When any non-resident of United States invest in U.S. securities, 30% withholding tax is applied to all dividends paid out by U.S. corporations under the Foreign Account Tax Compliance Act (FATCA) and remitted to IRS. The dividends paid out by U.S. Corporations are subject to tax if the securities are owned in non-registered accounts or a registered account like TFSA that is not recognized by U.S.
This tax rate can be reduced by Canadians under the Canada-US treaty by providing proper documentation, which in this case is a W8-BEN form, also known as 'Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting'. When you sign up for a MogoTrade account, you are asked to sign a W8-BEN which allows us to reduce the withholding tax to preferential treaty rates of 15% for our Canadian members. The signed W8 forms are valid for the year in which they are signed and for three full calendar years after that. We will ask you to sign a new copy of the W8-BEN form once it is close to getting expired.