RE:RE:US dividendWithholding Taxes
Assuming you are a NON-REGISTERED SHAREHOLDER, and hold your shares with your broker
then by default, your stockbroker will be required to withhold 15% from any dividends you receive from a non-resident corporation. This amount is not dependent on whether the dividends come in the form of USD or CAD dividends. You must convert any USD dividends when you file your income taxes.
IMPORTANT EXCEPTION: By mutual agreement, the U.S. and Canada have a Tax Treaty which EXEMPTS accumulating dividends INSIDE an RRSP from any withholding tax. No withholding taxes would apply to any such dividends. Therefore if your AQN shares are held inside your RRSP, there will be NO WITHHOLDING TAXES by virtue of the Canada-U.S. Tax Treaty.
NOTE: The TFSA is NOT COVERED by the latest Tax Treaty. So, a 15% withholding tax will apply inside your TFSA if dividends are received from a NON-RESIDENT corporation. This
anomaly may be addressed in future negotations covering the Tax Treaty between the two countries. Any withholdding tax paid inside your TFSA is currently lost forever, and cannot be claimed as a tax credit. But this situation (15% withholding tax) will NOT apply to AQN dividends received inside your TFSA..
I believe some posters here are confusing the currency that the dividend is paid in with the application of the withholding tax. Remember that the withholding tax applies to NON-RESIDENT corporations (unless exempted by Treaty). Despite its recent acquisitions, AQN remains a taxable Canadian corporation. It is based in Canada, and is NOT treated as a non-resident corporation.
Therefore, if you are a Canadian resident shareholder receiving your dividends inside of a TFSA, any AQN dividends are completely free of wihholding tax, REGARDLESS of whether the actual dividends are received in USD funds or CAD funds. What matters is that the issuer remains a Canadian resident corporation.
If you are a Canadian resident shareholder receiving any dividends inside your RRSP, then they
are TREATY EXEMPT, regardless of the residency of the corporation. So, if you get dividends from Procter & Gamble (a US resident corporation) or from AQN (a Canadian resident corporation), these are exempt from withholding taxes as long as they accumulate inside your RRSP.
Whether AQN pays its dividends in USD or in CAD does not change the tax status of the issuer.
AQN remains a taxable Canadian corporation. As a result, whether you hold your AQN shares inside your TFSA (Canadian side or U.S. side) it will NOT be subject to withholding taxes.
Also, if your AQN shaers are held inside your RRSP, again it doesn't matter whether you hold them in the Canadian side or U.S. side of your RRSP, any dividends would NOT be subject to wihholding taxes. The Tax Treaty nullifies any potential withholding taxes.
All of the above assumes of course that you are a Canadian resident. Non-Canadian shareholders would be subject to withholding tax. Some of the posters here are conflating the very distinct and separate issues of (1) Forex leakages when you receive USD dividends in any Canadian currency account (2) withholding taxes applicable to dividends received from non-resident corporations and (3) the DRIP price applicable when the currency of the dividends and the currency of the account and not aligned. (for example receiving USD dividends in a Canadian-denominated account)
I believe the original post had to do with the DRIP price of newly acquired AQN shares through your broker. Based on my observation, it would appear that the DRIP price is affected by the forced currency conversion when you receive USD dividends in a Canadian dollar denominated account. The solution, as I see it, is quite simple -- just have your stockbroker move the AQN shares over to the U.S. side of your account. AQN does NOT suddenly become a non-resident corporation when you move your shares over from one side to another. Result: NO WITHHOLDING TAXES.
Not sure if this helps, but there appears to be some confusion over whether dividends from AQN will be subject to withholding tax, depending on where you hold the dividends (U.S. side or CAD side of your TFSA), or the currency that the dividends are paid in. As far as AQN is concerned, and assuming you are a Canadian resident for tax purposes, there should be no withholding taxes applied to AQN dividends. (This assumes of course, that your stockbroker has correctly coded AQN to be a resident Canadian Corporation).