Author Topic: US Equity ETF for canadians.. very confused  (Read 1415 times)

Greenblatt

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US Equity ETF for canadians.. very confused
« on: June 26, 2014, 08:59:10 AM »
I have some money available to invest in a RRPS. I was looking to buy some US equity for diversification (mayby VFV?)
I thought that by using a RRPS I would basically be sheltered from any US taxes.

Then I stumbled on this statement from myownadvisor ''You should know that foreign dividends are taxed at your marginal rate.  With U.S. listed ETFs the Internal Revenue Service will take a 15% withholding tax on all dividends received.''. So are they taxables or not? If they are what is the point of holding them in a registered account? And wouldn't it make more sense to invest in the US version of the same ETF directly (in this case VOO)? Will there be any currency issues as the account is in Canadian dollars?

What is the best way to go about this?

« Last Edit: June 26, 2014, 09:20:37 AM by Greenblatt »

AssetGrinder

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Re: US Equity ETF for canadians.. very confused
« Reply #1 on: June 26, 2014, 09:45:09 AM »
If the US equity etf is in a rrsp your are not subject to withholding tax. If you hold it anywhere else then U r. Also holding the Us version would be more ideal because the Mers are often lower and their are a wider array of funds. But it depends if your RRSP can hold US dollars as most cannot. If yours does not then your US ETF apyouts will be converted to Canadain at of course the Banks Exchange rates.!

Hope that helps answer your question. Just this past week I constructed an all ETF portfolio for a new Retiree and the process was overwhelming with these same type of scenarios.

Best of luck!

Greenblatt

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Re: US Equity ETF for canadians.. very confused
« Reply #2 on: June 26, 2014, 10:14:28 AM »
So assuming that I can have an account in US dollar if is better to hold to US version of the ETF while if I have only the option of a canadian dollar account the Canadian version is better? I think that my broker offers a US dollar account for a fee (200$ or so). Worth it?

Thanks!

AssetGrinder

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Re: US Equity ETF for canadians.. very confused
« Reply #3 on: June 26, 2014, 11:02:21 AM »
$200 seems pretty high for a us dollar rrsp fee. If you have an amount under 100k I would just stick with a US equity ETF in Canadian dollars. The hassle would not be worth the minute differences in going that extra step. Plus you have to pay currency exchange fees as well to get Us dollars. There are tricks around  not paying exchange fees but are only viable when transferring over 10k.

daverobev

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Re: US Equity ETF for canadians.. very confused
« Reply #4 on: June 26, 2014, 11:30:57 AM »
$200??

Try Questrade - free purchase of ETFs. You can hold CAD and USD in there, and convert it through Norbert's Gambit (slightly complicated but not too bad) - have a read on Canadian Couch Potato.

VUN.TO is a good Canadian listed US-equity ETF.