VNU ETF study - tax issue

Here is the discussion I like to review: 


I hold both VTI and VUN - they are essentially the same except for tax treatment.

VUN is a TSX-listed wrapper for VTI, and it trades in Canadian dollars. If VTI doesn't change, but the CAD dollar goes up 1%, then VUN will drop 1% (because VTI is now worth 1% less in terms of the canadian dollar).

All that is to say - they are equivalent. The advantage of buying VUN is that you don't incur the cost of exchanging your CAD into USD, as the fund takes care of it. When you hold VUN, you are holding VTI.

The difference comes if you are holding them inside an RRSP. In an RRSP, there is no tax on foreign dividends (normally you pay the US govt a 15% withholding tax). However, this is only the case if you hold VTI directly. If you hold VUN in your RRSP, the 15% foreign dividend tax is swallowed by the VUN wrapper and you can't recover it.

In a TFSA, you have to pay the 15% tax no matter which one you hold, and in an unregistered account you can get a foreign dividend tax credit no matter which one you hold.

Summary: hold VUN in your TFSA and registered account (to avoid forex fees), and VTI in your RRSP (to avoid the 15% foreign dividend tax).

Actionable Items

RRSP - purchase US ETF directly, no foreign dividend tax 
TFSA - avoid forex fees