First, holding U.S. dividend-paying stocks in TFSAs will lead to a 15-per-cent withholding tax on that dividend when received . This applies to common or preferred shares held directly or those held within managed products such as exchange-traded funds or mutual funds.
My suggestion, Trevor, is to consider what the withholding tax would actually be for your investment. Using an example, let’s assume that ABC Widgets is a U.S. publicly-listed manufacturer with common shares trading for US$100. ABC pays a monthly dividend of 37.5 cents U.S. per share, or US$1.50 quarterly. With a share price of US$100, this represents an annual yield of 1.5 per cent. If this stock was held in a TFSA, 15 per cent, or 22.5 cents U.S.
The bigger question of moving U.S. stocks to your RRSP has less to do with the withholding tax, and more to do with your overall tax situation. Instead of whether to hold U.S. stocks or not, Trevor, you may want to consider whether you should invest in a TFSA or RRSP and why?tax deductions and tax refunds.