US-Listed vs Canadian-Listed ETFs: Withholding Tax, Currency and Hedging

A US-listed ETF and a Canadian-listed ETF can own the very same US companies. What separates them is the wrapper: the currency you pay in, how many times foreign tax is taken off the dividends before they reach you, whether your account can get that tax back, and some paperwork that comes with owning a US-listed fund. This page explains them without recommending either. How ETF distributions are taxed in general is on our page on how ETFs are taxed in Canada.

On this page: Three routes · US withholding · International funds · .U units · Converting currency · Hedged vs unhedged · Estate tax and reporting

What are the ways to own US stocks through an ETF from Canada?

One fund company’s guide to withholding tax sorts the choices into three structures:

1. A US-listed ETF that holds the stocks itself, bought on a US exchange in US dollars.
2. A Canadian-listed ETF that holds a US-listed ETF. VFV is an example: its fact sheet reports figures for the US-domiciled S&P 500 ETF it mainly invests in.
3. A Canadian-listed ETF that holds the stocks directly. ZSP is an example: its issuer says it holds the index’s stocks in the index’s own proportions.

The same fund company notes that how much foreign tax a fund pays depends on where the fund is resident for tax and on how it reaches the foreign market. Beyond tax, one custodian’s article for advisors and a personal-finance magazine both point to greater liquidity and to strategies that have no Canadian-listed equivalent. If you’re weighing VFV against the US-listed fund it holds, our S&P 500 ETF comparison covers that pair.

How much US withholding tax does each route lose?

The US taxes dividends paid to foreign investors at 30%, and the tax treaty between Canada and the US generally cuts that to 15% for taxable Canadian investors. For US stocks, that is one layer of tax on each of the three routes: one fund company’s guide says Canadian-listed funds pay the same level whether they hold US stocks directly or go through a US or Canadian ETF.

What changes from route to route is whether your account gets the tax back:

So in an RRSP or RRIF, a US-listed ETF can avoid the US tax, while Canadian-listed VFV or ZSP can’t. In a TFSA the tax generally still applies, and in a taxable account a foreign tax credit can generally reduce its effect. The full rule is on our page on US withholding tax in an RRSP, the TFSA case on US withholding tax in a TFSA, and the accounts side by side on our asset location guide.

Is VFV subject to withholding tax? Yes. The US tax is taken inside the fund, so the distribution you receive is already net of it. As a rough size, VFV’s underlying portfolio had a dividend yield of 1.1% as at August 31, 2026, and 15% of that is about 0.17% of the fund’s value a year. One fund company notes this tax often goes unnoticed because it’s taken before the distribution is paid.

Swap-based and corporate-class ETFs are built differently; our page on how those structures are taxed covers them.

What about international ETFs?

Funds that hold stocks outside North America face a different tax: the country where a company is incorporated generally charges withholding on its dividends, so a fund holding Japanese and German stocks pays tax to Japan and to Germany. How many layers you pay depends on the route:

• A Canadian-listed ETF holding the stocks directly pays one layer, to the country where each company is based.
• A Canadian-listed ETF holding a US-listed international ETF can pay two: the foreign country’s tax, then US tax on what the US fund passes up to the Canadian fund. One fund company adds that this fund-of-funds approach usually costs less to trade.
• A US-listed international ETF bought directly pays the foreign tax, and US tax may also apply depending on whether the account is taxable.

The foreign tax is paid inside the fund, and you receive a distribution net of it. In a taxable account the fund may designate that foreign tax to you, which can let you claim a foreign tax credit. One fund company’s guide marks the same tax as a net cost in registered accounts and creditable in a taxable account.

Rates vary by country, and many of Canada’s tax treaties cap the rate a country can charge Canadian residents on dividends. The countries below are the largest in two common index families: Japan, the United Kingdom, France and Switzerland lead the MSCI EAFE index of developed markets outside the US and Canada, which also includes Germany, Australia and the Netherlands, and Taiwan, South Korea, China, India and Brazil lead the MSCI Emerging Markets index.

Each rate links to its source in the Sources list below. “n/a”: the treaty caps the rate only for companies holding at least 10% of the payer, not for portfolio investors.

A treaty sets a maximum rate, so where a country’s own rate is lower than its treaty cap, as for India, the treaty doesn’t raise it.

What are .U units and US-dollar ETFs?

Some Canadian-listed ETFs also come in units priced in US dollars, and one custodian’s article notes that these give investors another way to manage their currency exposure. ZSP and ZSP.U are two tickers for the same fund, ZSP.U being its US-dollar units; the fund holds the index’s stocks in the index’s proportions, and ZSP.U trades on the TSX in US dollars. So ZSP vs ZSP.U comes down to the currency you pay in, not what the fund owns.

A .U unit is still a Canadian-listed fund, so the RRSP condition above applies to it as it does to ZSP, and its US withholding happens inside the fund. Buying with US dollars you already hold skips converting Canadian dollars for that trade, one of the costs of investing abroad.

What does converting the currency cost?

Buying a US-listed ETF with Canadian dollars means converting them first, and one fund company lists the cost of foreign currency exchange alongside withholding tax and fees as costs of investing abroad. One brokerage’s pricing disclosure says it can earn revenue from the gap between its buy and sell rates on a trade that needs a conversion, and one custodian’s article adds that these fees can add up for investors who trade often. Our guides to buying US stocks from Canada and Norbert’s Gambit cover how the conversion is done.

Hedged or unhedged: what’s the difference?

US and international stocks are priced in their own currencies, so an unhedged ETF’s value in Canadian dollars also moves with the exchange rate. The Ontario Securities Commission’s investor site calls this currency risk: if the US dollar loses value against the Canadian dollar, your US stocks are worth less in Canadian dollars. The Nova Scotia Securities Commission describes an unhedged ETF as one that doesn’t use a derivatives contract against those swings.

A hedged ETF does: the Nova Scotia regulator says the manager enters derivatives contracts to offset exchange-rate moves. One fund company describes a currency forward, an agreement to swap one currency for another at a set rate on a later date. Another says a hedged fund and its unhedged twin from the same provider, tracking the same index, usually hold the same assets.

What hedging does, in both directions:

• If the Canadian dollar rises, the unhedged fund loses value in Canadian dollars, and the hedged fund’s contracts gain to offset it.
• If the Canadian dollar falls, the unhedged fund gains, and the hedged fund’s contracts lose, so it gives up that gain.
• Hedging isn’t complete. One fund company notes the risk can be reduced but not removed entirely.
• It has a cost. One fund company says the result depends on the gap between Canadian and US interest rates: hedging can add a small gain when Canadian rates are higher and a cost when they are lower.

The Nova Scotia regulator says there is no single answer to whether hedged or unhedged is the better choice. The Nova Scotia regulator also suggests reading a fund’s ETF Facts and prospectus to see how it hedges.

Is VFV hedged? No. VFV is unhedged; its issuer sells a separate fund that tracks a CAD-hedged version of the S&P 500. The hedged versions of the S&P 500 funds are compared on our S&P 500 ETF page. For how currency moves affect returns and your adjusted cost base, see our page on currency exchange and investments.

What else comes with a US-listed ETF?

US estate tax. The IRS says nonresidents who aren’t US citizens can owe US estate tax on assets situated in the US, and that stock of US corporations counts as such an asset; estate tax treaties can narrow what counts.

Foreign property reporting. If the total cost of your foreign property is more than $100,000 at any time in the year, the CRA says you must file Form T1135 and report all of it; a US fund trust is reported as US property, and property inside an RRSP or TFSA is excluded. Our T1135 guide explains who has to file.

Where to go next

• How ETFs are taxed in Canada: distributions, return of capital and your adjusted cost base
• Asset location: which account suits which fund
• US withholding tax in an RRSP and in a TFSA
• US index ETFs compared and Canadian ETFs by category
• The ETF hub