What foreign withholding tax is
When a foreign company pays you a dividend, its government often withholds tax at source before the cash reaches you. For US dividends the treaty rate is typically 15% in a non-registered account. Whether you get that back depends on the account.
Account by account
| Account | US dividends |
|---|---|
| Non-registered | 15% withheld; usually recoverable via foreign tax credit |
| RRSP / RRIF | US-listed US equities: generally exempt by treaty |
| TFSA | 15% withheld; generally not recoverable |
The treaty exemption is narrow. The RRSP exemption applies to US withholding on US securities held directly. Hold a Canadian-listed ETF that holds US stocks, or international (non-US) equities, and the exemption may not apply.
ETF structure adds layers
A Canadian-listed ETF that holds a US-listed ETF that holds international stocks can suffer two layers of withholding, some of it unrecoverable even in an RRSP. For heavy foreign-dividend exposure, holding the most direct structure in the right account reduces the leakage. This is asset-location, not just asset-allocation.