The Ultimate Guide to Foreign Withholding Taxes on ETFs

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DIY Index Investing with Justin Bender

DIY Index Investing with Justin Bender

Күн бұрын

Пікірлер: 115
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
100% of KZbin revenues received by the Canadian Portfolio Manager channel have been donated to SickKids Foundation.
@futureproofd
@futureproofd 4 жыл бұрын
*Applauds* Fantastic contribution! Keep up the good work.
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@@futureproofd - thanks - will do! ;)
@MoementumFinance
@MoementumFinance Жыл бұрын
Amazing! God bless you.
@RyanThomasWoods
@RyanThomasWoods 4 жыл бұрын
This video was one of the most useful ETF explanation videos I’ve seen on KZbin for Canadians. Thanks so much Justin!
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Ryan Thomas Woods - I'm so glad you found it helpful, Ryan - it was certainly a beast to coordinate with my animator ;)
@mkqemeawgck
@mkqemeawgck 3 жыл бұрын
Agreed,
@a.j.4644
@a.j.4644 3 жыл бұрын
I'm in the middle of a binge of videos on these topics, and yours stands out for two reasons: 1) You are the only one to mention that withholding taxes are not necessarily gone forever, that some people might be able to recoup all or part of them (no different than the income tax your employer withholds from your pay), and 2) You mention U.S.-Canadian Dual Citizens, of which there are far more than people realize--including some of the dual citizens. "Accidental" Americans are a real thing, and the tax implications can be complicated.
@jenkins5265
@jenkins5265 4 жыл бұрын
I really enjoyed your original white paper. This is better! Love both yours and Bens content. Finally, some high quality Canadian content!
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Jiji - wow - thank you! I'm so happy I've managed to top the white paper :)
@BryanByTheSea
@BryanByTheSea Жыл бұрын
Great video. Is the foreign Withholding Tax Calculator (14:53) available for download?. Site that is referenced appears to be no longer available.
@nottinkerbell
@nottinkerbell 3 жыл бұрын
So well explained! ,thxs for including rdsps. Its so difficult to find info on them. I did a lot of googling trying to find the answer that you just provided about holding us etfs in my rdsp, thanks so much!
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@My Garden of Eating - We're glad you found the video helpful - thanks for watching! :)
@squishtomar1676
@squishtomar1676 4 жыл бұрын
Great video. Your foreign withholding tax whitepaper helped me find out and understand this much better.
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Blaze Neff - Excellent to hear - hopefully the animations in the video make things a bit more digestible for investors who would prefer to avoid reading my boring white paper ;)
@MoementumFinance
@MoementumFinance Жыл бұрын
Super informative! Thank you so much.
@barettmac
@barettmac 3 жыл бұрын
You and Ben Felix are making amazing, highly useful Canadian investing content. Thank you so much for sharing your knowledge and expertise with us!
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@Barett MacLeod - You're very welcome! I'm so glad you've been enjoying the content :)
@naeem5779
@naeem5779 4 жыл бұрын
I have a question. I have 2 apple stocks. And they payed me dividends. But apple is a US stock so does that mean that when i do my taxes i have to show somehow that they payed me dividends ? Im new to this and very confusing
@johnjakobs6563
@johnjakobs6563 4 жыл бұрын
Hi Justin. A somewhat complicated subject made clear by the video, great job! I currently have VEQT in both my tax paid account and my RRSP. Based on the video, I am planning to leave my VEQT alone in tax paid and move my VEQT in my RRSP to VTI (60%), VEA (30%), VWO (10%). This reduces my combined MER and tax drag from 0.47% to 0.14%. I understand this will change my global allocations, which I accept. All sound correct?
@BYODevices
@BYODevices 2 жыл бұрын
ZEA, ZDM and ZEQ are listed as by BMO as BMO ETFs Solutions for Foreign Investing that "Hold International Equities directly". How do ZDM and ZEQ compare to ZEA which is the only one of the three recommended in this video. Thank you again for such an informative video!
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@BYODevices - ZEA, ZDM, and ZEQ are Canadian-listed ETFs that hold international stocks directly (so they would have similar foreign withholding tax implications to XEF in the video).
@josephalainleconte3788
@josephalainleconte3788 3 жыл бұрын
Justin honestly those kinda of educational videos people have to pay for it; therefore you did it for free we all thanks you for your wonderful work ,God bless you 🙏 my brother be safe.
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@joseph alain Leconte - We're so happy to help! We have many more great videos planned (and in the editing stage), so stay tuned! :)
@AlbertoGarcia-xg4tb
@AlbertoGarcia-xg4tb 3 жыл бұрын
If Canadian is a non-residents living in another country, same 15% withholding tax in dividends (US ETF) applies?
@amitoh88
@amitoh88 Жыл бұрын
Comprehansive and well presented, best video I've seen on this topic by far!
@JustinBenderCPM
@JustinBenderCPM Жыл бұрын
@amitoh88 - Thank you so much! :)
@allyb96
@allyb96 3 жыл бұрын
This video is so appreciated. So helpful for any independant investor. Thank you!
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@Alix Houle - You're very welcome - thanks for watching! :)
@IKTGWIW
@IKTGWIW 8 ай бұрын
Thank you for the excellent video. Could you please tell me if I need to complete the W-8BEN form if I own a Canadian mutual fund or Canadian ETF that holds US and/or international equities in an investment account, TFSA account, and RRSP account? Thank you!
@idyllicbear
@idyllicbear 4 жыл бұрын
Thanks for all the detailed information you've published on this topic!
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Dave W - It was my pleasure! (thanks for reading/watching/listening :)
@napalm8030
@napalm8030 3 жыл бұрын
Do I really have to wait until I have a 6-figure RRSP before using Norberts Gambit to buy ITOT, IEFA, and IEMG??? I was under the impression that since the annual savings are on a continuous basis, that even with low 5-figure account the savings would pass the transaction fees fairly quickly. I’m not familiar with the costs of Norberts Gambit, but is there like a known minimum DLR/DLR.U transaction size that would make the savings outweigh the costs with a brokerage like Questrade?? The math hurts my brain haha but I really want the most tax/fee efficient portfolio I can build.
@napalm8030
@napalm8030 3 жыл бұрын
This ^^ could make a great video, by the way, if you’re looking for more content to create haha.
@sgill4833
@sgill4833 Жыл бұрын
What is you become a non resident Canadian.
@JustinBenderCPM
@JustinBenderCPM Жыл бұрын
@S Gill - Then there could be ANOTHER withholding tax from Canada (of generally 25%). You should ensure you're working with a competent accountant at this point.
@TJCanada
@TJCanada 7 ай бұрын
What about XAW and VXC in RRSP and XEQT in TFSA?
@zq9813
@zq9813 2 жыл бұрын
Very knowledgeable! Thank you
@ladyk1466
@ladyk1466 2 жыл бұрын
Thank you for this great video! Is there any way to know which ETF belong to which category? For example, does VIU hold a U.S.-listed ETF that holds foreign stocks, or does it hold foreign stocks directly? I looked at Vanguard's fact sheets however this information is not shown at all (e.g.: VUN's fact sheet doesn't show that it holds VTI).
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@Lady K - Thanks! The best way to determine this is to review the ETF's annual financial statements, where they will list each individual holding (unfortunately, you can't rely on the fact sheets or the company websites).
@ladyk1466
@ladyk1466 2 жыл бұрын
@@JustinBenderCPM Thank you very much!
@HillsterFifa
@HillsterFifa 3 жыл бұрын
Thanks for the great video! For a Canadian investing in international stocks, would they prefer 1 or 3? All else being equal, 1 has less product costs, but there would be currency conversion costs when converting the USD into CAD.
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@HillsterFifa - I've crunched the past after-tax returns (Ontario top rate taxpayer) for XEF vs. IEFA, and here's what I found: - XEF had higher after-tax returns than IEFA in TFSA and taxable accounts (even taking into account IEFA's lower fees) - IEFA had higher after-tax returns than XEF in RRSP accounts
@allyb96
@allyb96 2 жыл бұрын
Desjardins Disnat (Quebec only?) now charges no fee for converting currencies (i.e. CAD To USD). Perfect to buy VTI or VOO ;)
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@Alix Houle - Where does their site indicate they don't take a conversion fee to exchange CAD to USD?
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@Alix Houle - Here is what their site states: "Currency conversion In any transaction requiring currency conversion, the broker (Desjardins Online Brokerage) may earn, in addition to commission for the brokerage, income from the conversion. In this type of transaction, the firm (Desjardins Securities) acts as principal and uses a competitive conversion rate based on market buying and selling rates for the currency, with “currency conversion” and “income” included as separate parts. Any currency conversion is conducted at the rate in effect on the day of the transaction." www.disnat.com/en/platforms-and-fees/pricing
@allyb96
@allyb96 2 жыл бұрын
@@JustinBenderCPM Oops - looks like they "hide" the fees in the exchange rate. Too good to be true! Thanks a lot!
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@@allyb96 - Man, you had me all excited for no FX fees ;) Definitely too good to be true!
@burnt1ce85
@burnt1ce85 2 жыл бұрын
Can someone please explain to me what is a "product cost" in the context of ETFs as mentioned at 5:50?
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@burnt1ce85 - Management expense ratio (MER) or expense ratio (ER)
@bitgearhk
@bitgearhk 2 жыл бұрын
Very insightful video! A lot of your content is so valuable, keep up the good work!
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@Bitgearhk - I'm glad you enjoyed it!
@coltukkor
@coltukkor 3 жыл бұрын
Your name was brought up by Ben Felix in one of his podcasts and so I’d thought I’d check out your content.I’m glad I did.Very insightful. See I was thinking of investing in a total U.S market ETF in my RRSP and was leaning towards VTI as opposed to VUN. Basically for the lower MER and in an RRSP to avoid the withholding tax. At around 4:15 I was following along in the video and you were speaking of Norberts Gambit as a method to avoid currency conversion and reduce costs.Which seems like a good idea to me.However you mentioned you don’t recommend it unless you were converting well into the six figures.This is where I lost you.Did you mean tens of thousands by chance? I have $25000 CDN and using Norberts Gambit I might be out about about $50 for the transaction cost including ECN fees, sales commission and a little market loss.That’s seems to me nothing compared to the annual potential savings of a much more favourable MER including no withholding tax. That said I have no doubt I’m overlooking something.If so can you point this out to me.Thanks
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@coltukkor - I was referring to the size of the portfolio (not the individual gambit). For smaller portfolios, I generally suggest investors consider one-ticket asset allocation ETFs (as the annual MER and FWTR savings are modest for the increased portfolio complexity).
@coltukkor
@coltukkor 3 жыл бұрын
@@JustinBenderCPM Thanks for the reply Justin.Much appreciated!! I’m going to try to mimic something very similar to the most recent model portfolio Ben released last December.(XIC,XEF,AVDV,XEC, AVUV,VTI) Not sure if I should use TFSA or RRSP for XEC or if it makes that much of a difference. Probably a dumb question but Is there any way to get a U.S version of VTI/AVUV indexes whereas the exchange rate has no effect.Or is the only way to avoid that by using their counterparts on the TSE? The thought of losing any gains to a dropping exchange rate is mostly my concern.
@bward7960
@bward7960 Жыл бұрын
I want to buy some high yield dividend paying American etf’s and I no longer qualify for a RRSP. For tax purposes, which would be more efficient, a cash account or a TFSA, or maybe it makes no difference. Is there a website where I can compare the numbers?
@purpleblueunicorn
@purpleblueunicorn 3 жыл бұрын
Great explanation! I'm thinking I made a mistake by purchasing BKL.F.TO (CAD ETF) that holds BKLN (US ETF with 88% direct US senior loans) in my TFSA. But then since these are not dividends and interest income instead, does that mean that withholding tax is practically null like VBU? Thanks
@BYODevices
@BYODevices 2 жыл бұрын
Great video! Very informative. In the BMO Tax FAQ - "What to Expect During Tax Season", ZSP, ZBK, and ZUE are mentioned as "Canadian ETFs that are not subject to the T1135 reporting requirement and ordinarily not subject to U.S. estate tax." Is there any reason why ZBK and ZUE are not included with ZSP in the video?
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@BYODevices - Thanks for watching! Unfortunately, I couldn't dissect all 1,000+ Canadian-listed ETFs in my video, so I mainly focused on broad market or total market ETFs.
@BYODevices
@BYODevices 2 жыл бұрын
@@JustinBenderCPM That's fine! Thanks again for the best video I have seen on the topic of "Foreign Withholding Taxes on ETFs".
@yusiftheranger
@yusiftheranger 2 ай бұрын
Thank you for the amazing content Justin! Something I would like to clarify for foreign funds (incl US) in a non-registered account: You said the withholding tax might be recoverable (in what cases would it not be?), but aren't we fully taxed on the dividend as a foreign income, which would matter much more if the marginal tax rate is high enough, making it unfit for the taxable account? Or are you only focusing on the withholding taxes?
@JustinBenderCPM
@JustinBenderCPM 2 ай бұрын
@yusiftherange - One example is if your taxable income is low, you may not be able to fully recover the foreign withholding taxes. You would be taxable on the dividend income in a non-registered account, which is why tax-deferred and tax-free accounts can make sense for most investors (regardless of FWT implications). So you shouldn't just hold an ETF in your non-registered account to reduce your FWT, when you still have the available room in your TFSA.
@Ones_Complement
@Ones_Complement 4 жыл бұрын
Hi Justin, love your channel, and amazing video, very detailed and thorough. Left with a question though, what would you advise between holding IEMG in an RRSP vs. XEC in a TFSA? Thanks!
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@OnesComplement - Thanks! This is more of an "asset location" question, which I've covered in past blog posts (it's a super complicated topic). But from a foreign withholding tax perspective (ignoring the asset location decision), IEMG in an RRSP will have less withholding taxes and product costs than XEC in a TFSA. www.canadianportfoliomanagerblog.com/canadian-portfolio-manager-introducing-the-plaid-etf-portfolios/
@Ones_Complement
@Ones_Complement 4 жыл бұрын
@@JustinBenderCPM Thanks Justin. I think in my case, the extra currency conversion costs I'd incur wouldn't be worth the tax savings.
@ektasinha9159
@ektasinha9159 Жыл бұрын
Thanks for the video. So to clarify anytime I hold an ETF that has a mix of US, emerging markets in my TFSA and RRSP, the taxes are already deducted before they would get paid to me as a dividend, correct?
@JustinBenderCPM
@JustinBenderCPM Жыл бұрын
@Ekta Sinha - For Canadian-based ETFs, the withholding taxes are deducted before you receive the dividends (so you only see the net dividend on your statements).
@ektasinha9159
@ektasinha9159 Жыл бұрын
@@JustinBenderCPM thanks so much.
@ektasinha9159
@ektasinha9159 Жыл бұрын
And when you say Canadian based ETFs, you mean any ETF (regardless of its structure) that trades on the TSX right?
@BrunoAlves-uy3sl
@BrunoAlves-uy3sl 4 жыл бұрын
Hi @Justin, a question related to the point 6:10 of the video: How does the process of claiming foreign credit works? Is it a field that is part of the T documents provided by Vanguard or iShares? Or do we need to do some math and fill a specific form during the annual tax period?
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Bruno Alves - you just need to input the figures from your T3 slip into your tax return (it's relatively straight-forward). As long as you have sufficient income, you should be able to reclaim the majority of the taxes withheld (although you will still need to pay tax on the gross foreign dividend).
@riscy00
@riscy00 10 ай бұрын
Why there no caption?
@philippsutka
@philippsutka 3 жыл бұрын
Thank you so much -- I'm new to investing and have been doing a ton of research to figure out what ETFs should be in my 1st portfolio and what broker I should use as a Canadian investor and this video just clarified so much of that for me!
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@Phillip Psutka - We're so glad you found the video helpful (it was a lot of fun to make)! Thanks again for dropping by the channel :)
@ischristopher
@ischristopher 4 жыл бұрын
This is an awesome video! Is there a resource you’d recommend to understand the tax implications for a range of ETF’s? I looked at your calculator, but I’m interested in S&P 500 funds like VOO and SPY.
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Chris Bowes - Thanks! :) VOO and SPY would have similar withholding tax implications to broad-market U.S.-based U.S. equity ETFs, like VTI or ITOT (so you can just assume a similar FWT drag as these ETFs). The best resource for digging into the nitty-gritty (if you want to calculate the tax drag yourself), is my white paper on the subject: www.pwlcapital.com/wp-content/uploads/2018/06/2016-06-17_-Bender-Bortolotti_Foreign_Withholding_Taxes_Hyperlinked.pdf
@solaron99
@solaron99 4 жыл бұрын
Been waiting for this one! Thanks Justin! 👍🏻
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@InspirMédia - you're very welcome! (I hope you enjoy it!).
@the_noble_lefty
@the_noble_lefty 3 жыл бұрын
Love your videos! If I want to save as much as I can on taxes and fees which is the best account to hold XEQT? Thanks
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@the_noble_lefty - Thanks for watching! If you have the contribution room, it's generally best to hold your investments in TFSAs and RRSPs. You should generally only hold XEQT in a non-registered account if you've run out of contribution room in your RRSP and TFSA.
@the_noble_lefty
@the_noble_lefty 3 жыл бұрын
@@JustinBenderCPM thank you
@jeffsilver5762
@jeffsilver5762 4 жыл бұрын
You mentioned holding VIU in a taxable account to avoid two levels of FWT. Just to confirm, that means that VIU a Canadian-listed Vanguard fund that holds the stocks directly?
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Jeff Silver - Correct! VIU is a Canadian-based ETF that holds the underlying international developed markets stocks directly.
@jeffsilver5762
@jeffsilver5762 4 жыл бұрын
@@JustinBenderCPM Thank you Justin! Love your channel and your articles. I have found them very helpful, clear and concise.
@kenloq
@kenloq 4 жыл бұрын
@@JustinBenderCPM does it make more sense to hold VEA in a taxable account instead of VIU since the MER is much lower? Assuming I can get access to US dollar. Keep up the great job Justin!
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
​@@kenloq - You would think so, but the foreign withholding tax drag differences can more than offset the MER differences. VEA and VIU are not the best ETFs to compare (as VEA allocates a chunk to Canadian equities, whereas VIU doesn't). But I recently crunched the after-tax figures (for a high-rate Ontario taxpayer) between 2015 and 2019 for IEFA and XEF, and found that the U.S.-based IEFA returned 5.65% after-tax, while the Canadian-based XEF returned 5.79% after-tax. This was even with XEF's higher MER of 0.22% (relative to IEFA's MER of 0.07%). It was due to XEF only having one-layer of withholding tax applied (which is generally recoverable), while IEFA has two layers of withholding tax (with only one layer being generally recoverable).
@kenloq
@kenloq 4 жыл бұрын
@@JustinBenderCPM very interesting. I always thought VEA was cheaper due to the lower MER. Also did not know that VEA hold about 8.5% in Canadian. Thanks for your helpful information.
@kevinhtlin
@kevinhtlin 3 жыл бұрын
Sorry, newbie here. I don't quite understand the exception of "If you have a smallish portfolio, you might want to stick with a Canadian-based U.S. equity ETF" and "Make sure your RRSP value is well into the six digits before considering US based ETFs". If I am just starting out to invest in my RRSP, and I have US dollars, wouldn't I invest in "US based ETF that holds US stocks" like VTI or ITOT to begin with, even though I have a smallish portfolio with less than 6 digits? Thank you!
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@Kevin Lin - You could invest in U.S.-based U.S. equity ETFs in your RRSP, but most investors with a smallish portfolio would arguably be better off converting their modest U.S. dollars to CAD first, and then investing in an easy-to-manage asset allocation ETF.
@kevinhtlin
@kevinhtlin 3 жыл бұрын
@@JustinBenderCPM Thank you
@kawaiikittylee
@kawaiikittylee 2 жыл бұрын
Thanks for another great video Justin! Really informative - I learned a ton! Just had some additional questions out of curiosity: - What’s the best or easiest way to tell which Fund Structure an ETF falls under? Especially between #2 and #3? - Is it possible to have both CAD Hedged and CAD Un-Hedged ETF options under Fund Structures #2 and #3? - Are foreign taxes in a TFSA/RRSP potentially recoverable as well like you mentioned they are in a taxable account? And similarly - are US taxes in a TFSA potentially recoverable? Thanks again! 😄
@JustinBenderCPM
@JustinBenderCPM 2 жыл бұрын
@Lee Ann Ng - Wow, you've started out with the toughest videos first...I like that ;) 1. The best way to differentiate between #2 and #3 is to review the holdings in the ETF's most recent annual financial statement. As an example, check out the holdings for the Vanguard FTSE Developed All Cap ex U.S. Index ETF (VDU) (type #2) vs. the Vanguard FTSE Developed All Cap ex North America Index ETF (VIU) (type #3). 2. Yes, #2 and #3 structures are generally available in hedged and unhedged versions (VEF and VI are the hedged versions from the two ETFs listed above) 3. Unfortunately, the foreign withholding taxes are not recoverable in TFSAs and RRSPs (even U.S. taxes in a TFSA). However, if you hold U.S.-based ETFs in an RRSP, the 15% U.S. withholding tax does not apply.
@kawaiikittylee
@kawaiikittylee 2 жыл бұрын
@@JustinBenderCPM Haha, I'm going to go back and watch all your other videos too! But these ones caught my eye first ;) Thanks a bunch for taking the time to reply - I really appreciated it! 😄
@jonorana9084
@jonorana9084 3 жыл бұрын
Thank you so much. I learned a lot.
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@Jon Orana - I'm so glad you found the video helpful (it's certainly a confusing topic).
@dude5045
@dude5045 3 жыл бұрын
Thank you! very helpful.
@galaxytrio
@galaxytrio 3 жыл бұрын
Well-explained, Justin. Thank you!
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@galaxytrio - You're very welcome - thanks for watching! :)
@adbp473
@adbp473 4 жыл бұрын
Good job Justin..how you manage all those acronyms in a sentence is the stuff of Jedi masters. Say hi to the rest of the team.
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@David Bateson - I definitely get tongue-tied throughout filming - thankfully there's multiple takes and editing ;) I'll let the team know you said hi!
@shaneh3175
@shaneh3175 3 жыл бұрын
thank you for what you do sir
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@Shane H - You're very welcome! :)
@myway8950
@myway8950 3 жыл бұрын
BEST VIDEO!!
@JustinBenderCPM
@JustinBenderCPM 3 жыл бұрын
@myway8950 - Glad you enjoyed it! :)
@MrNnightT
@MrNnightT 4 жыл бұрын
Thanks for this video! I am trying to determine which is the most tax efficient account to hold XAW. One of its major holdings is IVV (US-based ETF that holds US stocks). To my understanding, if I hold IVV directly in a RSP, it will bypass the withholding tax, but if I hold XAW in a RSP, I will be subjected to the 15% for its position in the ETF? If so, it will not matter much which account type XAW is held in correct? Thanks!
@JustinBenderCPM
@JustinBenderCPM 4 жыл бұрын
@Daniel Yip - Great question! The foreign withholding tax concepts discussed in this video are separate from the "asset location" concepts discussed elsewhere on my blog/podcast. From a "foreign withholding tax" perspective, holding XAW in a taxable account will allow most layers of foreign withholding tax to generally be recoverable (with the exception of the Level I withholding tax on the underlying emerging markets ETF held by XAW, but its tax drag is minimal). So from a foreign withholding tax perspective, it's more tax-efficient to hold XAW in a taxable account, relative to a TFSA or RRSP account. However, from an "asset location" perspective (which takes into account all taxes payable, like income taxes, in addition to foreign withholding taxes), this could change the analysis. Unfortunately, it is an extremely complicated topic without an easy answer. You would first need to start by choosing an asset location strategy (on my CPM blog, I call them the "Light", "Ridiculous", "Ludicrous" and "Plaid" model ETF portfolios). www.canadianportfoliomanagerblog.com/model-etf-portfolios/ This asset location strategy would tell you which asset class to hold in which account type. From there, you would choose the most efficient fund structure for reducing the foreign withholding tax drag in that specific account type I've included links below to blog posts about these asset location strategies: www.canadianportfoliomanagerblog.com/canadian-portfolio-manager-introducing-the-light-etf-portfolios/ www.canadianportfoliomanagerblog.com/canadian-portfolio-manager-introducing-the-ridiculous-etf-portfolios/ www.canadianportfoliomanagerblog.com/canadian-portfolio-manager-introducing-the-ludicrous-etf-portfolios/ www.canadianportfoliomanagerblog.com/canadian-portfolio-manager-introducing-the-plaid-etf-portfolios/ And the accompanying podcasts: www.canadianportfoliomanagerblog.com/podcast-4-shedding-light-on-the-light-model-etf-portfolios/ www.canadianportfoliomanagerblog.com/podcast-5-wrapping-your-head-around-the-ridiculous-model-etf-portfolios/ www.canadianportfoliomanagerblog.com/podcast-6-asset-location-strategies-with-the-ludicrous-etf-portfolios/ www.canadianportfoliomanagerblog.com/podcast-7-asset-location-strategies-with-the-plaid-model-etf-portfolios/
@hermes8258
@hermes8258 9 ай бұрын
Not trying to be sarcastic here, but for the senior on low fixed income (pays no income taxes) who has much less than 20K in the market, who hates accountant and tax lawyer complications (and more importantly is not willing to do a lot of paperwork with CRA), is any of this important or even relevant? Maybe one can just choose the simplest solution: buy only CAD stocks/ETFs from a broker in Canada, choosing only equities that fit criteria X and be done with it? It seems very complicated thus far. I want to structure my investments on such a way as to only consider safety and yield, not taxes, that is beyond investing only a registered account, i.e. TFSA.
@hermes8258
@hermes8258 9 ай бұрын
Why us USA not considered foreign? Is there a political or financial reason? I presume the explanation is not cultural. I always find it funny when at the airport I see the sign 'US and international destinations', as if there is a difference. Leave Canada amd you are on foreign soil. Seems pretty obvious to me.
@Johann75
@Johann75 Жыл бұрын
Complicated explanation. Do not understand anything
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