TSE:CHB and US withheld tax
TSE:CHB and US withheld tax
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Isaac · External communityPost link
External question — Personal Finance Stack Exchange
Author: Isaac
Original post: https://money.stackexchange.com/questions/152129
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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"iShares U.S. High Yield Fixed Income Index ETF (CAD-Hedged)" (TSE:CHB) is listed on the TSX and tracks an index of US high-yield bonds. It holds these bonds directly (i.e. not through a US-listed ETF).
As such, I figured that investing in
CHB
inside a TFSA would be suboptimal, as withheld US taxes can't be recovered in any way (whereas, inside an RRSP, there are no withheld US taxes to begin with).
However, looking at CHB's distribution history for 2020, I can see that it generated foreign income ($0.95265 per unit), while it paid $0 in foreign tax.
Looking at my broker's records, I can't see any US withholding tax activity for this security whatsoever.
I'm not sure what that means.
Does
CHB
"work around" US withheld taxes in any way? How does this happen?
Is it, therefore, reasonable to hold
CHB
in a TFSA?
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Flux · External communityPost link
External answer — Personal Finance Stack Exchange
Author: Flux
Original post: https://money.stackexchange.com/a/152134
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
Does CHB "work around" US withheld taxes in any way? How does this happen?
Income from US bond interest may be considered "portfolio interest" or "qualified interest income" (see
26 U.S. Code § 871 - Tax on nonresident alien individuals
). This kind of income is not taxed by the US.
Further details:
Non-resident alien: Why did I pay no tax on dividend income?
What are the taxation rules for US non-resident aliens with respect to qualified dividends?
Note: that question is about "qualified dividends" which is irrelevant to your question, but one of the answers there explains "portfolio interest" and "qualified interest income".
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Quoted from Forex.com.bd-Editorial External question — Personal Finance Stack Exchange Author: Isaac Source score (net votes, not local likes): 1 Original post: https://money.stackexchange.com/questions/152129 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. "iShares U.S. High Yield Fixed Income Index ETF (CAD-Hedged)" (TSE:CHB) is listed on the TSX and tracks an index of US high-yield bonds. It holds these bonds directly (i.e. not through a US-listed ETF). As such, I figured that investing in CHB inside a TFSA would be suboptimal, as withheld US taxes can't be recovered in any way (whereas, inside an RRSP, there are no withheld US taxes to begin with). However, looking at CHB's distribution history for 2020, I can see that it generated foreign income ($0.95265 per unit), while it paid $0 in foreign tax. Looking at my broker's records, I can't see any US withholding tax activity for this security whatsoever. I'm not sure what that means. Does CHB "work around" US withheld taxes in any way? How does this happen? Is it, therefore, reasonable to hold CHB in a TFSA?
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