# Is there a US Withholding Tax on Long Term Capital Gains?



## ignacvucko (Jan 4, 2014)

Hi everyone,

Hoping that someone with US withholding knowledge can comment:

1) If a Canadian individual holds stock in a private US C corporation and then sells it to a US public company, triggering as a capital gain (US long term), will any proceeds be subject to US withholding tax? If yes, how much?
2) If a Canadian Controlled Private Corporation (CCPC) holds stock in a private US C corporation and then sells it to a US public company, triggering as a capital gain (US long term), will any proceeds be subject to US withholding tax? If yes, how much?

Thanks!
Ignac


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## Zeeshanbmerchant (Jan 4, 2014)

No

Canada/US Tax Treaty requires each country to be taxed for capital gains in the country of their residence

http://www.fin.gc.ca/n07/data/07-070_1-eng.asp


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## warp (Sep 4, 2010)

I think that is correct......however,

If you receive a capital gain distribution, ( short or long term), from a US ETF, then US taxes will be withheld,,,even though our tax treaty with the US clearly states that there will be no taxes withheld on Capital Gains.

This has happened to me...and there is no use in complaining about it at my broker as I tried to do...this is just another wrinkle in the stupidity that is our tax code, although the problem might lie with the US and their intention to steal as much taxes as they can from Canadians. Of course our government will not fight this nonsense.


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## My Own Advisor (Sep 24, 2012)

"...this is just another wrinkle in the stupidity that is our tax code."

Agreed. 

But if things were simple and straightforward, we'd have so little to complain about?


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## andrewf (Mar 1, 2010)

All distributions are considered income, including capital gains distributions. As a Canadian, this makes it important to avoid any US domiciled funds that may give big surprise capital gains distributions when holding in a taxable account.


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## Guban (Jul 5, 2011)

warp said:


> I think that is correct......however,
> 
> If you receive a capital gain distribution, ( short or long term), from a US ETF, then US taxes will be withheld,,,even though our tax treaty with the US clearly states that there will be no taxes withheld on Capital Gains.
> 
> This has happened to me...and there is no use in complaining about it at my broker as I tried to do...this is just another wrinkle in the stupidity that is our tax code, although the problem might lie with the US and their intention to steal as much taxes as they can from Canadians. Of course our government will not fight this nonsense.


You can always file a US tax return to get the withholding back. A big pain, but it may be worth it, depending on the dollar amount.


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## andrewf (Mar 1, 2010)

If that were so, what would explain the failure of Canadian ETF providers to do so?


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## warp (Sep 4, 2010)

Guban said:


> You can always file a US tax return to get the withholding back. A big pain, but it may be worth it, depending on the dollar amount.


Yeah, thats all I need...another country , with another idiot tax code to deal with.


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## james4beach (Nov 15, 2012)

andrewf said:


> As a Canadian, this makes it important to avoid any US domiciled funds that may give big surprise capital gains distributions when holding in a taxable account.


Such as derivative based funds, like the inverse or leveraged (double, triple) trading vehicles. A few years ago, Rydex distributed 86% of the value of one of their funds. Proshares also distributed up to 44% of one of their ETFs. Massive distributions and a total surprise to traders.


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