Usually there’s a non-resident withholding tax on dividends paid by foreign companies. For example, as a Canadian, the US dividends I receive in my non-registered (taxable) account will automatically get 15% deducted. However, I can recover that by filing for a foreign tax credit. Still, I must pay the marginal income tax rate on those foreign dividends.
So, to save the tax on the foreign dividends, Canadians would buy US dividend stocks in the RRSP instead. However, the point of this article is to record the list of companies which don’t have a withholding tax on the dividends for non-residence. As I’m continuing on my dividend growth investing journey, I’ve collected a list of companies which do not have withholding tax on the dividends for Canadians. That means, if you’re holding these dividend companies in the RRSP or TFSA, you receive the full dividend. If you’re holding them in the non-registered (taxable) account, then, it’s true that there’s no withholding tax on the foreign dividends, but you still need to pay the marginal income tax rate on the dividends.
Buy these companies in your TFSA, and receive their full dividend.
- BP plc (NYSE: BP) – *yield: 4.87% – an Energy company
- Royal Dutch Shell plc or simply, Shell (NYSE: RDS.B) – *yield: 4.44% – an Energy company
- Unilever plc (NYSE: UL) – *yield: 3.52% – a Consumer Staple
- Westpac Banking Corporation (NYSE: WBK) – *yield: 5.25% – an Australian bank
- BHP Billiton plc (NYSE: BBL) – *yield: 3.49% – a Basic Materials company
- HSBC Holdings plc (NYSE: HSBC)
- Vodafone Group plc (NASDAQ: VOD)
*yield as of August 8, 2014 closing; Note that I collected this list from the web, so there could be inaccuracy. Please let me know if any correction is needed. I will also add to this list as I come across such companies.
Of course, buying the above companies in the RRSP will yield the same result — that there’s no withholding tax on their dividends. However, you get deducted 15% on US dividends in the TFSA, but get the full dividend in the RRSP. So, you probably want to leave the room in your RRSP for US dividend companies instead.