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iShares Core MSCI EAFE IMI Index ETF (XEF $46.26)
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iShares Core MSCI EAFE IMI Index ETF (XEF.U $33.29)
I have a sizeable amount of US dollars in my TFSA and RRIF accounts and intend to add international investments with that money. I can either just purchase the XEF.u with the US money or go thru the Norbert Gambit process to convert to canadian dollars and then buy the XEF ETF. My question is which would you recommend and also buying XEF.u in my TFSA which I believe is a Canadian listed ETF would there be a 15% US withholding tax on the dividends.
Many thanks.
The two strategies will likely result in similar outcomes, but considering the high liquidity of XEF and currency risks, we think buying XEF.U is the easier option. We do prefer to keep investments in the same currency as the securities, but in this case there are multiple securities so we would default preference to the US dollar. XEF.U will pay its dividend in US dollars, and this will avoid f/x issues on dividend payments as well (XEF pays in Canadian but the underlying securities pay in all different currencies). There is still withholding taxes in a TFSA even on a Canadian issued ETF. Withholding taxes will vary by country and the positioning of the fund, and some countries are exempt, but if they apply at all they will be passed through to unit holders of XEF.