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Foreign Withholding Tax on US and International Dividends

The US takes 15% of your US dividends before they reach you. Which account they sit in decides whether you ever get it back.

By Nate Sorensen Reviewed for accuracyUpdated Oct 202611 min read
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Your US dividend arrived smaller than the company said it would. The United States took 15% of it before it reached you, and you can't opt out of that. Whether you ever get the 15% back depends entirely on which account your shares are sitting in. In an RRSP or a RRIF it's never taken in the first place. In an account that isn't registered, it's taken and you claim it back when you file. In a TFSA, an FHSA, an RESP or an RDSP, it's taken and it's gone for good.

Key takeaways

  • 15% of your US dividends goes before you ever see it, at the rate the tax treaty between Canada and the United States sets.
  • In an RRSP or a RRIF, nothing is taken from US shares you hold yourself, or from a US-listed fund holding US shares.
  • In a non-registered account you get it back, as a foreign tax credit when you file your return.
  • In a TFSA, an FHSA, an RESP or an RDSP you don't, because none of that income reaches your return in the year the tax came off, so you have no Canadian bill for a credit to cut.

Where the 15% goes, and when

Withholding tax comes out of your dividend before it reaches you. No bill arrives. You don't write a cheque, and you don't file anything to set it off. A US company declares its dividend, and by the time your share of it turns up in your account, 15% has already gone to the United States.

That 15% is a ceiling the treaty sets, not a rate somebody picked for you. Under the tax treaty between Canada and the United States, tax on a dividend can't go above 15% of the gross payment when you live in the other country and you genuinely own what's paying it.1 Both halves matter. You have to live here, and the shares have to be yours rather than somebody else's.

Canada then taxes that same dividend on your own return, where it goes in alongside your interest rather than with your Canadian dividends.4 So two countries take a cut of one payment of yours. You can't change the American cut, and whether you ever see it again depends on the account your shares are in.

Which accounts give the 15% back?

Two accounts give it back by never letting it go in the first place: the registered retirement savings plan you know as an RRSP, and the registered retirement income fund it turns into, the RRIF. The treaty exempts income from an arrangement that's generally free of tax at home and runs exclusively to provide pension, retirement or employee benefits, and both of those plans of yours fit that.1 So a US share you hold yourself in either one pays you the whole dividend, and so does a US-listed fund holding US shares.

Your non-registered account gives it back at tax time instead. You report the full dividend, including the part that didn't reach you, and you claim the 15% as a foreign tax credit. Your claim is capped at the lesser of the foreign tax you actually paid and the Canadian tax you'd otherwise owe on income from that country, which means your whole 15% can come back to you, just months after you first gave it up.3

You get none of it back inside a tax-free savings account. The same is true of a first home savings account, of a registered education savings plan, and of a registered disability savings plan. Those four are your TFSA, FHSA, RESP and RDSP. A foreign tax credit works by reducing Canadian tax, and nothing those accounts earn reaches your return in the year the foreign tax came off, so you have no Canadian tax for a credit to reduce. Inside a TFSA the income and the foreign tax paid on it are left out of the calculation outright.2 No form recovers it for you.

If your US holdings have been sitting in your TFSA this whole time, you haven't broken anything. Say they pay you an illustrative $400 of dividends in a year. Your 15% is $60. That's real money, and it's also small beside what your TFSA saves you on everything else inside it.

What happens to $100 of US dividends, by account
What happens to one hundred dollars of US dividends in three kinds of accountThree horizontal bars, each representing one hundred dollars of US dividends. In an RRSP or a RRIF the whole bar is kept and nothing is withheld. In a non-registered account eighty-five dollars arrives and the remaining fifteen dollars, drawn with a dashed outline, comes back as a foreign tax credit when you file. In a TFSA, FHSA, RESP or RDSP the same eighty-five dollars arrives and the remaining fifteen dollars, drawn solid, is gone for good.RRSP or RRIF$100 reaches youNothing is withheld.Non-registered$85$15The $15 comes back as a credit when you file.TFSA, FHSA,RESP, RDSP$85$15The $15 is gone for good.A dashed edge means the money comes back. A solid one means it does not.
What you are left with from the same dividend, in each kind of account.
Source Illustrative. The $100 is a round number; the 15% rate and the account treatment are sourced. See sources 1, 2 and 3.

Why a fund can change the answer

The exemption follows whoever holds the US share, and that person isn't always you.

When the US share sits in your own name inside your RRSP, you're the holder the treaty describes, and nothing is taken from you. When a Canadian-listed fund holds those shares for you, the fund is the holder instead. A fund doesn't exist exclusively to provide retirement benefits, so it fails the treaty's test. The exemption doesn't apply, and the ordinary 15% cap governs instead.1

None of that makes a Canadian-listed fund a mistake for you. Outside a registered account it can be the easier thing to own, because the fund passes both the foreign income and the foreign tax it paid straight through to you, on your T3 slip, where you can claim it.4 It files the paperwork you'd otherwise be sorting out on your own.

Who the treaty sees as the holder
How the treaty treats a US share held directly against one held through a Canadian-listed fundTwo rows of three boxes. In both rows a US company pays a dividend. In the first row you hold the US share directly inside your RRSP, so the treaty sees a Canadian retirement arrangement, the exemption applies and nothing is taken. In the second row a Canadian-listed fund holds the US share, so the treaty sees a fund rather than a retirement arrangement, the exemption does not apply and the fifteen per cent cap governs instead.Where the dividend startsWho holds the US shareWhat the treaty gives youA US companypays a dividendYou do,inside your RRSPThe exemption.Nothing is taken.A US companypays a dividendA Canadian-listedfund doesThe 15% cap.No exemption.
Read across a row. The only thing that differs between them is who owns the US shares.
Source Department of Finance Canada, Canada-United States tax convention, Articles X and XXI. See source 1.

You can only claim foreign tax that shows up on a slip in your name, on income you've reported.3 If nothing shows up in the foreign tax box, you have nothing to claim, whatever happened further up the chain.

That same test handles a fund holding companies outside North America. Working out which country charged what to whom isn't your job, which saves you a great deal of guesswork. Your slip either shows foreign tax paid or it doesn't, and only the number printed there is yours to claim.

What if more than 15% comes off?

Some countries take more than 15% from you. Their own treaty with Canada sets that rate, not the American one, and Canada negotiates a separate treaty with each country it deals with.5 So what you give up depends on where the company is, not just on the fact that it's foreign.

If you see more than 15% come off a US dividend, that's a different problem. The cap only applies where the payer knows you qualify for it, as somebody living in Canada who genuinely owns the shares.1 That one is a question for your broker.

Above 15%, you can't claim all of it as a credit. Foreign tax on your investment income counts toward your foreign tax credit up to 15% of that income, and anything over that comes off your income as a deduction instead.2 A deduction only saves you your marginal rate, not the whole dollar. So the part above 15% still costs you something, even after you've claimed everything you're entitled to.

You won't be doing this split by hand. It falls out of the same two slip boxes when you file. But a country taking 30% doesn't hand you a 30% credit, and if a lot of your money sits in one country like that, you'll notice.

Where the line falls when a country takes 25%
How foreign tax above fifteen per cent is treated differentlyA single horizontal bar representing twenty-five per cent of foreign tax withheld on investment income. The first fifteen percentage points count as a foreign tax credit against your Canadian tax. The remaining ten percentage points cannot be claimed as a credit and come off your income as a deduction instead, which is worth only your marginal rate.A credit against your Canadian taxA deduction instead015%25%Worth a full dollar off your tax bill.Worth your marginal rate, not the dollar.
Only the first 15% behaves like a refund. The rest reduces your income instead.
Source Illustrative rate. The 15% ceiling and the deduction above it are sourced. See source 2.

Finding the number on your own slips

Two boxes carry it. On a T3, box 25 is your foreign income and box 34 is the foreign tax paid on it. On a T5, they're box 15 and box 16. Both of the tax boxes feed the same line on the form where your foreign tax credit gets worked out.4

The income box holds the gross amount, before the tax came off. So if your T3 shows $400 in box 25 and $60 in box 34, you were paid $340 and you report $400. There's more on what each of your slips carries in the guide to reading a T3, T5 and T5008.

Nobody can tell you from the outside how much foreign tax your funds paid last year. Your own slips can, and they turn up in late winter. If you hold funds outside a registered account, those two boxes are where you'll find the figure, and you won't find it anywhere else.

When the 15% is big enough to matter

Fifteen per cent of a dividend isn't 15% of your money, and what you'd gain by shifting things around stays small until the amounts get big. Five things move it for you.

  • How much of your money pays a foreign dividend. You give up 15% of the dividends, never 15% of the holding. A fund yielding an illustrative 2% hands over 0.3% a year, and only in your accounts that can't recover it.
  • Whether you have Canadian tax to offset. A credit needs a bill to reduce. In a year when your taxable income is low, your credit can be worth less than the full 15%, because it's capped at the Canadian tax on that income.3
  • Your province, and whether you file in Quebec. The federal credit isn't all of it. You claim a provincial or territorial credit on its own form as well, and Quebec runs its own.3
  • What a move would cost you. Moving your US holding into an RRSP uses contribution room, and that room may be worth more to you somewhere else.
  • Whether you're drawing the account down. In a RRIF the exemption still holds, so nothing is taken there either. If you're taking money out of more than one account, the same US dividend can be treated two or three different ways in the same year, depending on which one it lands in. Joanne starts on that question in her story.

What this actually costs you depends on your marginal rate, your contribution room and what you already own, and none of that shows from out here. Your notice of assessment will tell you the room, and your own statements will tell you the holdings.

Where most people end up holding their US shares

People who have RRSP room and a TFSA both usually put their US-listed holdings in the RRSP, because the 15% never goes there at all, and it doesn't cost them anything to arrange.

Where a TFSA is somebody's only investing account, their US holdings usually stay there anyway, because giving up 15% of a dividend is a far smaller problem than not investing at all, and the account still does the larger job of keeping both the growth and the withdrawals out of tax.

Outside registered accounts, the withholding tends to get treated as a timing problem rather than a cost, because it comes back at filing. People there generally watch their two slip boxes instead of where each fund happens to be listed.

You're not obliged to land anywhere in particular. For most people these amounts stay small enough that whichever account they already use wins on convenience, and it only starts to bite once a real share of your money pays a foreign dividend.

?

Common questions

Is the 15% on top of my Canadian tax?

In a non-registered account, no. You report the full dividend and claim the 15% back as a foreign tax credit, so you're not paying both. In a TFSA, FHSA, RESP or RDSP that income never reaches your return, so there's no Canadian tax for a credit to reduce, and you can't recover the 15% at all.

Can I claim the withholding from my TFSA later on?

No. It isn't deferred, it's gone. Foreign tax paid inside your TFSA is left out of the foreign tax credit calculation entirely, and there's no later year in which it comes back to you.

Does this apply to a US stock that doesn't pay a dividend?

No. Withholding only comes off a dividend. If you sell a US share at a profit, the treaty leaves that gain taxable only in Canada, and nothing is withheld from it.

My ETF is Canadian-listed but it holds US stocks. Have I already paid this?

Box 34 on your T3 slip carries the amount. If the fund paid foreign tax and passed it on to you, that box has it, and outside a registered account you can claim it. Inside your RRSP the treaty's exemption doesn't reach a fund holding the shares on your behalf.

Is an RESP treated like an RRSP here?

No. The treaty's exemption is for arrangements that exist to provide retirement benefits, and your RESP isn't one. The same goes for your FHSA and your RDSP.

Further reading

  • Reboot Your Portfolioby Dan Bortolotti🍁 Canadian

    Building a Canadian index portfolio out of ETFs, and how the pieces sit across the accounts you already have.

Sources

  1. Department of Finance CanadaCanada-United States tax convention, consolidated. Article X(2)(b) caps the tax on a dividend at 15%; Article XXI(2) exempts an arrangement operated exclusively for pension or retirement benefits; Article XIII(4) leaves other gains taxable only where you live. The consolidation has no official sanction. Accessed 2026-09-03.
  2. CRAIncome Tax Folio S5-F2-C1, Foreign Tax Credit, effective 2026-03-31. Paragraph 1.69 on TFSAs and RRSPs; paragraph 1.22 on the 15% ceiling and the deduction above it. Accessed 2026-09-03.
  3. CRALine 40500, federal foreign tax credit: the claim is the lesser of the foreign tax paid and the Canadian tax otherwise payable on that country's income, and the income has to be on your return. Provincial and territorial credits use their own form. Accessed 2026-09-03.
  4. CRATax treatment of mutual funds: foreign income is reported on the interest and other investment income line, and T3 box 25 and box 34, T5 box 15 and box 16 each map to a line on Form T2209. Accessed 2026-09-03.
  5. Department of Finance CanadaTax treaties: the list of Canada's treaties in force, negotiated country by country. Accessed 2026-09-03.

Educational, not financial advice. Figures verified against primary sources on the date shown.

Where this fits: for what a dividend actually pays you in the first place, see dividend investing in Canada. For the Canadian half of the bill on that same payment, see the guide on how Canada taxes what you earn from investments, or browse the whole tax hub.

Related guide

Dividend Investing in Canada: What You Actually Get Paid