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If I ran out of room in my RRSP and TFSA, and have to move some foreign ETF's into taxable account, which ones should be moved first? US Equity (VTI)? or International Equity (VEA, VWO, etc) ?
 

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Discussion Starter #3
Personally, I would move Canadian equities into a taxable account before foreign. Foreign dividends are taxed as interested in a taxable account whereas Canadian dividends receive the dividend tax credit.
Canadian Equity is already in taxable account. :)
 

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As I recall, emerging markets and foreign equity pay higher dividend yields. Also, some of these countries may have higher withholding taxes than the US does. That would seem to indicate that US equity would be better to hold outside of registered accounts, since there will be less dividends to tax, and they will be taxed at a lower rate. That said, apparently the legislation setting US dividend tax rates is expiring, and dividend taxes will be rising in the US. This may have implications for withholding tax.

All that said, I'm not sure it would make a significant difference.
 

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Agreed with Frugal Trader. I would move the CDN equities into a non tax sheltered account first.

Upon your response to that, which is unclear. I would then assume that your CDN equities are ALL in a non tax sheltered account (taxable) and that you have over contributed to either your RRSP and/or your TFSA with ALL foreign ETF's or equities. I would also assume that you are over the $2000 allowable overcontribution in your RRSP.

In that case...I don't think it would matter which you moved, but I would do it soon to minimize penalties.
 

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I thought the same as Cal ... What do you mean by “move”? ... have you overcontributed and now need to transfer something out? ... or do you really mean “buy” when you say “move”?

The general rule, when you run out of sheltering room and your portfolio spills over into the taxable realm, is to place into your taxable accounts whichever assets will be punished the least ... this is why Cdn equities are usually first to be accumulated in taxable accounts, when there’s no more sheltering room.

Capital gains are punished less than ordinary income in a taxable account, so one approach may be to keep whichever ETF has the lowest yield. Another factor is whether or not you’ll be able to claim credit or deduction for any foreign (non-US) taxes withheld ... theoretically you should be able to, but if you have no way of knowing how much those taxes were, then how can you claim them??? ... Question - does Vanguard provide information to Canadian investors, on foreign taxes withheld?
 

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Discussion Starter #7
Sorry for the confusion. I have not over contributed. I simply don't have enough RSP room for the foreign ETF's I wish to buy.

So I guess I should consider buying the international equities in the taxable account instead of the US equities.

Thanks
 

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Sorry for the confusion. I have not over contributed. I simply don't have enough RSP room for the foreign ETF's I wish to buy.

So I guess I should consider buying the international equities in the taxable account instead of the US equities.

Thanks
But, do you mean that you want to "re-gain" some contribution room in these accounts to put the ETFs that you want? Keep in mind you can't do this with RRSPs (once contribution room is used, it cannot be recovered) and for TFSAs you have to wait until the next year.
 

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Discussion Starter #9
I must have really phrased thing badly. Start over. I wish to know the tax consequences of VTI, VEA, VWO, and XIC in a taxable account.
 
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