Thanks, I have a non-registered account that the majority of my portfolio is in, in this account I have a US ETF (VTI) and a International ETF (VEA), should I consider transfering VTI to my RRSP or even just dump VTI and invest the monies in VEA or something else in my non-registered account, I do have some US equity in my RRSP alreadyBest spot for US stocks or US ETFs holding US stocks is in an RRSP as there is no withholding tax as prescribed by the Canada/US Tax Treaty. International equities are best held in a taxable account so as to claim foreign tax paid on the withholding taxes. US stocks are still subject to withholding tax even when held in a TFSA. All foreign dividend income is taxed in Canadian resident hands as regular income at your full MTR.
I wouldn't be making any changes in your situation. With the bulk of your investments in a taxable account, it is still better to have those securities with capital gains potential held there than in a registered account; leave the fixed income in the registered account. You will still be able to claim foreign tax paid on VTI, so there is no advantage to trading it for VEA.
I'm pretty sure withholding tax is not exempt for US investments held through a Canadian mutual fund or ETF. Take XSP as an example. It actually holds IVV and pays a 15% withholding tax, which is not recoverable for RRSP accounts. The best bet is to hold US-listed investments directly in a RRSP account provided you are comfortable with foreign currency fluctuations.I'm not completely sure, but I don't think the withholding tax exemption on US-based RRSP investments applies when those investments are held through a mutual fund or ETF. Withholding tax is supposed to be withheld by the entity making the cross-border payment. If you are an investor in a Canadian mutual fund or ETF that owns US investments, then the tax will probably be withheld by the US entity making distribution payments to the Canadian mutual fund or ETF. In short, if you are holding US investments through a Canada-based fund, you are probably still paying 15% withholding tax on interest and dividends.
IVV is a US-listed ETF that tracks the S&P 500. For a Canadian resident, withholding tax will depend on which account holds IVV. In a RRSP, there is no withholding tax. In a taxable, TFSA or RESP account, the withholding tax is 15%. You can receive a credit for the withholding tax in a taxable account when filing your taxes.Does IVV have withholding tax, or do you need to hold the constituent securities? If the latter, I'm not sure it's worth it. Withholding tax on the 2% yield is 0.3% per year. I'm willing to bet that the average investor would underperform the index by more than that if they held individual securities.
You should make your asset allocation decisions separately from, and before, the decision as to which account to house things in ... don’t let the tax tail wag your asset allocation dog.runner39 said:should I .... just dump VTI and invest the monies in VEA or something else
Countries have withholding taxes ... individual investments don’t ... since IVV consists exclusively of US securities, the withholding rules that apply are the US rules ... See CC’s post for the implications of that.andrewf said:Does IVV have withholding tax, or do you need to hold the constituent securities?
Not exactly ... the actual tax burden can be higher than either of them ... it can be a lot higher, in fact ... there are various factors that play into this ... the key one being that you may not get a full dollar for dollar tax credit for the withheld amount ... not everyone does ... you get a credit for foreign taxes withheld ONLY to the extent that the income would ordinarily incur tax in Canada.Robillard said:(Essentially this works out to you paying the higher of the Canadian and international tax rates.)
The problem occurs when you don’t have enough contribution room to shelter everything ... in that case, you keep in RRSP and TFSA whichever assets would be punished the most by being held outside, and you hold in the taxable account whichever assets will be punished the least.
Generally, Canadian equities ... dividend payers if your income is low, and capital growers if your income is higher ... considering your holdings, XIU is a combination of both, and would be punished least, in comparison to your other assets.runner39 said:which assets would be punished the least being in a non-registered (taxable account)?
One consideration is the currency conversion fees (1-2%) most discount brokers charge every time you buy and sell foreign equities in a RRSP or TFSA. Most brokerages don't give you the option to keep the funds in US dollars and therefore they automatically convert it to Canadian dollars every time you buy or sell a US Stock.Foreign Equities in non-registered account a good idea or should foreign equities be better off in RRSP of TFSA?