Often, it doesn’t pay to procrastinate. I wrote about how I was in the process of moving our investment accounts out of Questrade and though I had filled out the transfer forms, I’ve been neglecting to mail the forms to TD Waterhouse. Sure enough, at the end of the year, some of my ETF holdings paid dividends and I find out yet another issue with Questrade.

If you hold a stock that trades in a US exchange in a taxable account and the stock pays you a dividend, a withholding tax is automatically charged to your account. Under a bilateral treaty, the withholding tax for Canadian residents is 15%. If you are not classified as a Canadian resident, the default withholding tax of 30% is charged. Fortunately, you can receive a credit for the 15% tax paid to the IRS when you file your taxes with the CRA but the 30% rate will result in some double taxation. Note that the withholding tax does not apply to RRSPs. You can find a detailed discussion on the withholding tax on Bylo’s website.

Though I had submitted a driver’s license along with my application and Questrade says that it’s policy is to classify clients as Canadian residents when a government-issued photo ID is supplied, our account “slipped through the net” and was set up as a non-resident account. As a result, when some of our ETF holdings made a distribution, 30% of the dividends were withheld. I contacted customer service and as is my usual experience, received little help beyond being told that it was my responsibility to submit a W8BEN form and since I didn’t, there was nothing they could do.

So, once again I contacted Emil Vojkollari, Chief Acquisitions Supervisor at Questrade to sort things out and as things stand now, I’ll be classified as a Canadian resident for future dividend payments and I’ll be issued a NR4, which I should file along with a NR7 to claim back the extra withholding tax. I could have avoided this headache if I had paid more attention to a dividend payment in September when a tax of $9.63 was withheld on a dividend payment of $32.10. I missed it because somehow we don’t tend to pay attention to small amounts.

If you have an account with Questrade and you hold US stocks in an investment account, you may want to check that 15% of dividend payments are being withheld. If not, contact Questrade and ensure that the correct withholding rate will be applied to future dividend payments. Check if a NR4 will be issued to you. As for me, I’ve finally had enough: my transfer papers are in the mail.

This article has 24 comments

  1. I believe you’ll have to fill out the W8BEN if you move to TDW as well–any broker, in fact. All brokers I believe, are required to deduct & submit the withholding tax for dividends for US based securities held: confirm with your broker. Note this also applies to Canadian companies like Tim Horton’s that are registered in the US, and some mutual funds. Again, confirm with the broker–hopefully you’ll get someone who’s in the know at the call centre.

  2. Canadian Capitalist

    Leslie: I don’t recall filling out a W8BEN for TDW but they did require a copy of my driver’s license when opening an account. I vaguely remember E*Trade wanting a W8BEN form and sending constant reminders to send one.

    A Questrade account specialist told me that a W8BEN is not necessary (but recommended) for classifying a client as a Canadian resident and a government-issued id would be enough. I guess its best to submit a W8BEN anyway.

  3. The big banks normally fill in the W8BEN on your behalf. This was what happened with Royal Bank ActionDirect when I signed up with them a few years back.

    After reading this post, I immediately went to verify my Questrade statements, all US dividends were deducted by 15%. Even Vanguard European Pacific.

    I don’t remember filing W8BEN for Questrade though.

  4. Canadian Capitalist

    FJ: Good to know that you were correctly classified as a Canadian resident. I guess it’s just my run of bad luck with Questrade.

  5. I’m confused. If I, as a Canadian, buy shares through Questrade in a vanguard ETF say – do I have to file a tax return in the US?! Tell me this is not true. Thanks.

  6. Canadian Capitalist

    pessimist: No, you don’t have to file a tax return in the US. But if you hold say VTF in a taxable account, a withholding tax of 15% is charged. You get a credit for the withholding tax when filing a Canadian tax return.

  7. Thanks a lot CC. That is reassuring.

  8. CC,

    I don’t think your experience at Questrade is unique. I’ve also had many bad experiences and have closed my account as a result. If you’re interested here were my reasons:


  9. Canadian Capitalist


    I did check out your post on Questrade (I’ve subscribed to your feed). Nothing gets resolved with them unless you have Emil on speed dial. I won’t be with them long – my transfer application is in the mail.

  10. In the United States Tax Returns are filed with the Internal Revenue Services or with the state or local tax collection agency containing information used to calculate income tax or other taxes. Tax returns are generally prepared using forms prescribed by the IRS or other applicable taxing authority.

  11. Pingback: Tax Implications of Foreign Dividend Investing

  12. How can a foreing customer could claim the backwithholding
    interest amount hold thru this year, he just signed his w8ben .
    and he wants his interest withholding back . as far I know we the banks send in to irs every month.

  13. Hi,

    Unfortunatley, I moved all my five accounts with Questrade last summer. I regret it so much as it has been a nightmare. I am not going to see naything else about Questrade as there is enough said about them on this and other website.

    I am not sure how can I transfer to another financial institution with the least cost. I think Questrade charges $125 per account so that will be $625 for me. Any idea on how to avoid or reduce this. As well, I am holding several ETF’s in each account. Do I need to sell all of them with Questrade and then then buy each one of them in the other financial institution?
    As well, if anyone transferred accounts from Questrade, please let me know what else to watch for.
    thank you very much for your advise and insights.

  14. KS, sometimes some companies will swallow their competitors fees in order to get your business. Tradefreedom did this. The big banks are less likely to, and Tradefreedom may not now that it is owned by Scotia Bank. But it never hurts to ask. It might be worth it for them if you have large accounts.

    Good luck

  15. BTW, I have sent in a W8BEN form for every account I opened, and it has been specifically recommended that I do so at every brokerage except questrade. I found the form and sent it in anyways figuring I would rather be safe than sorry.

  16. Nick,
    I am also having problems with the CCA and rental income using net file. It seems like there is a problem with the input for “to whom the CCA should be allocated”. In the help, it indicates that yourself alone is one of the options, but in the pull downs for the tab, its not an option. The only options are business level, partner level, or use of home for business purposes.
    I’d love to hear if anyone who has a sole owned rental property has been able to successfully claim CCA deduction using u-file.
    I’m definitely showing a positive rental income in my results so there should be room to claim some CCA.

  17. I had EXACTLY the same issue! Talk to 2 of their reps in the chatting room, got 2 different stories, the 2nd rep told me that is just way it is, and if you don’t believe it, contact CRA to verify. I did call CRA, and I was confirmed that I should not be taxed within RRSP account what so ever. I wouldn’t even bother getting my money back, will switch to Virtual Brokers, they provide cheaper commissions (6.45), free Level II screen, most importantly, more knowledgable staffs (met a few at Money Show in Vancouver)

  18. Another thing about Questrade, I think they have trouble with their business, right now they are so desperately trying to push their customers to crank up trading volume. They send emails to their customers encourage them to participate a course provided by Online Trading Academy which is affiliated to Questrade and promise that they will reimburse tuition. I went to one of their seminars, and found out how Questrade reimburse is actually by giving you a 10% discount on commission of each trade, basically 1 dollar each trade. I did some simple calculations, to get that 5K tuition back, I will have to make 5 thousand trades, and spend 45K on commission. No, thanks.

  19. I’m a Canadian and recently sold my US stock through a US broker. When the cheque and the transaction detail, there are 28% of the proceed has been withheld (TAX WITHHELD). Is there anything this withheld tax can be claimed back? and/or, is there any credit can be claimed when filing the personal tax return and how if yes?
    Thank you.

  20. I bought LVMUY on the OTC/pink market through TDW and they seem to take a 30% NRT and about a 10% fee. Anyone have any idea what this is – and why the NRT is not 15% like on my US stocks? Thanks.

  21. I am a non-resident Canadian and thus, do not fill out tax returns since I live abroad. Am I taxed on capital gains as long as I am a non-resident?

  22. Hi -I read your US Withholding tax on US dividend payments with a lot of interest, and wonder if you could give me some expert advice in this area.

    (1) I recently bought some US shares thru’ a major Cdn. bank’s brokerage firm and today received the US dividend payment for the first time. I noticed the US W/holding tax is almost 40% and so have the sinking feeling I’ve the same problem as you’ve experienced.

    (2) What’s the best way to resolve this? Would appreciate any advice you can give. I will follow up with the discount brokerage firm but it most likely would be long and circuitous.

    (3) I now know what W8BEN is. But do I have to file a copy thru’ my brokerage firm? No one has ever mentioned this to be before.

    (4) Also, you mentioned CRA’s NR4 and NR7 in your article above. I’ve seen a copy of NR7 BUT a lot of the info. required therein is so technical -such as what treaty # signed on what date, etc. How does one start to gather all such information!? I’m not sure the dividend w/holding tax in my case even qualifies as Part XIII tax??

    Thank you very much for any help you can give.


    • Ram Balakrishnan

      @Stephen: Based on your withholding tax rate of 40%, it sounds to me that you might be receiving dividends from a MLP or an ADR. If so, the withholding tax is probably correct. Check with your broker.

      Questrade never issued me a NR4 and when I tried to get more help at tax time, I got the usual run around. It wasn’t worth my time to track this down, so I just chalked it up to a learning experience.

      I’ve transferred accounts multiple times since and never once had to submit a W8BEN to a Canadian brokerage.