I'm new to investing in U.S. securities. As a Canadian, how will I be taxed on all types of U.S. income?
Answer:
Assuming you are not a U.S. resident for tax purposes (or a dual Canadian - US citizen), then:
Interest income from U.S. sources is subject to a U.S. withholding tax of 10% under the U.S. Canada treaty (or in certain cases, exempt from U.S. tax under U.S. law, if it meets the definition of portfolio interest-see links below).
Dividends income from U.S. sources is subject to a U.S. withholding tax of 15% under the U.S. Canada treaty.
Capital gains are exempt from U.S. tax (except as related to (1) U.S. real estate income or (2) income from ownership of a U.S. business from U.S. sources).
U.S. real estate income including capital gains (held directly or via a partnership or corporate investment) and partnership income from a U.S. business from U.S. sources is subject to U.S. withholding at a 35% tax rate and will require the filing of an annual calendar year Form 1040-NR. Additional taxes might be due (or a refund received) on the filing of the return.
Partnership income from a U.S. business from U.S. sources are subject to U.S. withholding at a 35% tax rate and will require the filing of an annual calendar year Form 1040-NR. Additional taxes might be due (or a refund received) on the filing of the return.
U.S. taxes withheld, or additional U.S. taxes paid (less refunds) on filing of Form 1040-NR should be allowed in computing a foreign tax credit on your Canadian income tax return (T1 for individuals, seehttp://www.cra-arc.gc.ca/tax/individuals.
like an American
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