US withholding taxes

RYAN By Guest Blogger Ryan Lewenza

.

As Canadians we pay a lot in taxes. When you consider personal, sales, and property taxes and social security contributions, it really starts to add up, and I would argue, one reason why Canadians are finding it more difficult to make ends meet. Now we are incredibly lucky to live in such a great country like Canada where we, generally, have a good health care and education system, a robust social safety net including unemployment insurance, childcare benefits and pension benefits for seniors, and generally a peaceful and prosperous place to live. Given all this we should pay a healthy amount of taxes (how much we pay in taxes is for another day), but when we can, we should look to minimize taxes in every way (legally) we can. So today I cover a small but not insignificant tax that investors can try to minimize, known as withholding taxes on foreign investments.

When investing in stocks an important component of returns are dividends. Dividends paid by Canadian corporations can be eligible for the dividend tax credit, which reduces the taxes paid on the dividends. In contrast, dividends received from US or international equities are not eligible for the dividend tax credit and additionally are levied a ‘withholding tax’ from the countries where the companies are domiciled. This withholding tax therefore reduces the net dividends received by the investor and lowers the overall rate of return. Today I’ll cover ways to minimize this tax and improve after-tax returns on foreign investments.

The impact of US and international withholding taxes is complicated so some background is needed. There are three critical pieces to this puzzle.

First, with ETFs (the only vehicle we and all our readers should invest in) there are three different ETF structures related to foreign-based ETF investments. They include: 1) a US-listed ETF (the S&P 500 ETF (SPY-N) is an example of this), 2) a Canadian-listed ETF that holds a US-listed ETF (the iShares Core S&P 500 Index ETF (XSP-T) in an example of this), and 3) a Canadian-listed ETF that invests in the underlying US or international stocks directly (the BMO MSCI EAFE Hedged ETF (ZDM-T) is an example of this). Now that that is clear as mud, we need to move on to the different types of withholding taxes.

Second, for foreign withholding taxes there are two ‘levels’ of this tax. The ‘level one’ withholding tax is the tax that the US government levies on Canadian investors who hold US equities. This is currently 15% and is withheld before the dividend hits the account. The ‘level two’ withholding tax applies to international stocks that are held in a Canadian-listed ETF. In this case the Canadian investor pays two different withholding taxes of roughly 30%. The first one is withheld by the US government on the international company dividend (you don’t actually see this) and then the US government withholds their 15% (you see this in your account). This is the worst of all the options.

Finally, where the ETF is held (i.e. in an RSP or taxable account) will determine what the investor ends up actually paying. So it’s the combination of the ETF structure and the type of account that will determine the amount of withholding taxes paid.

Putting this all together here are the key takeaways on how to minimize the withholding tax for ETF investors:

  • For a US-listed ETF it’s best to hold this in an RSP/RIF or a taxable account. The US government has a tax treaty with Canada where they will not withhold taxes on US dividends if held in an RSP account. For the taxable account you still pay the withholding tax at source but when you file your taxes at year-end you can offset this withholding tax against your overall taxes owed thus recouping some of this tax.
  • For TFSA and RESP accounts it’s generally best to hold Canadian-listed international ETFs as US-listed ETFs offer no tax advantages in these accounts.
  • Lastly when purchasing a Canadian-listed ETF that invests in international stocks (non-US), try to focus on the ETFs that invest directly in the underlying international stocks versus holding another international ETF. This will avoid that double taxation.

Admittedly, this isn’t the most exciting blog topic but hopefully you’ve learned a few things about withholding taxes and minimizing this drag on returns. Also sticking it to Uncle Sam is always a plus!

The last point I’ll leave you with is that withholding taxes is just one consideration when determining where to hold certain ETFs. You also have to consider things like currency transactions, how the funds are spread across each account, which accounts hold US dollars, the tax rates on other investments like bonds, and the potential growth rate of each investment.

Meaning, sometimes we’ll hold a US-ETF in a TFSA, for example, because the other factors like the potential growth of the investment will outweigh the hit of US withholding taxes.

So the main takeaways above are things to strive for but don’t lose perspective of all the other factors that go into where you should hold certain investments. Don’t lose the forest for the trees as they say!

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

 

79 comments ↓

#1 Bytor the Snow Dog on 10.26.19 at 1:06 pm

First!

Interesting link here:

https://readingunidebating.wordpress.com/2019/09/19/piers-corbyn-man-made-climate-change-does-not-exist/

#2 Last of the Boomers on 10.26.19 at 1:11 pm

Brilliant post Ryan! You answered so many of my questions in one single blog… And that is why I choose you to be my advisor!

#3 Shawn Allen on 10.26.19 at 1:47 pm

What!, we pay Social Security Contributions?

“When you consider personal, sales, and property taxes and social security contributions,”

****************************
Social Security is a U.S. pay roll deduction of course.

Apologies for pointing this out. But someone had to be anal enough…

#4 Shawn Allen on 10.26.19 at 1:53 pm

Level two with holding taxes

Never heard of that…

“The ‘level two’ withholding tax applies to international stocks that are held in a Canadian-listed ETF. In this case the Canadian investor pays two different withholding taxes of roughly 30%. The first one is withheld by the US government on the international company dividend (you don’t actually see this) and then the US government withholds their 15% (you see this in your account). This is the worst of all the options.

Lastly when purchasing a Canadian-listed ETF that invests in international stocks (non-US), try to focus on the ETFs that invest directly in the underlying international stocks versus holding another international ETF. This will avoid that double taxation.”

*********************************

So this would be a disadvantage for holding XBAL or VBAL (even in RRSP or TFSA) as compared to a portfolio of the ETF components of XBAL and VBAL? Interesting and not information I have seen elsewhere.

#5 espressobob on 10.26.19 at 2:15 pm

I thought a W8ben form took care of withholding taxes to some degree regarding an RRSP? I’m getting complacent lately and can’t remember. It happens.

Must be that smooth bourbon?

#6 Shawn Allen on 10.26.19 at 2:28 pm

Even Tony once had a good year!

#105 Tony on 10.26.19 at 1:09 pm
Re: #99 Shawn Allen on 10.26.19 at 12:25 pm

1982 was the best year financially of my entire life.

*************************************
So, all downhill for the past 37 years then?

Maybe your perma doomer views are not working?

#7 Andrewski on 10.26.19 at 2:41 pm

Excellent explanation Ryan, thanks!

#8 Andrewski on 10.26.19 at 2:46 pm

If an investor owns individual US stocks, remember to complete the W-8BEN:

https://www.irs.gov/pub/irs-pdf/fw8ben.pdf

#9 crossbordershopper on 10.26.19 at 2:48 pm

yup, great country to live in, lousy country to invest in. its funny how you quickly go from safety net, and security to tax consequences of foreign holdings. the huge middle is the reality, which is most canadians are poor, they dont earn very much, high costs of lots of things etc.
the tax implications of investment decisions for canadians is outlined by you, great, but most people dont contribute to rrsp or tfsa etc, they are paycheque to paycheque, not millionaires who read this blog.
they would rather do anything except discuss k1 forms of us master lp and witholding of us based companies.
im just saying, canadians talk about land value, americans talk money in cloud stocks, thats basically the difference between the two, huge.

#10 akashic record on 10.26.19 at 3:02 pm

No, not boring at all! The fine details are sometimes the most interesting.

#11 Dave on 10.26.19 at 3:05 pm

Canada is a great place to live but now the cost of living is out of control:
Housing
Fuel
Grocery
Restaurant
Its shocking and sad. Why is this the case? Why is it soo expensive today compared to 15 years ago?
I can’t remember the last time I went to purchase something and said “that was a steal”

#12 Jer Mo on 10.26.19 at 3:36 pm

Great post and I couldn’t agree more with all the pts especially TFSA/RESP accounts – best not to buy USA div paying products which are subject to with-holding taxes. Every penny compounds over time.

#13 US withholding taxes | LoginBookkeeping on 10.26.19 at 3:37 pm

[…] Source […]

#14 AlbertaGuy in AB on 10.26.19 at 3:44 pm

Ryan, to sum up given your 3 ETF examples, what is the recommended account for each ETF?

To minimise withholding tax

1) a US-listed ETF (eg S&P 500 ETF (SPY-N)) should be held in a TFSA? TAXABLE? RETIREMENT? account

2) a Canadian-listed ETF that holds a US-listed ETF (eg iShares Core S&P 500 Index ETF (XSP-T)) should be held in a TFSA? TAXABLE? RETIREMENT? account

3) a Canadian-listed ETF that invests in the underlying US or international stocks directly (eg BMO MSCI EAFE Hedged ETF (ZDM-T)) should be held in a TFSA? TAXABLE? RETIREMENT? account

#15 Stan Brooks on 10.26.19 at 4:28 pm

#11 Dave on 10.26.19 at 3:05 pm

It was a great place to live 20-30 years ago.

There, I fixed it for you.

Since then it has been downhill as you noted with the economy, cost of living and taxes increasing, but benefits, quality of services declining.

That ‘generally good health care and education’ is a myth.

The elite has to become less stingy and leave some carrots, just beating with the stick (debt) does not work.

As for the general preaching: ‘be thankful that there is no war, we live in a peaceful, prosperous society, blah blah blah… but don’t forget to pay up’, that sounded pathetic. We lived in much better society 20-30 years ago, bring it back.

Cheers,

#16 Keeping the Faith on 10.26.19 at 4:52 pm

Great article Ryan!

Gives some good foundations for DIY investors & to do it correctly DIY’ers need to know more.

W8BENs being updated are mandatory & many should become familiar with this PWL white paper too – very useful when putting together a mixed account with ETFs in the different fixed income and equity categories.

https://www.pwlcapital.com/resources/foreign-withholding-taxes-estimate-hidden-tax-us-international-equity-etfs/

Thanks again Ryan for giving so many people awareness to a tax that many thank is fully taken care of after competing a W8BEN form.

Also be aware these forms expire and your institution should be contacting you months prior to get it reinstated.

Cheers

#17 Not So New guy on 10.26.19 at 5:00 pm

#11 Dave on 10.26.19 at 3:05 pm

Its shocking and sad. Why is this the case? Why is it soo expensive today compared to 15 years ago?

==============================

Because our corrupt central bank has refused to keep prices in check via fair and adequate interest rates. Rates that would both reward saving and restrict reckless borrowing.

They don’t want to do that because they have betrayed us to the banking system and most Canadians are too financially illiterate to march on Ottawa (or even vote properly!) to have something done about it

#18 Shawn Allen on 10.26.19 at 5:02 pm

Inflation is nothing new:

#11 Dave on 10.26.19 at 3:05 pm
Canada is a great place to live but now the cost of living is out of control:
Housing
Fuel
Grocery
Restaurant
Its shocking and sad. Why is this the case? Why is it soo expensive today compared to 15 years ago?
I can’t remember the last time I went to purchase something and said “that was a steal”

***********************************
The above could have been written in any year back to at least 1960.

The last time prices fell was I believe the 1930’s.

Overall inflation is far lower now than in the 1970s.

There are always reasons to complain as well as reasons to be most grateful.

#19 Ignorance Is Bliss on 10.26.19 at 5:29 pm

@ #11 Dave

….But there are deals to be had!

I bought 4 bananas that only cost 36 cents (they were 25 cents/lb) at the grocery store today. Considering how many thousands of kilometres away they were grown, and the labour involved in picking/packing/shipping, that’s a deal! A lot of grocery staples can still be found at very cheap prices, that can feed a family affordably….pasta packages at 99 cents (and I’m not talking about Kraft Dinner!), peanut butter on sale for $3.99 or less, a whole chicken for $6 (cut it up yourself! And stop buying the overpriced chicken breasts!) The problem is that too many people rely on ‘convenience foods’ and packaged foods that aren’t good deals. It’s a vicious circle, because the more you buy that kind of stuff, the more you have to work/earn to afford it, leaving you with no time for meal planning and prep.

I mean, if you HAVE the money and want to spend it that way, I’m all for it.

And the amount of money people spend on restaurants and food delivery apps is crazy! I love to eat out too, but it sure adds up with tax + tip.

#20 Out Of Work CEO, Will Travel on 10.26.19 at 5:51 pm

In my whole financial career over many decades the Canadian currency has determined a lot of my returns as it limits the ability to buy foreign assets. Most Canadian firms will not alert you to the fact you will be undermined by U.S. withholding taxes twice in their ETF’s. It surely requires stamina or alternately hire Raymond James.

#21 Loonie Doctor on 10.26.19 at 5:54 pm

Nice post and explanation of a topic that often makes peoples heads spin. We use XEF (holds non-NA developed market stocks directly so only 1 level of FWT), XUU (for US market), and IEMG (US-listed EMM) in our RRSP for this reason.

The issue that many high-income professionals using a corporation will encounter is the limited space in their TFSA/RRSP relative to their ccpc. Plus, eligible dividends flow nicely through a corp that is dispensing dividends. So, in that case, I put Canadian in the corp and XEF, REITs, and smattering of EMM in the TFSA. The recoverable FWT is lost in the TFSA, but it is much lower than the US-FWT rate (about 8% instead of 15%). That shifts more US-into the RRSP where the dividends are sheltered and the FWT avoided (if US-market or US-listed ETF). A bit of a different situation and most people get scared off of the complexity. Why I built my Robocorp portfolio builders (to make it easy).

Thanks again for your educational posts. I quite enjoy them and find them useful.
-LD

#22 Brian Ripley on 10.26.19 at 6:16 pm

#1 Bytor the Snow Dog “Interesting link here:”

No, It’s not interesting.

It is common on this blog and elsewhere, for people to hide behind an anonymous handle when they “publicly” suggest there is no relationship between humans producing ever increasing amounts of C02 and the increase of our planet heating up.

Look Bytor… Piers Corbyn (Weather Action) whose ideas you are promoting with your link has been thoroughly debunked:

Here: https://skepticalscience.com/open-letter-mayor-boris-johnson.html
JAN 2013: “If Corbyn would like his climate opinions to be taken seriously, he should subject them to the peer-review process like climate scientists do.”

Here: https://www.desmogblog.com/piers-corbyn
AUG 2019: Corbyn appeared on a talkRADIO show in which he responded to news that the ten hottest years in the UK had occurred since 2002 by saying: [26]
“Their observation of this extra number of warm years since 2002 is that they’ve had an extra amount of climate fraud since 2002.”

Here: https://climate.nasa.gov/blog/2893/nope-earth-isnt-cooling/
JUL 2019: “Nope, Earth Isn’t Cooling”

Not only is C02 and earth’s temperature rising (NASA charts) but we also have a serious methane problem as northern latitudes lose their reflective snow and ice cover. I covered this in part on Election night here: http://www.chpc.biz/history-readings/federal-election-2019

One only has to look at our degraded environment to see that humans are changing our planet’s ecosystem dramatically… see:
https://en.wikipedia.org/wiki/Human_impact_on_the_environment

This is the Anthropocene era.

#23 PeterfromCalgary on 10.26.19 at 6:39 pm

Great post!!!!

I am glad you covered this because most investors myself included do not understand this stuff. I was wondering about these taxes and now I understand them better.

I plan to make some changes Monday to save money!

Keep up the great work Ryan!

#24 Ronaldo on 10.26.19 at 6:47 pm

#3 Shawn Allen

so·cial se·cu·ri·ty
noun
any government system that provides monetary assistance to people with an inadequate or no income.
“she was living on social security”
—————————————————————
So what do we call it in Canada? the Dole?

#25 Flop... on 10.26.19 at 6:52 pm

Ryan, what are you doing?

You do realize this is a wood chopping blog now…

M45BC

#26 Flop... on 10.26.19 at 7:15 pm

Deckie, thanks for the shoutout the other day, here is the next instalment.

Hopefully I can drive some high earning individuals into the arms of Turner Investments.

Garth talks about suspender snapping advisors, I’m going to be disappointed if Garth tells me to meet him at Scotia Plaza, and I walk in see InfLewenza and Robax are playing mini-golf in khaki shorts and flip flops…

M45BC

“Charted: These U.S. Jobs Have the Biggest Paychecks in 2019.

You may have heard growing up that the path to a good salary was to become a doctor or a lawyer. It turns out that this conventional wisdom is right—at least partly. Our new visualization uses the most recent data from Glassdoor to illustrate the highest-paying jobs nationwide, based on median salary.

Most of the highest-paying jobs are in the medicine or technology industries.

Notably, five of the top ten occupations by salary are related to healthcare.

While physician ranks highest on the list, the median pay for this occupation is downcompared to last year ($195,842 vs $193,415).

Seven of these top ten lucrative careers, especially those related to medicine and law, require a graduate degree. The technology and management roles are also likely to require a college education and/or many years of experience before reaching top dollar.

Demand for these occupations also varies significantly. According to Glassdoor’s datafrom August 2019, there were 17,572 job openings for nurse practitioners, but only 299 for corporate controllers.

Top 10 Highest-Paid Occupations by Median Base Salary in USD.

1. Physician: $193,415
2. Pharmacy Manager: $144,768
3. Dentist: $142,478
4. Pharmacist: $126,438
5. Enterprise Architect: $122,585
6. Corporate Counsel: $117,588
7. Software Engineering Manager: $114,163
8. Physician Assistant: $113,855
9. Corporate Controller: $113,368
10.Software Development Manager $109,809
11.B-Grade Blog Commentator Guy From Tasmania $000,000

https://howmuch.net/articles/americas-highest-paid-jobs-2019

#27 Somerset on 10.26.19 at 7:17 pm

On the question of taxes:

If my wife and I make 2 margin accounts out of the present joint margin account, with an equal split between the 2, are there any taxes or liabilities we should know about?

The reason for doing so is to make our wills separate and clear for our beneficiaries.

#28 Ryan Lewenza on 10.26.19 at 7:21 pm

Shawn Allen “So this would be a disadvantage for holding XBAL or VBAL (even in RRSP or TFSA) as compared to a portfolio of the ETF components of XBAL and VBAL? Interesting and not information I have seen elsewhere.”

I believe VBAL hold ETFs that invest directly in the underlying stocks so they would not pay the level 2 tax if the case. – Ryan L

#29 Ryan Lewenza on 10.26.19 at 7:37 pm

Stan Brooks “it was a great place to live 20-30 years ago.

There, I fixed it for you.

Since then it has been downhill as you noted with the economy, cost of living and taxes increasing, but benefits, quality of services declining.

That ‘generally good health care and education’ is a myth.

The elite has to become less stingy and leave some carrots, just beating with the stick (debt) does not work.

As for the general preaching: ‘be thankful that there is no war, we live in a peaceful, prosperous society, blah blah blah… but don’t forget to pay up’, that sounded pathetic. We lived in much better society 20-30 years ago, bring it back.

Cheers,

Stan you complain a lot about Canada. Given how much you dislike our country maybe you should consider moving and trying out other countries. But it will cost you higher taxes in Europe, less safety and security in South America and a lower quality education system than Japan. According to the OECD, Canada ranks third in the world for our education system, well ahead of Japan in the ninth spot. https://dailyhive.com/vancouver/canada-ranked-best-country-education-2019. And why is it ‘pathetic’ to highlight our peaceful and prosperous country?? You travel around our great country more and smell the roses. – Ryan L

#30 baloney Sandwitch on 10.26.19 at 8:02 pm

Great post alone worth the annual subscription of this pathetic blog. I have copied and kept for future reference.

Capital gains are best – uncomplicated and taxed at half the regular rates. That is why I am more and more veering into options. Very tax efficient.

#31 Flop... on 10.26.19 at 8:15 pm

Hey Vamp, I will continue to try and help out with the Infill information because when I had my real estate blog people would write me and ask for my help in trying to improve their living situation.

I believe, and the quote posted previously seemingly supported it, was that they are deemed non-conforming strata because there are multiple detached properties on a block of land that would normally only have one structure.

I remember featuring this Infill project on my PinkSnow blog and on Greaterfool.

Don’t worry about the numbers, what I want you, or someone who is interested in buying a brand new detached property in Vancouver for under a million dollars is to focus on the shape of the property.

https://www.rew.ca/insights/166261/4650-baldwin-street-vancouver-bc

Because the way Kingsway slashes through the city from N.W to S.E this area is chocked full of irregular sized blocks that can be candidates for Infill detached housing.

This is what was supposedly there before.

https://pshomes.ca/mylistings.html/listing.v1076552-4650-baldwin-street-vancouver-v5n-5b6.41276569

And from memory, I think they turned it into a duplex and one detached structure that looked like this.

https://www.zolo.ca/vancouver-real-estate/4650-baldwin-street

https://www.remax.ca/bc/vancouver-real-estate/4652-baldwin-street-wp_id210197503-lst

Part of me misses not helping out people as much, but I decided to choose my wife over strangers on the internet.

I might reverse that decision if she continues to serve up steamed vegetables…

M45BC

#32 Shawn Allen on 10.26.19 at 9:15 pm

Social Security?

#24 Ronaldo on 10.26.19 at 6:47 pm
#3 Shawn Allen

so·cial se·cu·ri·ty
noun
any government system that provides monetary assistance to people with an inadequate or no income.
“she was living on social security”
—————————————————————
So what do we call it in Canada? the Dole?

**********************************
Well, note that Ryan’s opening couple of sentences were about the taxes Canadians pay.

In the U.S.A. they have a deduction for Social Security. In Canada we have a deduction for Canada Pension Plan.

Income taxes cover Old Age Pension.

I don’t think it is at all common in Canada to call either CPP or old age pension or any of a myriad of other benefits, social security. And we don’t call the deduction for CPP, social security. Do we?

And yes, Garth does (unfairly in my opinion) call all old age pension payments dole or the equivalent wording. Even for those who paid in (or are still paying in) the taxes that support it.

Tell me though, in the U.S. if you never worked and never paid into social security do you still get paid something? Do they have the equivalent of our universal old age pension?

#33 just a dude on 10.26.19 at 9:16 pm

Ryan,

Great post – thank you.

What are your thoughts on swap type etf’s for people wishing to have some international exposure in their TFSA. Horizons HXDM etf for example. Thank you

#34 Sydneysider on 10.26.19 at 9:19 pm

#28 Ryan

“According to the OECD, Canada ranks third in the world for our education system, ”

That might be right, but since the average high school student in Canada does not know how to use the apostrophe in English, and does not speak the second official language, that can probably be attributed to the mediocrity of the competition in 2019.

#35 Dr V on 10.26.19 at 10:36 pm

24 Ronaldo

It’s called welfare if you’re under 65, GIS if 65 or older

#36 Ustabe on 10.26.19 at 11:03 pm

#25 Flop… on 10.26.19 at 6:52 pm

Ryan, what are you doing?

You do realize this is a wood chopping blog now…

M45BC

I could give you a paragraph or two on the differences between wet wood and seasoned wood if you’d like?

#37 Jenny Wang on 10.27.19 at 1:37 am

Looking for answers in the past is biological. It’s nonsense for investors. You may as well revert to analyzing the entrails of dead birds. Stick to the balance sheet. Stick to what’s really happening in the world. For Canada, you can just shutter the resource industry and save it for later. We know Trudeau is a dupe for foreign players shifting financial profits to other jurisdictions. Reality will return when the billions of woke millennials are broke, unemployed and shivering in the dark. The pendulum will swing. That’s human nature. Look at hard examples like Russia and China. This Trudeau Soros alliance will last just until people get pissed that they can’t fly to Bali or wherever and life is shit.

There’s good money to be made elsewhere. Canada is a shit stain on the world map. Go where taxes are low and livings easy. Let the weather freaks do what they will until they grow up.

#38 SoggyShorts on 10.27.19 at 2:50 am

Great topic Ryan, thanks!

I did try to set things up with FWT in mind, how’d I do?

TFSAs ->XIU & XRE
RRSP -> VOO, VIG, VWO (all USD)
Non-reg -> XUU, XEF, VEE

#39 Stan Brooks on 10.27.19 at 2:50 am

#28 Ryan Lewenza on 10.26.19 at 7:37 pm

Stan you complain a lot about Canada. Given how much you dislike our country maybe you should consider moving and trying out other countries.

That is an elementary generalization and not true. I loved the country from 20-30 years ago, bring it back.


But it will cost you higher taxes in Europe, less safety and security in South America and a lower quality education system than Japan.
According to the OECD, Canada ranks third in the world for our education system, well ahead of Japan in the ninth spot. https://dailyhive.com/vancouver/canada-ranked-best-country-education-2019.

That is stereotyping and untrue.
When comparing taxes, compare the safety net, the whole package.
I have not seen a single European pensioner to complain needing 2 million bucks to retire. Education is absolutely free.

The fact that South Korea is missing from your educational list of Finland is not at the top makes it non believable.

The taxes in Europe vary greatly.


And why is it ‘pathetic’ to highlight our peaceful and prosperous country?? You travel around our great country more and smell the roses. – Ryan L

You are preaching conformance and compliance at a time when we need critical thinking. Our educational system indoctrinates.

If you love something or someone tell it/him as it is. sugarcoating helps no one.

Tired and sick of ‘don’t rock the boat’ attitude, look at US where people are not afraid to be critical, it seems like a constant political turmoil but moving as it seems in the right direction as economy.

We have the greatest intolerance for critical thinking or difference in opinion that I have seen after the fall of communism in the former communist block.

Looking from outside things look much different. Maybe you should try it?

Best,
Stan.

#40 Ponzius Pilatus on 10.27.19 at 4:27 am

#25 Flop… on 10.26.19 at 6:52 pm
Ryan, what are you doing?

You do realize this is a wood chopping blog now…
————
Right on Floppy.
Next episode of “Mountain Man” is Sunday 9pm Eastern

#41 Jenny Wang on 10.27.19 at 5:20 am

Trump is going to stick it to smarmy Quebec by removing the cap trade deal with Cali. Now Trudeau will have to impose his carbon tax on them hah. Lov Donald.

https://www.thepostmillennial.com/trump-administration-sues-california-over-climate-pact-with-quebec/

#42 Jeff from Markham on 10.27.19 at 6:56 am

Ryan, best post ever. I had suspected much of what you posted. Now I know. Thanks!

#43 Sail Away on 10.27.19 at 8:10 am

Ayn Rand on a person’s philosophy:

“[y]our only choice is whether you define your philosophy by a conscious, rational, disciplined process of thought and scrupulously logical deliberation—or let your subconscious accumulate a junk heap of unwarranted conclusions, false generalizations, undefined contradictions, undigested slogans, unidentified wishes, doubts and fears, thrown together by chance, but integrated by your subconscious into a kind of mongrel philosophy and fused into a single, solid weight: self-doubt, like a ball and chain in the place where your mind’s wings should have grown.”

#44 crowdedelevatorfartz on 10.27.19 at 8:18 am

@#35 Ustabe
“I could give you a paragraph or two on the differences between wet wood and seasoned wood if you’d like?”

As a shout out to the blog subject at hand for our hard working, financial advisor

+++++

Perhaps a parable of how splitting wood is like a tax audit?

If your knowledgeable and prepared everything works out.
If your not prepared, everything devolves into an agonizing, sweaty, curse laden exercise in futility….

#45 Bytor the Snow Dog on 10.27.19 at 8:58 am

Of course as expected, and in defense of his “religion” Ripley comes to “debunk” the source, rather than address the sources arguments.

Like I said, as expected.

#46 crowdedelevatorfartz on 10.27.19 at 9:27 am

@#36 Jenny Wang
“There’s good money to be made elsewhere. Canada is a shit stain on the world map. Go where taxes are low and livings easy. Let the weather freaks do what they will until they grow up.”
++++

I believe in Stalin’s Russia there was a Gulag built in Siberia in your honor.
Or was that Trump’s Florida?
I always confuse the two.

#47 akashic record on 10.27.19 at 9:47 am

Jenny Wang, #42 Sail Away

High five!

#48 Dharma Bum on 10.27.19 at 9:50 am

The taxation on dividends from Canadian listed ETFs that hold US securities (stocks and other ETFs) still eludes me.

Are you saying that on, for instance, Vanguard’s VUS and VGH, the withholding taxes are deducted prior to dividend distributions? In other words, at tax time, there’s nothing further to do other than to declare the actually received amount of the dividends with CRA?

Oh Man, I’m SO CONFUSED!

https://www.youtube.com/watch?v=xfGzyKRJSuA

#49 Hanna Danson on 10.27.19 at 9:58 am

All this could be avoided with RRSP’s and TFSA’s if we actually could still get decent interest rates before 2008, 4.75% to 5.0% and before 2001, 5.75% to 6.5%. All these with GIC’s and government bonds.

This is the real reason so much investing is complicated and time consuming.

#50 Blog Bunny on 10.27.19 at 10:14 am

You forgot to mention estate taxes that will apply if wealthy individuals hold US stocks or US-listed ETFs directly.

#51 Ryan Lewenza on 10.27.19 at 10:30 am

Shawn Allen “Well, note that Ryan’s opening couple of sentences were about the taxes Canadians pay.

In the U.S.A. they have a deduction for Social Security. In Canada we have a deduction for Canada Pension Plan.

Income taxes cover Old Age Pension.

I don’t think it is at all common in Canada to call either CPP or old age pension or any of a myriad of other benefits, social security. And we don’t call the deduction for CPP, social security. Do we?”

For the record I was using ‘social security’ as a general term for things like CPP and EI which we pay into. Yes social security is the US name for their pension benefits, which we call CPP, but again I was using it as a general term. – Ryan L

#52 MF on 10.27.19 at 10:34 am

36 Jenny Wang on 10.27.19 at 1:37

No your post is a sh*t stain on this blog.

Why is this person still allowed to post here?

MF

#53 Ryan Lewenza on 10.27.19 at 10:36 am

SoggyShorts “Great topic Ryan, thanks!

I did try to set things up with FWT in mind, how’d I do?

TFSAs ->XIU & XRE
RRSP -> VOO, VIG, VWO (all USD)
Non-reg -> XUU, XEF, VEE”

Looks good. Well done Soggy! – Ryan L

#54 NoName on 10.27.19 at 10:39 am

Now that we touched a bit on foreign taxes…

in Europe taxes are high, so plan your vacation accordingly, may i suggest to visit countries that give foreign people tax rebate after their stay.

So if you are planing europien vacation, red this first, and familiar your self what to do and where. In cro vat rebates kicks in above 740hrk, around 150cad, so what ever you buy/pay for something over that amount on a single transaction, save receipt and start vat rebate claim when you return.

And on a side note spend bare minimum in countries that charge negative interest rates on bonds.

Link to pdf file about vat return.
https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-european-vat-refund-guide.pdf

Vat rates in Europe.

Keep in mind that vat is already hidden in price of goods and services that why everything is so much more expencive…

#55 not 1st on 10.27.19 at 10:41 am

So much for that green utopia.

Oil demand to increase by 10mm bbls a day even with renewables, Canada set to double. $100 bbl forecast.

https://www.jwnenergy.com/article/2019/9/canadian-oil-production-spike-between-2040-2050-eia/

#56 Ryan Lewenza on 10.27.19 at 10:44 am

just a dude “Ryan,

Great post – thank you

What are your thoughts on swap type etf’s for people wishing to have some international exposure in their TFSA. Horizons HXDM etf for example. Thank you”

The big advantage of those ETF structures is to the defer capital gains and income, which is definitely a plus. However it adds a bit complexity for clients when we’re trying to keep things simple. Plus I’m old school and like knowing we actually hold the underlying stocks. Lastly, you never know if the government is going to come in and change that. So we generally just stick with ETFs that own the underlying stocks versus holding swaps. – Ryan L

#57 Coopoiler on 10.27.19 at 10:49 am

Hi

Ryan you say that in a non-registered account who can use a tax offset to the withholding tax on your taxes.
You say this partly offsets the cost. Does it not fully offset the withholding tax if you hold individual stocks?

#58 Ronaldo on 10.27.19 at 11:17 am

#34 Dr. V

Yep, Welfare, Income Assistance, Social Security, the Dole,
and several other terms it seems
————————————————–
Terminology
In the U.S., welfare program is the general term for government support of the well-being of poor people, and the term social security has come to be referred to to as US social insurance program for retired and disabled people even though social security is itself a retirement insurance plan paid for by taxes taken from the individual worker’s payroll check and matched by his employer, no part of it is paid by the Federal Government. In other countries, the term social security has a broader definition, which refers to the economic security that a society offers when people are sick, disabled, and unemployed. In the U.K., government use of the term welfare includes help for poor people and benefits, including specific social services such as help in finding employment.[3]

#59 Loonie Doctor on 10.27.19 at 11:21 am

#37 Soggy Shorts

Whether to hold XEF in a non-reg personal account vs RRSP actually depends on your personal tax bracket. In a high personal tax bracket, the loss to Canadian income tax due to the high yield in a non-reg is worse than the FWT loss in an RRSP.
-LD

#60 Brian Ripley on 10.27.19 at 11:34 am

#1 + #44 Bytor the Snow Dog

At this Nasa link there is a chart of Solar Irradience and Temperature
https://climate.nasa.gov/blog/2910/what-is-the-suns-role-in-climate-change/

And here is a quote from that same page:

What Effect Do Solar Cycles Have on Earth’s Climate?
According to the United Nations’ Intergovernmental Panel on Climate Change (IPCC), the current scientific consensus is that long and short-term variations in solar activity play only a very small role in Earth’s climate. Warming from increased levels of human-produced greenhouse gases is actually many times stronger than any effects due to recent variations in solar activity.

For more than 40 years, satellites have observed the Sun’s energy output, which has gone up or down by less than 0.1 percent during that period. Since 1750, the warming driven by greenhouse gases coming from the human burning of fossil fuels is over 50 times greater than the slight extra warming coming from the Sun itself over that same time interval.

And if you read the comments section of the above NASA page link you will find NASA responding to questions concerning whether we are headed for a cooling period or not.

Read that Bytor, if you are really interested in credibility of source argument.

#61 Ryan Lewenza on 10.27.19 at 11:41 am

Coopoiler “Ryan you say that in a non-registered account who can use a tax offset to the withholding tax on your taxes. You say this partly offsets the cost. Does it not fully offset the withholding tax if you hold individual stocks?”

It’s the same whether you own US stocks directly or a US listed ETF. Since you can deduct the withholding taxes from your overall taxes owing I believe you can recoup all of the withholding tax but confirm that with your accountant. – Ryan L

#62 Ustabe on 10.27.19 at 11:58 am

in Europe taxes are high, so plan your vacation accordingly, may i suggest to visit countries that give foreign people tax rebate after their stay.

I don’t mean to start a war but if any part of your vacation planning includes the above then you need much more than a vacation.

A foreign vacation should be about where you are, who you are with and food, not about filing receipts.

As John Prine says, order your money around.

#63 Remembrancer on 10.27.19 at 1:03 pm

#51 MF on 10.27.19 at 10:34 am

Come on MF, Jenny’s amusing but sad People’s Liberation Troll Army attempts to demoralise Canadian investors reading the blog is an easily recognisable Lord HaHa / Tokyo Rose level of psy-ops – one level up from a warning that your ETFs are off cavorting with day traders while you are away from home working…

Be watchful for the more skilled social media propagandists…

#64 SoggyShorts on 10.27.19 at 1:27 pm

#8 Andrewski on 10.26.19 at 2:46 pm
If an investor owns individual US stocks, remember to complete the W-8BEN:
https://www.irs.gov/pub/irs-pdf/fw8ben.pdf

*****************************
Is that just for owning individual stocks, or do I need it if I have an ETF like XUU/VOO?

———————————————-

#58 Loonie Doctor on 10.27.19 at 11:21 am
#37 Soggy Shorts
Thanks, I’ll keep that in mind.

#65 not 1st on 10.27.19 at 1:29 pm

#59 Brian Ripley on 10.27.19 at 11:34 am

Buddy, NASA has no friggin idea what they are even modelling. They freely admit it.

https://isccp.giss.nasa.gov/role.html

Unfortunately, such a margin of error is much too large for making a reliable forecast about climate changes, such as the global warming will result from increasing abundances of greenhouse gases in the atmosphere. A doubling in atmospheric carbon dioxide (CO2), predicted to take place in the next 50 to 100 years, is expected to change the radiation balance at the surface by only about 2 percent. Yet according to current climate models, such a small change could raise global mean surface temperatures by between 2-5°C (4-9°F), with potentially dramatic consequences. If a 2 percent change is that important, then a climate model to be useful must be accurate to something like 0.25%. Thus today’s models must be improved by about a hundredfold in accuracy, a very challenging task. To develop a much better understanding of clouds, radiation and precipitation, as well as many other climate processes, we need much better observations.

#66 TRUMP2020 on 10.27.19 at 1:32 pm

Now THIS IS THE STUFF that brings me to this blog.

FACT-BASED INVESTMENT ADVICE…

Thanks Ryan!!!!

#67 NoName on 10.27.19 at 2:20 pm

#61 Ustabe on 10.27.19 at 11:58 am
in Europe taxes are high, so plan your vacation accordingly, may i suggest to visit countries that give foreign people tax rebate after their stay.

I don’t mean to start a war but if any part of your vacation planning includes the above then you need much more than a vacation.

A foreign vacation should be about where you are, who you are with and food, not about filing receipts.

As John Prine says, order your money around.

Filling receipts comes after vacation. Fun first, diligence second. Capish???

And as per Bob Rock (many probability in familiar with) “Better to live hundred years as a millionaire, than one week in poverty!”

#68 Sold Out on 10.27.19 at 2:27 pm

You can imagine that this blog would be a target-rich environment for academics studying the causes and manifestations of conspiracy theory mentality. Maybe Garth can open a new stream of income, and funnel test subjects to appropriate studies; he’s up to his manly, chiseled armpits in them here. Science doesn’t seem to have a cure for it yet, and when they do, those who suffer from this affliction will undoubtedly refuse to accept treatment for fear it will render them impotent, sterile or Liberal.

#69 SoggyShorts on 10.27.19 at 2:32 pm

#52 Ryan Lewenza on 10.27.19 at 10:36 am

Looks good. Well done Soggy! – Ryan L

********************************
Hold up, I missed a big one when typing that list: I have a very large allocation to VGG in my Non-reg, and I’m thinking now that it’s a mistake…

Should I reconsider the VGG holding in my Non-reg accounts?

♦VGG holds just VIG meaning I’m being double taxed, right?
♦The yield on VIG is 1.77 vs VGG 1.31
♦The expense ratio on VIG is also lower at .06 vs VGG .028

Really the only possible downsides I’m seeing are increasing my USD exposure by a lot (currently around 28% and this would go up to just over 50%) and having to do a really big Norbert’s Gambit.

Or is there a VGG equivalent in CAD that holds the underlying stocks directly rather than holding VIG?

Thanks again!

#70 Tony on 10.27.19 at 2:38 pm

Since all that’s basically left in the worldwide stock markets are day traders this won’t affect very many.

#71 Tony on 10.27.19 at 2:45 pm

Re: #54 not 1st on 10.27.19 at 10:41 am

The powers that be will never let the price of oil spike ever again. With the entire world’s financial system at risk the world price of oil will stay around the 50 to 60 U.S. dollar range indefinitely. Just another one of the commodities that’s now 100 percent rigged. The author of the article must be kidding himself.

#72 Sail Away on 10.27.19 at 2:50 pm

#67 Sold Out on 10.27.19 at 2:27 pm

You can imagine that this blog would be a target-rich environment for academics studying the causes and manifestations of conspiracy theory mentality.

those who suffer from this affliction will undoubtedly refuse to accept treatment for fear it will render them impotent, sterile or Liberal.

———————————

Yes! Have you noticed how many people have bought in hook, line and sinker to that ‘climate emergency’ hogwash?!?

Crazy, I know.

#73 Sold Out on 10.27.19 at 3:16 pm

#71 Sail Away on 10.27.19 at 2:50 pm
#67 Sold Out on 10.27.19 at 2:27 pm

You can imagine that this blog would be a target-rich environment for academics studying the causes and manifestations of conspiracy theory mentality.

those who suffer from this affliction will undoubtedly refuse to accept treatment for fear it will render them impotent, sterile or Liberal.

———————————

Yes! Have you noticed how many people have bought in hook, line and sinker to that ‘climate emergency’ hogwash?!?

Crazy, I know.

—————————————————————–

Congratulations!

You have been selected to have your IP address forwarded to researchers at Cambridge University(just kidding, of course; they’re already watching you). Your ability to demonstrate the classic traits of the conspiracy theorist, in so few words, will advance the cause of knowledge accumulation and distillation immeasurably. Take comfort in the knowledge that your suffering will help others!

#74 Shawn Allen on 10.27.19 at 3:29 pm

Climate Change Deniers who advocate no action

Maybe review Pascal’s wager?

https://en.wikipedia.org/wiki/Pascal%27s_wager

#75 MF on 10.27.19 at 3:33 pm

#62 Remembrancer on 10.27.19 at 1:03

You bet.

I’d put Stan on that short list too lol.

MF

#76 NoName on 10.27.19 at 3:47 pm

#73 Shawn Allen on 10.27.19 at 3:29 pm
Climate Change Deniers who advocate no action

Maybe review Pascal’s wager?

https://en.wikipedia.org/wiki/Pascal%27s_wager

Do tell us how is that vegan diet of yours coming along. Any recepies to share?

#77 Shawn Allen on 10.27.19 at 3:58 pm

Pay to Spew Carbon

#75 NoName on 10.27.19 at 3:47 pm
#73 Shawn Allen on 10.27.19 at 3:29 pm
Climate Change Deniers who advocate no action

Maybe review Pascal’s wager?

https://en.wikipedia.org/wiki/Pascal%27s_wager

Do tell us how is that vegan diet of yours coming along. Any recepies to share?

*************************
Not sure your point. I advocate the right to emit carbon but am willing to pay a tax to do so which the government should use to offset carbon consumption. I wish to compensate the world for my meat eating and gas guzzling. It’s only fair. Money can help to lower overall carbon emissions.

I also may choose to take certain actions to reduce my carbon emissions. Vegan diet will not be part of that however.

#78 Sail Away on 10.27.19 at 4:44 pm

#72 Sold Out on 10.27.19 at 3:16 pm
#71 Sail Away on 10.27.19 at 2:50 pm
#67 Sold Out on 10.27.19 at 2:27 pm

———————————

Yes! Have you noticed how many people have bought in hook, line and sinker to that ‘climate emergency’ hogwash?!?

Crazy, I know.

—————————————————————–

Congratulations!

You have been selected to have your IP address forwarded to researchers at Cambridge University(just kidding, of course; they’re already watching you). Your ability to demonstrate the classic traits of the conspiracy theorist, in so few words, will advance the cause of knowledge accumulation and distillation immeasurably. Take comfort in the knowledge that your suffering will help others!

————————————

Glad to help

#79 Brad on 10.28.19 at 10:12 pm

Wow! Thanks.