Last Updated: March 6, 2017
Usually, there’s a non-resident withholding tax on dividends paid by foreign companies. Canadians earning U.S dividends in their non-registered (taxable) accounts will automatically get 15% deducted. However, they can recover that by filing for a foreign tax credit. However, at the end of the day, they still pay the marginal income tax rate on those foreign dividends.
To save taxes on foreign dividends, Canadians can buy US dividend stocks in an 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.
Here’s a list of companies which do not have withholding taxes on the dividends for Canadians. That means, if you’re holding these dividend companies in an RRSP or TFSA, you receive the full dividend.
If you like these companies, buy them in your TFSA or RRSP, and receive their full dividend. Because you get deducted 15% on US dividends in a TFSA but get the full dividend in an RRSP, you probably want to leave the room in your RRSP for US dividend companies with high yields.
- BP plc (NYSE: BP) – *yield: 7% – an Energy company
- Royal Dutch Shell plc (NYSE: RDS.B) – *yield: 6.7% – an Energy company
- Unilever plc (NYSE: UL) – *yield: 3% – a Consumer Staple
- Westpac Banking Corp (NYSE: WBK) – *yield: 5.3% – an Australian bank
- BHP Billiton plc (NYSE: BBL) – *yield: 4.2% – a Basic Materials company
- GlaxoSmithKline plc (NYSE: GSK) – *yield: 4.8% – a pharmaceutical company
- HSBC Holdings plc (NYSE: HSBC) – *yield: 7.3% – a London-based bank doing business in 80 countries
- Vodafone Group plc (NASDAQ: VOD) – *yield: 6.1% – a Telecom
*yield as of March 6, 2017. Note that I collected this list from the web, so there could be inaccuracies. Please let me know if any correction is needed. I will also add to this list as I come across such companies.
Foreign dividend risks
The fluctuating foreign exchange rate between the currency of the company and your currency will result in a fluctuating income for you. From 2014 to 2016, we also saw the horror of investing in resource-based companies as the commodity prices experienced a landslide.
It goes without saying that whether you’re investing for foreign dividends or not, the fundamentals and growth prospects of the company must be good. It’s probably wise to only invest in resource-based dividend stocks with a huge margin of safety because of the nature of their cyclical businesses.
|Country||Withholding Tax on Dividends (%)|
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Disclaimer: I am not a certified financial advisor. This article is for educational purposes, so consult a financial advisor and or tax professional if necessary before making any investment decisions.
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