Foreign Withholding Tax | International Equity ETFs: XEF vs. IEFA
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- Опубликовано: 10 июл 2024
- In this video, Justin compares the foreign withholding tax cost between U.S.-listed and Canadian-listed international equity ETFs (IEFA vs. XEF) across various account types.
The below topics are explained in this foreign withholding tax tutorial:
00:00 Factors that impact the amount of foreign tax withheld on foreign dividends
00:27 Difference between Level 1 and Level 2 foreign withholding tax
01:24 How IEFA and XEF gain their exposure to international stocks
01:36 Foreign withholding taxes on international equity ETF dividends received in RRSPs, RRIFs, LIRAs, LIFs, etc.
03:17 Foreign withholding taxes on international equity ETF dividends received in TFSAs, RESPs, and RDSPs
04:04 Foreign withholding taxes on international equity ETF dividends received in non-registered accounts
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You guys are like the nicest Canadian finance youtubers ❤
Very informative, as always, Justin, the animations are always a nice touch.
I assume VGRO, XGRO, MGRW etc would also fall in the same category as XEF for these purposes?
Some couch potato podcast investors might also be curious about how the TD e-series is treated, as well, and whether the fact it's a mutual fund has any effect on withholding tax.
@Spirit Of The Law - The underlying international equity ETFs within VGRO, XGRO, MGRW (i.e. VIU, XEF, QDX) would all have similar foreign withholding tax implications as XEF across accounts.
Since the TD international equity e-Series mutual funds all hold the underlying international stocks directly, their foreign withholding tax implications would be similar to VIU or XEF.
@@JustinBenderCPM Perfect. Thanks for the quick response!
I recently re-listened to the Canadian Couch Potato podcast, and really enjoyed the episode you were on. Appreciate all the info you're sharing!
OMG, two of my favorite RUclipsrs from completely different worlds conversing in the comments. What a time to be alive :)
What are your thoughts on withholding tax for emerging markets. Of the three largest Canadian listed etfs, XEC, VEE, ZEM. iShares and Vanguard hold the us listed etf whereas BMO holds it directly. However ZEM does not have small caps. In your opinion does holding XEC or VEE make more sense to hold by having exposure to small caps versus saving a layer of withholding tax?
@Steven N - I would prefer an ETF provider to release an all-cap emerging markets ETF that holds the underlying stocks directly, but until then, I'm mostly sticking with Canadian-listed EM ETFs that hold U.S.-listed EM ETFs (i.e., XEC and VEE). However, I don't see any issues holding ZEM for the foreign withholding tax benefit.
Nice videos as always !!! ❤❤❤First question; Are same rules applied on withholding US and international stock ? (as I have few US stocks on my RESP and TFSA 😢)
Second, does it apply for both the DRIP and also on the earnings from selling them?
@Subash P - Thanks!
The rules are similar for individual stocks (although the withholding tax rates will be country-specific). For U.S. stocks held in RESPs and TFSAs, 15% withholding tax would generally apply.
A DRIP is just an administrative convenience (so enrolling in a DRIP program will unfortunately not get around the withholding tax issue.
Foreign withholding taxes do not apply to capital gains realized on the sale of ETFs/stocks.
How does XEF compare to Horizon's Corporate Class HXDM in a non-registered account? While HXDM's MER+TER is close to 0.57%, the dividends are folded into the stock price so no further deductions are incurred and you presumably get the full return.
@HackerCSVideos - HXDM does not include small cap stocks (whereas XEF does). But HXDM is expected to be more tax-efficient than XEF (assuming there are no defaults with the swap counterparty and government doesn't shut down or penalize the corporate-class structure).
Hi Justin, thanks so much for the video. Can you help me out with the math? (I haven't figured out Excel yet) Granting that FWT will be similar, if not the same, across similar ETFs from different providers . . . can we say that the total fees on VWO would be 0.54 (0.46 FWT + 0.08 MER) vs VEE at 0.50 (0.26 FWT + 0.24 MER)? Also VEA at 0.51 (0.46 FWT + 0.05 MER), VIU at 0.49 (0.26 FWT + 0.23 MER) and VCN at 0.31 (0.26 FWT + 0.05 MER). So VEA is 0.51 vs VIU + VCN at 0.08 or 0.54 because I counted the FWT twice and should not have done so? (I do realize I say MER throughout, but the US Vanguard seems to only list ER) Thanks so much, just discovered your channel!
@Allison_in_Canada - Welcome to the channel! Which account type are you trying to estimate the total fee in? (it could be different for RRSPs/TFSAs/Non-Registered)
@DIY Index Investing with Justin Bender hi, it was the TFSA (around the 3.50 mark in your vid). Thanks so much