Absolutely yes. XIN and XSP hold foreign ETFs. Dividend income from these ETFs is foreign dividend income and isn't eligible for the dividend tax credit.
Portfolio Allocation with all ETFs
I've been reading a lot lately about portfolio allocation and how we can allocate different bits of our portfolio to different accounts (RRSP, TFSA, non-registered) to take advantage of favourable tax treatment.
My question is this: If one holds only ETFs that are traded on the TSX, does it matter how these ETFs are allocated? For example, I hold XSP (S&P 500 currency-hedged ETF), CWO (emerging markets), and XIN (international). Would it make any difference for tax purposes where I hold those ETFs or should I treat them the same as I would XIC or CRQ?
Thanks for the input.
My question is this: If one holds only ETFs that are traded on the TSX, does it matter how these ETFs are allocated? For example, I hold XSP (S&P 500 currency-hedged ETF), CWO (emerging markets), and XIN (international). Would it make any difference for tax purposes where I hold those ETFs or should I treat them the same as I would XIC or CRQ?
Thanks for the input.
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Thanks. That's what I thought, but wasn't 100%. Yours is a great blog, by the way.Absolutely yes. XIN and XSP hold foreign ETFs. Dividend income from these ETFs is foreign dividend income and isn't eligible for the dividend tax credit.
Further to what CC wrote, if there are any foreign withholding taxes applicable to XSP, CWO, or XIN, they may be creditable if held in a taxable account, but they’d be lost forever if held in an RRSP ... the Canada-US tax treaty (for example) does not apply in such a case ... this would somewhat mitigate the disadvantage of holding such funds in a non-reg account, and would somewhat diminish the advantage of holding them in a registered account ... the effect would likely be too small to affect your registered-vs-nonreg decision, but is something to be aware of.
Note that this refers to taxes withheld from the Canadian-registered fund itself, not taxes withheld from you.
Note that this refers to taxes withheld from the Canadian-registered fund itself, not taxes withheld from you.
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