1

I am talking about Cenovus energy:TSE:CVE

It trades on both NYSE and TSE. If I buy it on TSE and pay in CAD, in my TFSA, do I still pay the 15% withholding tax, that cannot even be recovered using foreign tax credit?

I think yes, because all US stocks/ETFs trading in TSX are subject to this tax, but just want to confirm.

Basically I am looking for some high yield stocks in my TFSA and I don't want to lose money paying withholding taxes. Defeats purpose of TFSA.

  • 1
    Your example doesn't work because Cenovus is a Canadian company based in Alberta and not an American company. You might instead cite a U.S. headquartered company that also happens to trade on the TSX. You may perhaps be confusing the idea of "U.S. company" with one that is listed on an American exchange. Not the same thing. – Chris W. Rea Mar 26 '15 at 16:37
3

The US withholding tax applies to stocks/ETFs purchased on the NYSE and other US-based exchanges. If you buy Cenovus on the TSE then you will not be charged this tax.

Your last sentence seems like you might be misunderstanding this tax though. If the tax applied, it would not cost you 15% on all your profits, it only applies to dividend yields. So if it pays you a 5% dividend, the tax costs you 0.75%. However, if you buy at $21.19 and sell at $26, then your capital gain is not subject to withholding taxes. It is however, subject to Canadian income tax (at 50% of the gain amount) when it's not sheltered in a TFSA or other registered account. The tax on the gains could easily amount to 16% of your profits, which is a much more significant cost. Therefore, having to pay a 0.75% withholding cost certainly does not "defeat the purpose of the TFSA" which is to shelter from Canadian income tax!

  • 1
    Upon some further reading of various forums, it seems some brokers are applying the withholding tax on interlisted stocks even though they were purchased on the TSE. They shouldn't be required to, but I guess there's not much you can do about it. I would consult with your broker to verify if you are concerned about this. – Elbyron Mar 26 '15 at 16:58

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.