Foreign Withholding Tax

Important correction: In the video I say that the ETF XEC holds emerging markets stocks directly. That is false. It holds IEMG, which is a US listed ETF. The only Canadian listed ETF that holds emerging markets stocks directly is ZEM, though it also holds some US listed ETFs. ZEM also tracks an index that omits small cap stocks completely, making it potentially less desirable than the more diversified XEC.

Global diversification is universally accepted as beneficial to investors, but foreign withholding tax is a tricky little detail that can eat into your investment returns. When a foreign company pays a dividend to a Canadian investor, the company’s home country will often impose a tax on the dividend. The amount of tax withheld by the foreign government depends on the arrangement between the two countries.

Referenced in this video:
Foreign Withholding Taxes white paper: https://www.pwlcapital.com/pwl/media/pwl-media/PDF-files/White-Papers/2016-06-17_-Bender-Bortolotti_Foreign_Withholding_Taxes_Hyperlinked.pdf?ext=.pdf

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