Avoiding the ‘silent enemy’ of foreign withholding tax in RRSPs
A conversation about taxation can be a drag for clients, but so is the “tax drag” from foreign assets held in registered retirement savings plans.
Broadly, the U.S.-Canada tax treaty exempts U.S. income, dividends and capital gains in an RRSP.
However, dividend income from Canadian-domiciled exchange-traded funds and mutual funds with U.S. exposure remains subject to the 30-per-cent withholding tax, which is reduced to 15 per cent under the treaty, says Cynthia Kett, principal with Stewart and Kett Advisors Inc. in Toronto.