Investing

Thread for Foreign Withholding Tax Discussions

  • Last Updated:
  • Feb 12th, 2019 8:55 pm
[OP]
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Feb 1, 2012
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Thunder Bay, ON
kasm wrote:
Feb 11th, 2019 9:42 am
Is this US Withholding tax similar to taxes that are taken off your paycheck in the sense that whether they are withheld at the beginning or paid at tax time, in the end it's a wash because you still end up paying the same amount?

In other words, whether they are withheld on the distribution or not, you still end up paying the same come tax time?
Sort of, but not exactly. And only sometimes. Albert Einstein is reported to have said "The hardest thing to understand is income tax". :rolleyes:

If you really want to understand this refer to the links at the top of this thread.

In a non-registered account you get a tax slip that lists FWT as Foreign Non-business Tax Paid. You can claim that as a non-refundable tax credit. With non-refundable credits you must have other tax payable against which to claim the credit. And I believe there is a limit on the % refunded so for countries that have a high FWT you would not get all of it credited.

In registered accounts you don't get a tax slip therefore any FWT deducted is non-recoverable.
Invest your time actively and your money passively.
Newbie
Dec 22, 2018
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I am interesed in conv my CAD -> US using NG method since I need over 10,000 RRSP this year. Then I will buy US dominated ETF to avoid withhelding tax when ETFs pay out dividens as cash. Does it apply to EFTs pay out dividens as stocks?
I see now the cash divided is less than 2% in 2017.
Thanks for your input.
[OP]
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Reinvesting dividends does not affect withholding taxes. They are deducted when the dividends are paid. Reinvested dividends just takes the cash from dividends and buys more of the stock or ETF. Same as if you reinvested the dividends yourself, except you save the trading commission (if one applies at your broker).

Justin Bender at Canadian Portfolio Manager has some video tutorials on Norbit's Gambert. You did not say what broker you use so here is his video tutorial page:
https://www.canadianportfoliomanagerblo ... tutorials/
Invest your time actively and your money passively.
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Jan 21, 2017
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daverobev wrote:
Feb 11th, 2019 6:12 am
The info is on the T5 or T3; there is a box for foreign tax paid or something like that.

As others have mentioned - even if you are 100% US stock ETF in a TFSA, you are losing 15% of dividends, which is currently about 2%. So 0.3% loss.

The takehome is:

1. Buy your US stuff as US-domiciled ETFs in your RRSP

2. Buy ETFs that hold foreign stocks directly in the TFSA (ie, not a Canadian ETF that only owns a US ETF)

3. Don't worry about it *too* much - make a plan, follow your asset allocation *first*, worry about optimising what goes where *second*, and don't worry about FWT much at all.
true. while i've been paying 15% tax on dividend the last few years, it's better than not investing at all. lol.
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Jan 22, 2017
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AB
Deepwater wrote:
Feb 10th, 2019 10:15 pm
FWT apply in all of the funds you mentioned. You don't pay them directly. The fund pays them and the net distributions are issued to ETF holders.
Refer to this file: https://www.pwlcapital.com/wp-content/u ... linked.pdf

XUS is type B, a Canadian listed ETF that holds a US listed ETF of US stocks. In a TFSA, US withholding taxes apply and are not recoverable.
XEC is a type G, a Canadian listed ETF that holds a US listed ETF of emerging market stocks. In a TFSA, both US and foreign withholding taxes apply and are not recoverable.

XAW holds its US holdings in US listed ETFs of US stocks (type B). In a TFSA, US withholding taxes apply and are not recoverable.
XAW holds its global developed market stocks in a Canadian listed ETF that holds global developed market stocks directly (type E). In a TFSA, foreign withholding taxes apply and are not recoverable.
XAW holds its emerging market stocks in a US listed ETF of emerging market stocks (type G). In a TFSA, both US and foreign withholding taxes apply and are not recoverable.
So if I understand this correctly, say you have 500 shares of XAW in your TFSA and the dividend/share for Dec 2018 was $0.30064 per the iShares website.

As the FWT has already been deducted by the fund, then you should have received the full $150.32 (500 x 0.30064) in your account?
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Oct 4, 2009
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Montreal
LenG17 wrote:
Feb 12th, 2019 6:47 pm
So if I understand this correctly, say you have 500 shares of XAW in your TFSA and the dividend/share for Dec 2018 was $0.30064 per the iShares website.

As the FWT has already been deducted by the fund, then you should have received the full $150.32 (500 x 0.30064) in your account?
Correct.
[OP]
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Feb 1, 2012
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Thunder Bay, ON
LenG17 wrote:
Feb 12th, 2019 6:47 pm
So if I understand this correctly, say you have 500 shares of XAW in your TFSA and the dividend/share for Dec 2018 was $0.30064 per the iShares website.

As the FWT has already been deducted by the fund, then you should have received the full $150.32 (500 x 0.30064) in your account?
I cannot comment specifically on XAW since I do not own it. Every other ETF I have ever held has paid out the full amount of the declared distribution per share into my account.

Items like FWT and HST are not directly visible to the unit owners unless you look at the annual financial report for the fund. Even then they are listed as total amounts, not per unit.
Invest your time actively and your money passively.

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