VXUS is better for multiple reasons - it is cheap, it holds stocks directly, and the US has better double taxation agreements than Canada, apparently.
VXC is a wrapper around US funds. The nice thing about the RRSP is that the DTA with the US means you are NOT taxed at 15% by the US. With VUN, you ARE losing that 15% on dividends. Yes, I know, at 2% yield that's only 0.3% But when you add that to the lower cost to begin with...
Doesn't the withholding tax agreement only apply to US equities held by a CDN in a RRSP so VTI would get you a benefit, but VXUS is mostly non-US international equities and I don't think you see any benefit.
I'm no expert, but that's my understanding.
-- Vik
Vik, you are correct in that the tax agreement only applies to US equities, however you are a bit off about the benefit to VXUS in an RRSP, compared to VXC. It's actually very complicated why - I will do my best to explain:
VXUS holds the stocks directly. It gets a withholding tax foreign to US. However, then, since it is a US-indexed fund, and we are holding it as foreigners (Canadians), the US charges an additional 15% FWT on us. Note this is applied *on top* of the foreign->US withholding tax. If it is held in a RRSP, due to Canada-US tax treaties, this 15% FWT is recovered, but the foreign/US withholding is lost. So in the end we pay the "correct" amount - just the regular overseas foreign withholding.
Now, VXC. If you look up the prospectus:
https://www.vanguardcanada.ca/individual/mvc/loadImage?docId=506"Vanguard FTSE All-World ex Canada Index ETF
In order to achieve its investment objective, Vanguard FTSE All-World ex Canada Index ETF employs a
“passive management” - or indexing - investment approach designed to track the performance of the FTSE AllWorld
ex Canada Index.
This Vanguard ETF invests primarily in U.S.-domiciled Vanguard Funds, such that the
resulting portfolio has investment characteristics that closely match the characteristics of the FTSE All-World ex
Canada Index."
You can also see the details here:
http://quote.morningstar.ca/quicktakes/etf/etf_ca.aspx?t=F00000TVGA®ion=can&culture=en-CASo what happens in VXC? First off, the foreign part of VXC (such as Europe ETF) will get foreign tax withheld when put into the US-listed fund. Then when it is put into a Canadian-listed fund, there is the normal 15% US FWT applied. However this is not going to be recoverable, since this tax is totally shielded from the investor. If you hold VTI for example in a regular account, you report the withholding on your taxes, but if you have a fund which holds VTI you can't apply for it. Same here.
Complicated. But basically because of how VXC works, we lose the 15% on the wrapped US funds.
All that being said, VXC is a great fund, and sometimes simplicity is worth a small percentage lost, roughly .3% (15% * 2% dividend).
My sources are mostly from CCP, the articles and reading the comments:
http://canadiancouchpotato.com/2014/07/10/under-the-hood-vanguard-ftse-all-world-ex-canada-vxc/http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/and probably other articles of his.