The Canada–US tax treaty and dividends

What does the treaty do for dividends?

When a company in one country pays a dividend to someone in another, the source country usually taxes it by withholding. The Canada–United States Tax Convention, last amended by the 2007 Protocol, caps that withholding for residents of each country. The Department of Finance Canada publishes a consolidated text that we checked on October 31, 2026.

Two articles matter most for dividend investors: Article X, which sets the withholding rates on dividends, and Article XXI, which exempts certain organizations, including qualifying pension and retirement plans.

The treaty doesn’t remove tax in your home country. A Canadian resident still reports US dividends on a Canadian return, and the home country generally gives a credit for the source country’s tax. The foreign tax credit page covers the Canadian side.

Article X: the withholding rates

Most individual investors fall in the 15% row. The 5% rate is for corporate shareholders with a substantial stake, not individuals.

The treaty rates are caps on the source country’s tax, not a final bill. The withholding you actually see depends on documentation being in place, and the home country then taxes the dividend under its own rules, generally with a credit for the source country’s tax.

Worked example: one $1,000 US dividend, five ways

Here is the same hypothetical $1,000 dividend from a US company, paid to different Canadian holders. The figures are simple arithmetic on the rates above; they show the US withholding only, not any Canadian tax that follows.

How do you get the treaty rate?

The treaty rate isn’t automatic. The payer, or the brokerage and custodians in between, need documentation showing you are a resident of the other country. For an individual Canadian holding US shares, that is usually a W-8BEN form on file with the brokerage.

Without it, US law requires 30% withholding on US-source dividends paid to a foreign person. If your statements show 30% rather than 15%, it’s worth asking your brokerage whether the form is on file and current.

Article XXI: the retirement plan exemption

Article XXI(2) exempts dividends and interest earned by an arrangement that is resident in one country, generally exempt from tax there, and operated exclusively to administer or provide pension, retirement or employee benefits. In a private letter ruling (200810013), the IRS concluded that RRSPs and RRIFs, along with RPPs and DPSPs, are such arrangements.

That is why US dividends paid to an RRSP or RRIF are generally not subject to US withholding, while US dividends paid to a TFSA are. The widely applied reading of the treaty is that TFSAs, RESPs and FHSAs aren’t operated exclusively for retirement benefits; we found no IRS or CRA statement that addresses them directly. See US dividends in an RRSP and US dividends in a TFSA.

The other direction: US residents with Canadian shares

Article X is reciprocal. It applies to dividends paid by a company resident in either country to a resident of the other. So a US resident receiving dividends from a Canadian company is generally subject to Canadian withholding of no more than 15% on portfolio holdings, or 5% for a company owning at least 10% of the voting stock.

Article XXI(2) is written reciprocally too. How it applies to a particular US account type is a question for the account provider or a qualified tax professional; we don’t generalize about specific US accounts. The US tax treatment of the dividend itself is covered on the qualified dividends page.

Quick summary for Canadian investors

• RRSP or RRIF: US dividends generally exempt from US withholding.
• TFSA, RESP or FHSA: 15% withheld and generally not recoverable.
• Non-registered: 15% withheld; a Canadian foreign tax credit can generally offset it.
• Missing W-8BEN: 30% withheld until documentation is in place.
• Company owning 10% or more of the voting stock: 5%, which applies to corporate shareholders, not individual investors.