A dividend paid by a US company to a Canadian resident normally does not arrive whole: part of it is withheld at source, in the United States, before the money even reaches your account. That is neither an error nor a brokerage fee — it is a tax mechanism between countries.
The mechanism
The United States taxes dividends paid to non-residents. A tax treaty between Canada and the United States reduces that rate for Canadian residents who have identified themselves as such to their broker (usually through a tax residency form). The broker then withholds that percentage and remits the rest.
An important point: the exact percentage comes from the treaty and the forms in force — your statement governs what was actually withheld, and the official sources govern the applicable rates.
The role of the account type
This is where the container (see the article on accounts) changes everything:
- Non-registered account: the withholding applies, but a foreign tax credit generally allows part or all of it to be recovered on the Canadian return — the broker's tax slip details the amounts.
- RRSP and similar retirement accounts: the treaty normally provides an exemption — US dividends usually arrive there with no withholding.
- TFSA: in the eyes of the US tax authority, the TFSA is not a retirement account covered by that exemption. The withholding therefore applies in principle, and — since the account is tax-free in Canada — there is generally no mechanism to recover it. It is a real cost, often discovered with surprise.
A neutral worked example
A dividend of US$100, with a hypothetical withholding of 15%:
- The company declares US$100.
- The broker withholds US$15 at source.
- Your account receives US$85.
- Depending on the container: partly recoverable through the credit (non-registered), probably avoided from the start (RRSP), or permanent (TFSA).
What this changes for your tracking
In Everyfolio, enter the dividend as received — the net amount that appears on your statement. The app tracks what actually entered the account; the mechanics of the tax credit belong to your return, not to a tracking tool.
Challenge: check my understanding
Four questions wait behind an account: they check what you understood, and the state stays from one visit to the next.
Official sources
Withholding rates, residency forms and the foreign tax credit come from the Canada–United States tax treaty and from the Canada Revenue Agency. Quebec residents also claim the provincial side of the credit with Revenu Québec. Rules and percentages can change: consult their publications, and your broker's tax department.
- Canada Revenue Agency — income tax for individuals: https://www.canada.ca/en/revenue-agency/services/tax/individuals.html
- Department of Finance Canada — tax treaties: https://www.canada.ca/en/department-finance.html
- Revenu Québec — citizens: https://www.revenuquebec.ca/en/citizens/
Informative, general content — not personalized advice. For your situation: your institution or an advisor.