Updated Checked by the Tax-Services.ca editorial team How we check
US companies hold back 15% of the dividends they pay a Canadian resident under the tax treaty. Inside an RRSP nothing is withheld. Inside a TFSA the 15% is simply lost. In a regular account you claim it back with Form T2209, and once your US holdings cost more than $100,000 you also file Form T1135.
Why did my broker hold back 15% of my US dividends?
The treaty between Canada and the United States caps US withholding on dividends paid to Canadian residents at 15%, and you get that rate by giving your broker a W-8BEN form. Without one, the default rate is 30%. The treaty also exempts RRSPs and RRIFs, so US dividends paid inside those accounts arrive whole. A TFSA gets no such exemption. The account type changes the result like this:
| Account holding the US stock | US withholding | Can you claim it back in Canada? |
|---|---|---|
| RRSP or RRIF | 0% | Nothing to claim |
| TFSA | 15% | No, the credit needs taxable income |
| Non-registered account | 15% | Yes, with the foreign tax credit |
One catch: a Canadian-listed ETF that owns US stocks pays the 15% inside the fund, and nothing you file can recover it, even in an RRSP. Holding US stocks directly, or a US-listed ETF, in an RRSP avoids the withholding on the US dividends.
How does the foreign tax credit get the withholding back?
You claim it on Form T2209. The credit is the smaller of the foreign tax you paid and the Canadian tax that applies to that foreign income. The federal figure goes on line 40500, and the provincial part uses your province’s own form. Foreign dividends are taxed as ordinary income, with no dividend gross-up and no dividend tax credit. The Canada Revenue Agency: federal foreign tax credit page has the limits, and our foreign tax credit page goes further into the form.
An Ontario estimate from the site’s engine. You earn $85,000 in salary and receive C$5,500 of US dividends in a non-registered account, converted at Bank of Canada rates. The broker withheld $825.
| Item | Amount |
|---|---|
| Extra income tax from the dividends | $1,631 |
| US tax withheld | $825 |
| Federal credit limit (share of federal tax) | $690 |
| Provincial credit limit (share of Ontario tax) | $354 |
| Canadian tax left to pay after the credit | $806 |
| Same $5,500 as eligible Canadian dividends | $351 in tax |
The federal credit takes $690 and the province takes the other $135, so the full $825 comes back. Canada still charges the remaining $806. The last row is why people compare US and Canadian dividend stocks after tax: eligible Canadian dividends get a credit that foreign ones don’t. The dividend tax calculator runs the Canadian side for your province.
Do I have to file Form T1135?
Yes, if the total cost of your specified foreign property was more than $100,000 at any time in the year. The test uses what you paid, in Canadian dollars, not today’s market value. From $100,000 up to $250,000 you can use the short Part A. Above $250,000 you need the detailed Part B. The form is due with your return, on 30 April, or 15 June if you or your spouse run a business. The Canada Revenue Agency: Foreign Income Verification Statement page lists what counts.
US shares in a taxable account at a Canadian broker count, even though you never see them leave the country. So do US-listed ETFs, a US bank account balance and rental property abroad. Property inside an RRSP, RRIF or TFSA is left out, along with units of Canadian mutual funds, Canadian-listed ETFs and personal-use property such as a vacation home. Someone with US stocks that cost $70,000 plus $40,000 sitting in a US bank account is over the line at $110,000, even if nothing was sold. Late filing can cost $25 a day up to $2,500 under the Income Tax Act, more for a knowing omission, and the CRA gets three extra years to reassess unreported foreign income. The foreign income reporting page covers the wider rules.
Which exchange rate do I use?
The Bank of Canada rate on the day each amount arose, or the annual average rate if payments came in through the year. That goes for dividends, the tax withheld and what you paid for the shares. On a sale, convert the proceeds at the sale date and the cost at the purchase date, so a moving US dollar changes your gain even if the share price sat still. Shares bought for US$5,000 when the rate was 1.30 cost C$6,500. Sold for the same US$5,000 at 1.40, they bring in C$7,000, and you report a C$500 gain on a stock that went nowhere (an illustration, with made-up rates). Keep the broker statements that show each date and amount.
Where should I hold US stocks?
If you have the room, an RRSP is the cleanest home for US dividend payers, since the 15% never leaves. The TFSA suits growth stocks that pay little or no dividend. Non-registered money works with the credit, as the example showed, but it brings the T1135 paperwork and the tax on the remaining $806. The TFSA calculator helps you see how much room you really have.
Where does this information come from?
The credit and T1135 rules come from Canada Revenue Agency pages on the federal foreign tax credit and the Foreign Income Verification Statement; the 15% rate comes from the Canada-US tax treaty. Dollar examples come from the site engine and are estimates. Checked in October 2026. This is an independent information site: we provide no services, we do not represent the CRA or any organization, and we do not guarantee that anything here is accurate or current. We accept no liability for decisions based on it. Check the official source before you rely on it. See the full disclaimer.
Frequently asked questions
Do I need a W-8BEN form to buy US stocks?
Most Canadian brokers collect one when you open the account. It tells the US payer you're a Canadian resident, so the 15% treaty rate applies. Without it the withholding can be 30%, and recovering the extra means filing with the US tax authority.
Are US dividends in a TFSA taxed by Canada?
No, the dividends stay tax free in Canada. The 15% US withholding still comes off at source, though, and nobody refunds it. That's why many investors keep US dividend payers in an RRSP and use the TFSA for growth stocks.
Do I file T1135 if my US shares are in an RRSP?
No. Property held inside an RRSP, RRIF or TFSA is excluded from the T1135 count. Only foreign property outside registered plans counts toward the $100,000 cost limit, and the cost is the original price, not today's value.
Can I claim the foreign tax credit for the 30% withheld without a W-8BEN?
Normally only the part up to the 15% treaty rate is creditable. The extra 15% was over-withheld, so you'd ask the payer or the US tax authority for it back. Claiming more than the treaty rate on your Canadian return can lead to an adjustment.