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What is a W-8BEN form?
Canadian investors can avoid double taxation on US stock earnings with Form W-8BEN.
The United Stated Internal Revenue Service (IRS) issues W-8BEN forms to help you avoid paying income tax on US stock profits to both the the US and Canadian governments. We walk through Form W-8BEN, including what it is and how it’s used.
What is a W-8BEN form?
If you’ve made any money from business activities in the US, a W-8BEN form is used to inform the IRS that you are legally exempt from paying US income tax or that you qualify for a reduced tax rate. Otherwise, foreign investors are subject to a US tax rate of 30% on earnings from stock dividends and other sources of income like premiums, rents, royalties and annuities.
Rather than excusing you from paying income tax altogether, a W-8BEN form acts as a promise to the US government that you’ll declare the income you earned to your country’s government and will pay income tax accordingly.
Without this form, you could end up being taxed twice for the same income: by the US government and by your country’s government.
Not everyone can claim this benefit. To use a W-8BEN form, you must satisfy the following:
- Reside in a country that has a special tax treaty with the US. To foster good relationships with international trading partners, the US has entered into tax agreements with many nations—including Canada. The Canada-United States Income Tax Treaty prevents Canadian residents with US income from paying income tax in both countries.
You don’t have to physically be in the US to earn US-taxable income. Trading stocks on US exchanges is deemed to be a US-based activity for tax purposes even if you trade online while living in Canada.
- Earn income from US-based business activities. This includes buying and selling stocks on US stock exchanges like the NYSE or the Nasdaq.
The form’s full name is Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals).
How often do I need to fill out a W-8BEN form?
A W-8BEN form needs to be resubmitted every 3 years—your Canadian broker will likely notify you when it’s time to recomplete the form. You have to submit a W-8BEN form to every broker you use.
What does the broker do with the form after I submit it?
By submitting the W-BEN form to the US Internal Revenue Service, your broker can claim an exemption from US tax withholdings on interest income and dividends from your US stocks. Remember, though, that you still have to declare this income to the CRA on your next tax return and pay income tax in Canada.
Will my broker take care of the W-8BEN form for me?
Some brokers will assist in completion of your W-8BEN form, while others expect you to fill it out and submit it yourself. Many brokers let you complete and submit W-8BEN forms online, making the process fairly simple and painless.
|Broker||How to find your W-8BEN form|
|Wealthsimple||Clients are asked to fill out a W-8BEN when they first open an account.|
|Interactive Brokers||W-8BEN form can be accessed and completed online through clients’ IB account management portals.|
|Questrade||Clients do not need to submit a W-8BEN form, because Questrade automatically reduces withholding taxes based on identifying information provided when clients first register for their accounts.|
|Qtrade||Clients do not need to submit W-8BEN forms, because Qtrade automatically reduces withholding taxes based on identifying information provided when clients first register for their accounts.|
|Scotia iTRADE||Clients can access the W-8BEN online on Scotia iTRADE’s Forms Library (www.scotiaitrade.com)|
|TD Direct Investing||Clients can access the W-8BEN online on the TD Direct Investing Forms and Applications page.|
|CIBC Investor’s Edge||Clients are required to submit a W-8BEN form when they first open an account.|
|RBC Direct Investing||Clients are required to submit a W-8BEN form when they first open an account. Link to the form is provided during the online application process.|
|BMO InvestorLine||Clients can download a W-8BEN from RBC’s website. They can also access this form by logging into their online accounts and selecting “Forms and Agreements” from the My Portfolio menu.|
Where can I find the W-8BEN form online?
You can find Form W-8BEN (as well as instructions for filling out the form) on the IRS’s website.
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