxrate should be 15%, but in any event, Case number 1 applies, simply including it with any other US tax that was withheld. This would have no bearing on her Cdn tax return. The RESP manager should be issuing a US tax slip
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18413
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: How to reclaim US withholding tax within Canadian RESP

Post by nelsona »

btw, it is quite likely that these dividends are qualified dividends, and may be taxable at a reduced rate in US, possible 0%. The ETF firm would know about this.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
goldstone
Posts: 35
Joined: Wed May 29, 2019 11:27 am

Re: How to reclaim US withholding tax within Canadian RESP

Post by goldstone »

Thanks very much Nelsona.
goldstone
Posts: 35
Joined: Wed May 29, 2019 11:27 am

Re: How to reclaim US withholding tax within Canadian RESP

Post by goldstone »

Thanks very much Nelsona !
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