Fees and taxes
Between a security's return and yours stand intermediaries: currency exchange, withholding, fees, and tax on what is left. This section takes them in the order they appear on a statement.
It starts with the CAD/USD exchange rate, because it touches every foreign security before tax is even mentioned. It then moves to capital gains and their full mechanics, then the superficial loss rule, the one that most often surprises those who sell and buy back. It ends with dividends: withholding tax on US dividends, then the different treatment of Canadian, US and foreign dividends, and excess contributions, what happens when a limit is exceeded.
Every figure here comes from an official source cited in the article; rates and thresholds change, mechanisms do not.
- The CAD/USD exchange rate: why your return is not the security'sHolding a US security means making two investments at once: one in the security, and one in the US dollar.
- Capital gains, the full mechanicsThe capital gain is the most discussed tax in investing — and one of the most misunderstood.
- The superficial loss ruleSelling a security at a loss, then buying it back right away: the manoeuvre looks harmless, and it is exactly the one the superficial loss rule targets.
- Withholding tax on US dividendsNew challengeA US dividend paid to a Canadian resident normally does not arrive whole: part of it is withheld at source, in the United States.
Canadian, US and foreign dividends
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