dividend taxation

[pokka]

Hi All,
I would be grateful for some guidance on taxation of dividends. I think something like this could be helpful to many people in a similar situation as they decide where to invest.

I am a US citizen, resident of Canada. I avoid Canadian ETFs because of PFIC rules.

Here is my rough approximation of what taxation of dividends looks like. I guess it cannot be perfect because FTC calculations are complicated.

ASSUMPTION: Suppose my marginal tax rate in Canada is C% and my marginal tax rate in the US is A%. Dividend income is only side income, and is not changing the tax bracket I am in.

If I get a dividend of D from a public Canadian stock (eg from BMO.TO), then I pay D * 1.38 * (C% - 15%) tax on any dividend to Canada, and I would have paid D*A% to the US, but whatever I paid to Canada gives me an FTC of almost the same amount, so overall I pay something like
max(D * 1.38 * (C% - 15%), D*A%).

If I get a dividend of D from a pure US stock (eg from AAPL), then I pay C% to Canada, and would have paid 15% to the US, but the US part gets FTC'ed to 0, so overall I pay D*C%.

If I get a dividend of D from a US listed Canadian stock (eg BMO on NYSE), then I pay D * 1.38*(C - 15)% to Canada, and D*15% to the US, and again the US part gets FTC'ed to 0, so overall I pay
D * 1.38*(C - 15)% .


Is this right? If not, is there a better way of thinking about these things?
Thanks in advance!

[nelsona]

If your dividend tax credit exceeds the income tax you would have paid (ie. actually LOWERS your total tax), then you get no foreign credits, since you are paying no tax in canada.
In US, your Apple dividends are flat taxed depending on your total income, and could be zero, since they are qualified. The treaty doesn;t really apply to your dividends since you are US citizen, and your rate is 15% or less.

[nelsona]

Dividends on Your US listed Cdn stock is a qualified dividend.

[pokka]

Thanks nelsona!

If anyone has an independent confirmation of my 3 formulas (or have their own formulas), I would be glad to hear it!

[nelsona]

As I pointed out, your complex formulas are wrong from the start because you are including (a) US tax on qualified dividends (there are none in your tax bracket. And (b) that at your level you won't pay any Cdn tax on dividends.