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The article Tax Optimizing the Couch Potato Portfolio applies the coach potato across all acount types and notes that
However, if you decide to use your TFSA, then keep the foreign holdings (ie. US/international equities) within an RRSP as foreign dividends will face withholding tax (15%) in a TFSA.
I understand how this would work with ETF but don't understand how I would see the tax with the e-Series funds. For example, I were to use the TD e-Series US index and International Index funds in a TFSA and RRSP how would the 15% be withheld? A yearly tax bill? Or just as lower performance in the TFSA?

Thanks!
 

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There's no way to avoid the US withholding tax if you hold a Canadian-domiciled fund, whether it's a mutual fund or an ETF. You have to hold a US-domiciled ETF directly in your RRSP to avoid the withholding tax. I don't know of any way to avoid paying withholding taxes on international funds. However, one thing to avoid is holding a US-domiciled ETF that hold international equity in your TFSA. You'll pay two rounds of withholding taxes: a withholding tax to the country in which the equities are domiciled, and a withholding tax to the US on the ETF's dividends. Either keep your international equity in your RRSP or buy a Canadian-domiciled fund.

The tax will show up as lower returns by the fund. The foreign government just takes a percentage of the dividends paid by any equities to foreigners.
 
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