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I have a conundrum about withholding taxes on US dividends in my RRSP. I read the Canada US tax treaty as of September 2007. It says that RRSP (pension funds, not subject to tax) have zero withholding with respect to dividend or interest payouts.

Here is an interpretation by an accountant website which confirms this opinion:

“Normally, when a U.S. corporation pays dividends on its shares to a non-U.S. resident, a withholding tax of 30% must be withheld and remitted to the IRS. For Canadian residents, this tax is reduced by the Canada-U.S. tax treaty to 15% (5% in some cases where the shareholder is a corporation).
However, Article XXI(2) of the treaty makes an RRSP or RRIF entirely exempt from U.S. taxes. This is because an RRSP or RRIF is "a trust, company, organization or other arrangement that is a resident of Canada, exempt from income tax in Canada and operated exclusively to administer or provide pension, retirement or employee benefits".

Because the RRSP or RRIF is exempt, no U.S. withholding tax can apply.”

To me this seems clear, and is exactly what the tax treaty states. However, when I asked my Canadian broker - Questrade about this issue, this is their reply:

“Dear Customer:

Questrade (via Penson) is required to withhold NRT (Non-resident tax) on USA holdings. Typically this amounts to 15% of gross dividends/interest IF we have the W-8BEN or valid photo ID on file. Otherwise, the amount (by default) will be 30%.

If you still have further question please reply to this E-mail.

Have a nice weekend.

So I am left confused. The treaty says one thing - corroborated by accountants, and the opinions of others here on the fool boards, yet my broker says quite the opposite.

Is there a place I can go to get a definitive answer on this? Can I FORCE my broker to not withhold funds on US dividends and interest?

PS - please cc replies to

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