Saturday, February 17, 2018

Foreign Withholding Taxes on New Vanguard ETFs

When Canadians own foreign stocks, taxes on the dividends are often withheld by the foreign country. This can apply with U.S. stocks as well. This is a complex area. The amount of taxes silently withheld and whether you can effectively recover them depends on the country and the type of account you have.

Yesterday, I said I wanted to know the foreign withholding tax drag on the new Vanguard Canada ETFs. Justin Bender has done the analysis. He has a pdf with the foreign withholding tax details for RRSP and TFSA accounts, as well as an article discussing other aspects of Vanguard’s new ETFs.

In a personal note, Justin goes on to explain “The withholding tax drag in a taxable account is only about 0.01% to 0.02% for the three ETFs.” Thanks, Justin.

3 comments:

  1. Dear Michael,

    I've heard about this before and thought that I was mistaken so I'm going to ask this time, are there some ETFs (Canadian/USA/Other) that can ONLY be held in an RRSP or TFSA?

    I'm looking to purchase an ETF in a non-registered account. I want it to; not hold any/many US and Canadian stocks/indexes, be non-hedged, in a Developed market and with a reasonable MER. I have yet to find one. Any ideas?

    Regards, Sarah.

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    Replies
    1. @Sarah: I'm not aware of any ETFs that can't be held in a non-registered account. If you want an ETF without Canadian or U.S. stocks, VIU is a possibility.

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    2. Thanks for the clarification and ETF mention Michael. I will check it out. Sarah.

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