For Canadian tax purposes, all U.S. ETF distributions are considered fully taxable foreign income and will be subject to tax at your marginal tax rate. The disposition of a U.S. ETF may trigger a capital gain or loss that will qualify for the 50% capital gains inclusion rate.
Do I need to pay taxes on stocks?
Generally, any profit you make on the sale of a stock is taxable at either 0%, 15% or 20% if you held the shares for more than a year or at your ordinary tax rate if you held the shares for less than a year. Also, any dividends you receive from a stock are usually taxable.
What kind of taxes do you pay on foreign investment in Canada?
In Scenario A, a Canadian-resident individual invests directly in foreign stocks and bonds in a taxable (or non-registered) account. Investment income generated and paid to the investor from the foreign securities is first subject to foreign withholding tax. This is the first layer of withholding tax.
How are Canadian stocks taxed in the US?
Capital gains on publicly-traded securities sold by a Canadian non-resident are not taxable in Canada. In the U.S., your quarterly dividend income is taxable on your U.S. tax return. Your Canadian tax already paid is eligible as a foreign tax credit on filing to help avoid double taxation.
Do you have to pay taxes on foreign stocks?
To help address those questions, let’s start by looking at the tax treatment of foreign stocks by U.S. investors. If a foreign stock pays a dividend to shareholders in other countries, the taxes due on that income may be withheld by the foreign government where the dividend-paying company is domiciled.
Do you have to pay taxes on ETF income in Canada?
It is only payment of investment income from the U.S. ETF to the Canadian ETF/MF that triggers U.S. withholding tax (the first layer of tax). The second layer of tax (Canadian non-resident withholding tax) only applies when distributions of income from the Canadian ETF/MF are issued to a non-resident of Canada (see the white chevron below).
