How to avoid the long arm of the IRS

The CRA isn't the only tax collector that Canadian investors need to heed.

Gail Bebee 12 September, 2017 | 5:00PM
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The intrusion of the United States of America into the lives of Canadians is pervasive. And that intrusion extends well beyond the media frenzy generated by the latest incumbent in the White House. While you can escape that frenzy by ignoring the news media, keeping the Internal Revenue Service, the U.S. equivalent of the Canada Revenue Agency, at bay is another matter. You may not be able to avoid the long reach of the IRS, but you can take steps to mitigate its impact.

If you own shares of a U.S. company that pay dividends (almost de rigueur for an adequately diversified investment portfolio), or receive interest income from U.S. sources, U.S. withholding tax may be deducted from income earned before you are paid. The standard tax rate is 30%, but can be reduced to 15% on dividends and eliminated on most interest income, if you provide IRS form W-8BEN to your financial institution (or other withholding agent) to confirm your country of residency and that you are not a U.S. "person" (basically not a U.S. citizen or resident).

The W-8BEN form must be provided every three years, or earlier if any information changes, to maintain the reduced rates. Your investment advisor should be able to provide you with a form.

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About Author

Gail Bebee

Gail Bebee  Gail Bebee is an independent personal finance speaker, teacher and the author of No Hype--The Straight Goods on Investing Your Money. She can be reached at gbebee@gailbebee.com; her website is www.gailbebee.com.

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