Vanguard Investments Canada announced that they are introducing the following 5 new ETFs:
1. Vanguard FTSE Canadian High Dividend Yield Index ETF
2. Vanguard FTSE Canadian Capped REIT Index ETF (based on the FTSE Canada All Cap Real Estate Capped 25% Index)
3. Vanguard Canadian Short-Term Corporate Bond Index ETF (based on Barclays Global Aggregate Canadian Credit 1-5yr Float Adjusted Bond Index)
4. Vanguard S&P 500 Index ETF
5. Vanguard S&P 500 Index ETF (CAD-hedged)
The most interesting of these ETFs to me is number 4, the un-hedged S&P 500 index. My only question is whether there would be a 15% U.S. withholding tax on dividends when it is held in an RRSP or RRIF. Ordinarily a tax treaty between the U.S. and Canada allows RRSP and RRIF accounts to avoid U.S. dividend withholding taxes, but I’m not sure what happens when the dividends are generated within a Canadian ETF. Canadian Capitalist says that this ETF would be subject to a withholding tax. If any ETF company would be motivated to reduce investor costs, it is Vanguard, but I can't see any easy way for them to prevent this 15% drag on dividends.