Assume I have just three unused accounts – RRSP ($90 000), TFSA ($63 500 in 2019), and non-registered investment account. I'm Ontarian. I use another example like XUU. Where to put it first?

I discombobulated by pp 5,6 in Foreign Withholding Taxes 2016 Jun 17 by Justin Bender B.Comm Finance Guelph and Dan Bortolotti B.A. English University of Waterloo - St. Jerome's University.

One hand, Level 1 withholding taxes apply in TFSA and RRSP. But best to max TFSA then RRSP first.

Other hand, you can recover withholding taxes non-registered account. But no tax avoidance or deferral!

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Foreign Withholding Tax: Which Fund Goes Where? | Canadian Couch Potato doesn't instruct where to put XUU that belongs "A. Canadian mutual fund or ETF that holds US or international stocks directly". Note how it doesn't bring-up TFSA.

US Equities

For non-registered accounts choose A, B or D.

For RRSPs choose B. Avoid A and D.

1 Answer 1


These are two separate questions— one is about which savings account you max out first, the other is about what funds you put in there.

For short-term savings where you will need the funds within 1-5 years max out your TFSA account first. For any long term savings max out your RRSP followed by your TFSA. Note that there are other considerations— e.g. if you anticipate that you will be in a significantly higher tax bracket when you plan on withdrawing the money from your RRSP a TFSA may be more advisable.

Once you have figured out what account to use you need to understand what funds to put in there XUU.TO is a Canadian fund that holds US equities while ITOT is a US fund that holds US equities. Place American owned funds like ITOT in your RRSP since they are considered retirement accounts and they are not subject to foreign withholding taxes— you will see that the management expense ratio on these funds is lower than the Canadian held funds which roll the foreign withholding taxes into their MER. TFSAs and non-registered accounts don’t not offer you the withholding taxes back at all (rather you can fill out a tax form that will reduce them to 15%); therefore it is generally considered immaterial as to whether you hold US owned funds in your TFSA or non-registered account, and there’s just a slight preference for the Canadian owned fund because you’re not paying the cost of currency exchange required to purchase the American owned funds.

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