Hi, I am considering buying a Canadian REIT through my US TD Waterhouse account (as canadian non-resident), but I am somewhat confused by the tax implications.
I called TD Waterhouse and they told me that they will withold 15% of the dividend. This is the first thing I'm confused about because according to previous posts, 25% should be withheld. What does this mean?
Secondly, I know that the REIT I am looking at pays out dividends that are 80% tax-deferred. I have two questions about this: 1) will this 15% (or 25%) be taken off just the part that is taxable, or off the entire dividend. I suspect its off the entire dividend. Is the tax savings lost because I'm a non-resident? 2) When I'm filling out my US tax form - do I just consider the taxable part of the dividend or the whole dividend?
Sorry for the investment-specific question. I think REITs are a good idea, but I'm somewhat put off by the complexity of the tax issues. Any advice would be greatly appreciated.
Thank you.
Canadian REITs
Moderator: Mark T Serbinski CA CPA
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bigricardo
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15% is the correct ammount, I think when I said 25% i also said 'or some reduced rate' depending on treaty.
I seem to recall that this will be on the entire amount, and it will be upto you to file a special return eith CRA to recapture the tax on the principal.
You could alternatively just accept the flat amount of tax, and use it as you tax towards the foreign tax credit, since it will likely all be used up.
You will probably end up paying a little more tax than you would if this had been a non-Cdn investment, since you won't really get dollar for dollar credit for your Cdn tax paid.
You will also have some US filing requirements apart from the income tax (3520) whch may make these more trouble than they are worth. There are similar instruments in US.
<i>nelsona non grata</i>
I seem to recall that this will be on the entire amount, and it will be upto you to file a special return eith CRA to recapture the tax on the principal.
You could alternatively just accept the flat amount of tax, and use it as you tax towards the foreign tax credit, since it will likely all be used up.
You will probably end up paying a little more tax than you would if this had been a non-Cdn investment, since you won't really get dollar for dollar credit for your Cdn tax paid.
You will also have some US filing requirements apart from the income tax (3520) whch may make these more trouble than they are worth. There are similar instruments in US.
<i>nelsona non grata</i>
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bigricardo
- Posts: 10
- Joined: Sun Jan 09, 2005 7:39 am
- Contact:
Part of the reason why I want to buy a Canadian REIT is that I want to put my money in Canadian dollars to buffer myself from a possible decline of the US dollar, since I may move back to Canada some day.
In regards to Foreign Tax Credit, from what I understand if I fill out a Form 1116 then I should be able to get back all of my foreign tax paid. Is this correct?
Also, what other US filing requirements are you thinking of in regards to the REIT?
In regards to Foreign Tax Credit, from what I understand if I fill out a Form 1116 then I should be able to get back all of my foreign tax paid. Is this correct?
Also, what other US filing requirements are you thinking of in regards to the REIT?
As I said, both in this thread and the other you'll need to file 3520.
Filling in 1116, because of the arithmetical rules involved, usually doesn't yield dollar for dollar, unless the foreign tax is 10% or less. One almost always has a carryforwrd, which means, in effect, that not all the foreign tax gets used up.
<i>nelsona non grata</i>
Filling in 1116, because of the arithmetical rules involved, usually doesn't yield dollar for dollar, unless the foreign tax is 10% or less. One almost always has a carryforwrd, which means, in effect, that not all the foreign tax gets used up.
<i>nelsona non grata</i>