Q: The impending big ugly Republican bill is supposed to increase the witholding taxes for Canadians, on certain companies.
According to the Globe ("Trump’s new bill threatens major tax increases for Canadian companies", by Clare O’Hara and Rudy Mezzetta, May 22, 2025), this would include, "Canadian corporations that receive dividends from U.S. subsidiaries" and "Canadian individuals who own U.S. securities directly". This tax would rise to 50 percent from 5% and 15% respectively.
Though I do not depend on dividend income, I do own a couple of securities which I am wondering about:
Brookfield Corp: A company based in Canada but which is trying to become based in the US. Though this has a small USD yield, would it be affected?
Purpose US Cash High Interest ETF: This pays interest in USD on USD but is a Canadian company. Would this interest be affected by this bill?
Can you name some companies in particular that would be hit hard by this?
Lastly, I wonder if our pension plans, like CPP, HOOPP, etc would be affected significantly and how would they respond? Any insight on that?
Thanks as always.
According to the Globe ("Trump’s new bill threatens major tax increases for Canadian companies", by Clare O’Hara and Rudy Mezzetta, May 22, 2025), this would include, "Canadian corporations that receive dividends from U.S. subsidiaries" and "Canadian individuals who own U.S. securities directly". This tax would rise to 50 percent from 5% and 15% respectively.
Though I do not depend on dividend income, I do own a couple of securities which I am wondering about:
Brookfield Corp: A company based in Canada but which is trying to become based in the US. Though this has a small USD yield, would it be affected?
Purpose US Cash High Interest ETF: This pays interest in USD on USD but is a Canadian company. Would this interest be affected by this bill?
Can you name some companies in particular that would be hit hard by this?
Lastly, I wonder if our pension plans, like CPP, HOOPP, etc would be affected significantly and how would they respond? Any insight on that?
Thanks as always.
5i Research Answer:
BN could be impacted in terms of wire transfers and dividends flowing up to it from its subsidiaries. In terms of PSA and interest, we just do not know at this time (note that Canada is not specifically mentioned in the bill, so it is a moving target here). Generally speaking, Canadian companies with US subsidiaries transferring money back to Canada may be impacted. Pension plans would be significantly impacted (they pay no withholding tax right now). Large funds and companies can certainly put pressure on the administration, and like tariffs we doubt the final result will be as bad as it is reads now.