Last week the U.S. House passed the “One Big Beautiful Bill,” a massive budget package now in the hands of the Senate. Buried in the text (Section 899) is a set of tax “counter-measures” aimed at countries—Canada included—that run digital-services taxes or other levies Washington calls “unfair.”

What could change?

• Withholding tax on dividends: Today, the Canada-U.S. tax treaty caps the U.S. withholding tax at 5 % on dividends paid to a Canadian parent company and 15 % on portfolio dividends to individual investors (0 % inside RRSPs/RRIFs). The new rules would add five percentage points per year until the withholding rate hits 50 %—double today’s statutory U.S. rate and far above the treaty ceiling.

• Real-property sales (FIRPTA): The 15 % withholding on the sale of U.S. real estate could also climb by 5 p.p. a year, topping out at 20 % higher than today.

• Double-tax risk: Canadian investors can normally claim a foreign-tax credit for U.S. withholding, but only up to the treaty rate. Any excess—say a 35 % or 50 % U.S. levy—might not be creditable, leaving you with tax you can’t recover.

• Corporate cash-flow: Canadian firms pulling dividends out of U.S. subsidiaries would watch their tax drag jump every year, eating into repatriated profits.

The Senate has at most 20 hours of debate (budget-reconciliation rules mean no filibuster), so amendments will arrive fast and the final version could look different. Still, the White House says President Trump wants a bill on his desk by July 4.

What to do now?

1. Audit your exposure. How much of your dividend stream comes from U.S. companies held in non-registered accounts or through a Canadian corporation?
2. Check account location. Dividends inside RRSPs/RRIFs are exempt under the treaty—so sheltering more U.S. holdings there could blunt the hit.
3. Model the new math. Ask your tax adviser to run scenarios: a 5-, 10-, 15- or 20-point hike in withholding can turn a “low-yield, high-growth” U.S. allocation into a break-even or negative after-tax return.
4. Watch for treaty renegotiation. Ottawa and Washington haven’t tinkered with the treaty in decades, but this bill openly challenges it. If Section 899 survives, diplomatic talks (and possible Canadian counter-measures) are almost certain.

Case Studies

Consider two quick, real-life scenarios. Karen, a 67-year-old retiree in B.C., owns US $250,000 of dividend-paying blue-chips in a non-registered account. The shares yield 3 %, or about US $7,500 a year. Today she loses US $1,125 to the 15 % treaty withholding, then claims a foreign-tax credit and keeps the rest. If Section 899 takes full effect, the levy climbs to US $1,500 in Year 1, then US $1,875, US $2,250, all the way to US $3,750 when the rate peaks at 50 %. Only the first 15 % is creditable, so her net cash flow drops by roughly a third.

MapleTech Inc. in Toronto faces an even bigger hit. Its U.S. subsidiary remits US $5 million of profits each year. With a 5 % treaty rate the cost is US $250,000. Under the bill it would owe US $2.5 million—an extra US $2.25 million of trapped cash that could otherwise fund R&D or dividends in Canada.

Financial Planning Areas

There are planning levers. Individuals can migrate U.S. dividend payers into RRSPs, RRIFs or TFSAs (registered plans remain exempt) and replace them in taxable accounts with Canadian or non-U.S. holdings, covered-call ETFs or growth stocks that pay minimal dividends. Corporations can revisit transfer-pricing to earn more profit in Canada, reinvest earnings inside the U.S. to defer repatriation, or explore treaty-friendly entities such as unlimited-liability companies or hybrids. Real-estate investors might accelerate sales before FIRPTA withholding climbs, or structure dispositions via instalments and gain reserves. Everyone should audit how much U.S. source income they really need versus alternative jurisdictions—especially with Ottawa and the provinces still offering foreign-tax credits only up to treaty limits.

Concluding Remarks

The legislation could still change in the Senate, but the reconciliation process limits debate and the White House wants a signature by July 4. If even a pared-down version survives, the cost of holding U.S. assets from Canada is about to jump. Talk to your portfolio manager, cross-border tax lawyer or CFO now—waiting until the ink is dry could mean writing cheques you could have avoided.