# Dividend taxation of Canadian company dividends listed on NYSE



## Retiredguy (Jul 24, 2013)

If a Canadian buys shares of a Canadian based company, ie TD Bank or Royal Bank of Canada listed on the NYSE, what are the taxation consequences of the US$ Dividends received. The shares would be held in a US$ non registered account at TD Waterhouse.

Would they still be "eligible" Dividends for Canadian - CRA purposes and still get the tax credit?
Would there be any tax hold back, 15% ?

I'm thinking of doing this to pay some on going US$ based expenses.
Any pitfalls ?


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## humble_pie (Jun 7, 2009)

Retiredguy said:


> If a Canadian buys shares of a Canadian based company, ie TD Bank or Royal Bank of Canada listed on the NYSE, what are the taxation consequences of the US$ Dividends received. The shares would be held in a US$ non registered account at TD Waterhouse.
> 
> Would they still be "eligible" Dividends for Canadian - CRA purposes and still get the tax credit?
> Would there be any tax hold back, 15% ?
> ...




whatever you do, please don't even think of doing this! the broker'll hit you with foreign exchange fees every which way.

first, the dividends. There are about 20 companies that pay their dividends in US dollars. These are the only interlisted dividend-paying canadian companies that should be held in a US dollar account.

royal bank, TD, bmo & the other chartered canadian banks are not among these 20 companies. Canadian banks all pay their dividends in CAD only. If an investor holds these in US account, the broker will charge FX fees on all dividends without telling the client. That is, client will receive what's left of the dividend in US dollars in USD account, after the broker has collected roughly 1.50% in FX fees.

here is the list of canadian stocks that presently pay dividends in USD. To this list should be added Algonquin power, which switched to USD divs in september/14. If you own any of these stocks, they should be held in USD account, in order to prevent the broker system from charging FX fees on the dividends.

http://www.canadiancapitalist.com/canadian-stocks-paying-us-dollar-dividends/


notice that USD dividends from these companies will accumulate free of FX fees in a USD account.

Q: will canadian stocks held in USD account at TD be subject to US withholding tax?
A: No

Q: will such stocks receive eligible canadian dividend tax credits?
A: at big bank brokers such as TD, yes. However, it's said that some boutique brokers - IB, possibly virtual & others - cannot process this detail, therefore IB clients holding canadian interlisteds on US side of an account do sacrifice their canadian dividend tax credits (highly undesirable consequence.)

at the big bank brokers, a correct T5 will be furnished for such dividends, however this T5 will be in USD & taxpayer will have to convert all figures back into CAD for tax claiming purposes.

in general, if you wish to obtain USD, the best way is to gambit the currency. Google this as norbert's gambit or search the archives of this forum, there are dozens of useful how-to's.

one could also do a partial gambit. The latter means identifying which among canadian interlisted stocks that one already owns would have neutral-to-desirable tax consequences if sold.

once the investor identifies such a candidate, he can get an appropriate amount of such stock journalled over to USD side of the account (TD doesn't charge for journal.) Investor can then sell the stock for USD once the journal completes. One might describe this manoeuvre as a gambit done on the instalment plan.


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## Toronto.gal (Jan 8, 2010)

Retiredguy said:


> Would there be any *tax hold back, 15%?*


No, because the fact that it's an inter-listed Canadian stock that also trades in the NYSE, does not make it a foreign stock.

Foreign exchange conversion fees is another very important consideration as already explained upthread, but in short, you can certainly elect to earn the dividends in either currency, when you have dual accounts. 

As an example, I recently purchased on the NYSE, shares of a Canadian company that pays div. in CAD. The reason was because I did not have enough CAD on the day I wanted to make the purchase, but I have since journalled the shares to my CAD account, so when I'll receive the divs. later this month, there will be no conversion fee of any kind. When journalling/moving shares, you just need to do it before the date of record [not date of payment - but check with your broker just the same], otherwise you'll pay the conversion fee until the next div. payment.

You can also find the currency info. on company's website, and where I always go to double check information. Example:

*Notice Regarding Dividend Currency*
http://www.agrium.com/en/investors/shareholder-information/dividends


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## Retiredguy (Jul 24, 2013)

Thanks Toronto.gal & Humble_pie for your comprehensive responses.


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## Guban (Jul 5, 2011)

@Retiredguy,
I hold a few Canadian stocks that pay US$ in a US account to do exactly what you inquired about; I have some US$ expenses.

No problems. No currency exchange fees back to CAD$ to worry about. No worries about losing out on the dividend tax credit.


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## Retiredguy (Jul 24, 2013)

Guban said:


> @Retiredguy,
> I hold a few Canadian stocks that pay US$ in a US account to do exactly what you inquired about; I have some US$ expenses.
> 
> No problems. No currency exchange fees back to CAD$ to worry about. No worries about losing out on the dividend tax credit.


Do you mind naming the brokerage firm and stocks? Thanks


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## Guban (Jul 5, 2011)

Sure. For what it is worth: agrium, encana and barrick (yuck). 
May not want to follow my lead, though. See humblepie's post above for a more comprehensive list.

TDDI.


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## AltaRed (Jun 8, 2009)

Retiredguy said:


> Do you mind naming the brokerage firm


I think all the big bank brokerages do this. It's a no brainer. You just have to know whether to keep the stock on the right side of the account, i.e. the CAD side or USD side depending on what currency the stock issues its dividend.


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## My Own Advisor (Sep 24, 2012)

Agreed.

Previously posted in CMF I think:
http://www.canadiancapitalist.com/canadian-stocks-paying-us-dollar-dividends/

Agrium Inc. (AGU)
Barrick Gold Corp. (ABX)
Brookfield Asset Management Inc. (BAM.A)
Brookfield Infrastructure Partners LP (BIP.UN)
Brookfield Office Properties Inc. (BPO)
Brookfield Renewable Energy Partners LP (BEP.UN)
Constellation Software Inc. (CSU)
Encana Corp. (ECA)
Goldcorp Inc. (G)
IAMGOLD Corp. (IMG)
Inmet Mining Corp. (IMN)
Kinross Gold Corp. (K)
Magna International Inc. (MG)
Methanex Corp. (MX)
Open Text Corp. (OTC)
Potash Corp. of Saskatchewan (POT)
Silver Wheaton Corp. (SLW)
Talisman Energy Inc. (TLM)
Thomson Reuters Corp. (TRI)
WaterFurnace Renewable Energy Inc. (WFI)
Yamana Gold Inc. (YRI)

These are likely the ones to keep in a taxable USD $ account.

Don't lose DTC but income, capital gains, must be managed.


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## Toronto.gal (Jan 8, 2010)

Retiredguy said:


> Do you mind naming the brokerage firm and stocks? Thanks


*Rg:* all you have to do, is review your own CAD stock list, and find out which ones may already pay dividends in USD, then just call your broker and journal those shares to the USD account.

When you buy new CAD stocks, check with the company's website to confirm whether divs. are declared/paid in USD or CAD, so that you know in which account best to hold to receive 100% of your div. payment.

Regarding brokers, if by chance you're with Questrade, if I remember correctly [could be wrong], that's one of the only brokers that offers currency settlement preference, ie, if you owned AGU, you would receive dividends in USD even if you held the shares in your CAD account, hence no currency conversion would be triggered, or maybe that is just an option for registered accounts. Perhaps someone with Questrade could confirm.


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## humble_pie (Jun 7, 2009)

My Own Advisor said:


> Previously posted in CMF I think:
> 
> http://www.canadiancapitalist.com/canadian-stocks-paying-us-dollar-dividends/
> 
> ...




i don't believe it's a no-brainer ...

the art of avoiding brokers' hidden FX fees, plus the science of finding work-arounds to escape the same, add up to complex strategies. Basically they are all offshoots of arbitrage. It can be challenging for an investor to work his way into these for the first time.

RG did well to launch his topic here, since it allows for several different aspects to be elaborated.

to MOA's list from Canadian Capitalist should be added Algonquin Power, latest to switch to US dividends. 

i am, btw, the creator & the housekeeper of the CC list, the anonymous cmf member mentioned in CC's article. 

originally CC & i thought the dividend exposé plus its quasi-arbitrage solution might be too complicated to get across to readers. Then we thought to post about the topic in small increments, in the hope that the idea would take root over time.

we succeeded to a certain extent, nowadays it's common to hear from broker reps that clients are routinely phoning them to have their 21-canadian-stocks-paying-USD-divs journalled over to the US sides of their accounts.

unfortunately, company websites are not yet transparently clear about their dividends. Although such websites do state the dividend currency, they often continue to describe dividend choices that are available *only* to the tiny minority of registered certificate-holding share owners. 

these choices are not available to the majority of present-day shareholders, who are holding shares in street form at brokers & are at the mercy of brokers' FX fees.

there are no regulations that govern the broker FX issue. At present, the companies will tell shareholders with street shares to refer to their brokers. The brokers, in turn, often advise shareholders to contact the companies.

it's a looming issue whose time has not yet come, because not enough investors across all brokerages in canada are yet aware of the hidden FX fees. As one broker manager with 15 years' experience - arguably the best & the brightest licensed rep i've ever known - told me in 2013, "We're not getting significant complaints from clients about this issue, so we [the broker] are not prepared to do anything about it at present."

he said he thought it was a superb issue for journalists to write about though ...


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## My Own Advisor (Sep 24, 2012)

oh I don't think it's a no brainer HP, on the contrary! 

I suspect there is lots of money for banks to be made from FX fees 

Good thing I'm a shareholder!


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## RBull (Jan 20, 2013)

HP, I agree with what you're saying about hidden FX fees and the challenge for a newer investor (and I'll add even seasoned investors) to work around all this. They're fine ways for brokerages/banks to nibble away at your money and add up to easy profits for them. 

And I believe Brookfield Property Partners PPY.un should be added to the list.


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## Toronto.gal (Jan 8, 2010)

Further to my post #10, it was brought to my attention that Questrade keeps dividends in the currency they are received, so there is no conversion. However, it would be nice to have confirmation from a current client [heard this from a former client].


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## Tmil (Apr 10, 2021)

Toronto.gal said:


> No, because the fact that it's an inter-listed Canadian stock that also trades in the NYSE, does not make it a foreign stock.
> 
> Foreign exchange conversion fees is another very important consideration as already explained upthread, but in short, you can certainly elect to earn the dividends in either currency, when you have dual accounts.
> 
> ...


Let's say I buy suncor a canadian company on 
1.NYSE in a non registered/ margin account using my UDS cash that I have transfered from my bank account,
2. Since the dividends paid by suncor will be Canadian dollars, I was just thinking of selecting in my questrade account the option of trade currency ad thus when the dividends are paid they would settle in my Canadian side. My question is would I still be incurring an fx fee here?


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## Spudd (Oct 11, 2011)

Tmil said:


> Let's say I buy suncor a canadian company on
> 1.NYSE in a non registered/ margin account using my UDS cash that I have transfered from my bank account,
> 2. Since the dividends paid by suncor will be Canadian dollars, I was just thinking of selecting in my questrade account the option of trade currency ad thus when the dividends are paid they would settle in my Canadian side. My question is would I still be incurring an fx fee here?


I'm not familiar with Questrade so I am not sure. But the easiest thing to do is buy them in your USD account with USD cash, then journal them over to the Canadian side. Dividends will be paid in CAD into your Canadian sub-account. If you want USD back in the end when you sell, journal them back to the US side before selling.


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## AltaRed (Jun 8, 2009)

Per Spudd, securities that pay dividends/distributions in CAD need to be on the CAD side of the account, and vice versa for securities that pay in USD.


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## Tmil (Apr 10, 2021)

Spudd said:


> I'm not familiar with Questrade so I am not sure. But the easiest thing to do is buy them in your USD account with USD cash, then journal them over to the Canadian side. Dividends will be paid in CAD into your Canadian sub-account. If you want USD back in the end when you sell, journal them back to the US side before selling.


Oh okay. That was helpful. Maybe its just better I buy suncor with canadian cash held in my canadian side because if I was to do what you say the value of the amount I would then get when I am ready to sell would be based on the selling price of course when I am ready to sell and minus what the FX rate of norberts gambit is at the time correct?


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## Spudd (Oct 11, 2011)

Tmil said:


> Oh okay. That was helpful. Maybe its just better I buy suncor with canadian cash held in my canadian side because if I was to do what you say the value of the amount I would then get when I am ready to sell would be based on the selling price of course when I am ready to sell and minus what the FX rate of norberts gambit is at the time correct?


I can't really understand your question, but it literally makes zero difference to the price you pay or the price you get when you sell which side you do it on. They are the same, only one is in USD and one is in CAD.


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## gardner (Feb 13, 2014)

Something to keep in mind is that the book value is based on the effective $CAN cost on the day you buy it. If you buy with $US, you will need to note down the exchange rate on that day. Since you are holding $US cash, the disposal of it to buy a stock is also a capital event in its own right.

Some folks try to calculate the ACB in $US and convert the gain/loss to $CAN on the day it is realised, but that's not correct.


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## Tmil (Apr 10, 2021)

gardner said:


> Something to keep in mind is that the book value is based on the effective $CAN cost on the day you buy it. If you buy with $US, you will need to note down the exchange rate on that day. Since you are holding $US cash, the disposal of it to buy a stock is also a capital event in its own right.
> 
> Some folks try to calculate the ACB in $US and convert the gain/loss to $CAN on the day it is realised, but that's not correct.


Thanks much.


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