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Hi,


I am new to ETF investing.

Does anyone know of any Canadian Domiciled ETF's that track US and World stocks and that automatically re-invest dividends.

I don't want to pay tax on distributed dividends every year.



Also


Thanks
 

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Re-investing dividends in a taxable account means the dividends were paid and will be taxed.

Since you mention ETFs that hold US and World stocks, in a taxable account the source country likely takes a cut of the dividend paid then there is also Canadian tax as well.
http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/
http://canadiancouchpotato.com/2014/02/20/the-true-cost-of-foreign-withholding-taxes/


In a taxable account, the way to avoid paying tax on dividends is to avoid the dividends being paid. There are some ETFs that use swap instruments to do this, HXS is one.


Cheers


PS

This article should help with what a swap based ETF like HXS is.

Tax efficiency. The real benefit of swap-based ETFs comes when they are held in taxable accounts. Unitholders of HXT and HXS receive the full value of any dividends paid by the companies in their indexes. However, because they receive no distributions, those dividends are not taxable.

This is fundamentally different from a simple dividend reinvestment plan. Although DRIP investors collect their dividends in the form of new shares, they still get a T3 slip every year and must pay tax as though they received them in cash. With a swap-based ETF, however, no tax is payable on the dividends as long as the investor holds the fund.
http://canadiancouchpotato.com/2011/06/06/understanding-swap-based-etfs/


Regular ETFs where the investor will receive a T3 form listing the taxable income paid during the tax year to report one's tax return far outnumber the few that are swap based.
 

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Hi,
I don't want to pay tax on distributed dividends every year.
Well, it seems you are under the impression that you don't pay taxes on reinvested dividends. I had read in articles that this was a thing, though I had yet to see it for reals. Anyways, you should know that you will always have to pay yearly taxes on dividends for investments that are in non-registered accounts, whether they are reinvested automatically or not.

cheers
 

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Were the articles that mentioned this for a different tax jurisdiction, like say the US or Caymen Islands?

The articles I have seen for a Canadian tax resident are clear that for dividends paid, cash or non-cash that is re-invested are taxable, in a regular ETF (i.e. not a swap based one).
https://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm

The only cash paid that is not immediately taxable in a regular ETF that I am aware of is return of capital (RoC). Some articles are misleading as they say "RoC is not taxable" but the RoC paid is subtracted from the cost base. The net effect is what was paid as RoC is taxed in the future, as a capital gain.


Cheers
 
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