Hello:
I am Canadian living in the US with an IRA. Because I am planning to move back and retire in Canada I own a fair amount of Canadian dollar stocks in the IRA, for example Canadian Oil Sands. I noticed that there is a witholding tax of 15% on the distribution, in the IRA. I would have thought that everything in the IRA is tax-free until I withdraw funds. Can any one help me? Can I get the money back? If so, can I get it back in to my IRA? Thanks.
Ernie
Taxation in my IRA
Moderator: Mark T Serbinski CA CPA
That has been problematic in the past -- especially in reverse (IRS tax on dividends paid on RRSP-held US stocks for example) and I know that there has been a solution for that problem
I'll dig around a bit to see if the there is one for your problem.
However, once you move back to canada, the solution for the tax is quite simple: since this is tax being withheld and sent to CRA, then you would simply ad this amount to all your other withheld tax, and get it refunded to you at the end of the year. I understand that this effectively diminshes the amount in your IRA, but at least it is not lost tax, like it is while you reside in US.
I'll dig around a bit to see if the there is one for your problem.
However, once you move back to canada, the solution for the tax is quite simple: since this is tax being withheld and sent to CRA, then you would simply ad this amount to all your other withheld tax, and get it refunded to you at the end of the year. I understand that this effectively diminshes the amount in your IRA, but at least it is not lost tax, like it is while you reside in US.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
The solution to avoid the tax altogether lies in the treaty Atricle XXI.2:
Subject to the provisions of paragraph 4, income referred to in Articles X
(Dividends) and XI (Interest) derived by a trust, company, organization or other arrangement that is a resident of a Contracting State, generally exempt from income taxation in a taxable year in that State and operated exclusively to administer or provide pension, retirement or employee benefits shall be exempt from taxation in that taxable year in the other Contracting State.
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For those with RRSPs, the RRSP trustees must contact the US comapnies and notify them that the dividends that they are paying to the non-resident (the RRSP or the are not subject to US tax). Over the years this has become commonplace and most RRSPs are no longer being imporoperly withheld by the US firms.
The same would need to be done by your US brokerage, having them inform the Cdn comapnies that thse dividends are being paid to an exempt organization residng in the US (the IRA) and not subject Cdn withholding.
As an aside, this teatment, until January 1, 2011, applies only to corporation and not Income and royalty trusts (distributions are nort considered dividends by IRS) . After Jan. 2011 all such distributions will be treated as dividends.
Subject to the provisions of paragraph 4, income referred to in Articles X
(Dividends) and XI (Interest) derived by a trust, company, organization or other arrangement that is a resident of a Contracting State, generally exempt from income taxation in a taxable year in that State and operated exclusively to administer or provide pension, retirement or employee benefits shall be exempt from taxation in that taxable year in the other Contracting State.
----
For those with RRSPs, the RRSP trustees must contact the US comapnies and notify them that the dividends that they are paying to the non-resident (the RRSP or the are not subject to US tax). Over the years this has become commonplace and most RRSPs are no longer being imporoperly withheld by the US firms.
The same would need to be done by your US brokerage, having them inform the Cdn comapnies that thse dividends are being paid to an exempt organization residng in the US (the IRA) and not subject Cdn withholding.
As an aside, this teatment, until January 1, 2011, applies only to corporation and not Income and royalty trusts (distributions are nort considered dividends by IRS) . After Jan. 2011 all such distributions will be treated as dividends.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
I think that I understand. But since I do not plan on moving back to Canada for another 10 years, then maybe the best route would be for my broker to contact the companies that are witholding the tax and see if I can both dissuade them from doing so in the future, and get my prior (withheld) distributions back? Is that reasonable?
I thought I explained this.
As to getting past tax back, you would need to contact CRA. You may be able to file a non-resident return, report the tax withheld and get it back in cash. The company doesn't have it anymore. CRA does.
It is doubtful that this would be put directly back into your IRA, as CRA has no mechanism to put it there. Your broker may have a solution to that, however.
As to getting past tax back, you would need to contact CRA. You may be able to file a non-resident return, report the tax withheld and get it back in cash. The company doesn't have it anymore. CRA does.
It is doubtful that this would be put directly back into your IRA, as CRA has no mechanism to put it there. Your broker may have a solution to that, however.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks, Nelsona. Last question, if I may. My ex-wife, an American, with no plans to go to Canada (she's never lived nor filed a return there), also has Canadian dollar dividend paying stocks in her IRA). Any chance that she could ever recover such funds? Does she have an ability to file a non-resident return as well? Thanks again.
Yes. This has nothing to do with citizenship or residency of the individual. It has to do with the residence of the exempt organization -- the IRA.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best