1. Don't take yield at face value – When it comes to ETFs, not all distributions are created equal. ETFs may make distributions consisting of very different types of income including Canadian dividends, interest, foreign income, capital gains as well as returns of capital (ROC) to unitholders. These various forms of income within distributions can be taxed very differently with some being more tax efficient than others, and is a factor that ultimately needs to be considered when evaluating an ETF to invest in.
2. Structure matters - Generally speaking, ETFs are usually more tax efficient than actively managed mutual funds, largely because there is less turnover of securities within the fund. A mutual fund manager needs to frequently sell securities within the fund to accommodate redemptions or re-allocate assets. Because ETFs trade on a stock exchange, trading activity within the fund is limited. A lower turnover can help minimize capital gains distributions resulting in improved long-term after-tax efficiency and performance.
3. Canadian vs U.S. ETFs – For Canadians investing in either Canadian or U.S. listed ETFs there are some key words to consider – U.S. estate tax and withholding tax.  Depending on your situation, you may be subject to U.S. estate taxes upon death since U.S. listed ETFs are considered "U.S. property". These taxes can be significant. Then there is withholding tax. Most countries levy a tax on dividends paid to foreign investors. For example, the U.S. government levies a 15% withholding tax on distributions paid to taxable Canadian investors. Thus, depending on the vehicle in which you hold your U.S. listed ETFs (there are different rules for registered and non-registered accounts which are beyond the scope of this blog), you may be subject to foreign withholding taxes. These withholding taxes tend to increase the cost of the investment and reduces net returns when compared to direct exposure through Canadian-listed ETFs. Ultimately, for a Canadian investor, it is usually better to purchase a Canadian-listed ETF given the considerations above.
4. Tax loss selling – Tax-loss selling is the act of selling a security at a loss (capital loss) and using the loss to offset realized gains (capital gains) incurred from selling other securities in a non-registered account. These current capital losses can not only be used to offset capital gains in the current tax year but can also be carried back three preceding years or forward indefinitely. By applying realized losses from the sale to the current or prior year's capital gains in a non-registered account, investors can reduce their tax bill – which can mean more money in their pockets. However, investors need to be aware of the Superficial Loss Rule. You can read more about it in Is There a Silver Lining in Investment Losses?
5. DRIP units & phantom distributions – ETF distributions are often paid in cash but may also be reinvested within the fund when enrolled in a dividend reinvestment plan (or "DRIP"). With a DRIP the unitholder receives the "income" for tax purposes but doesn't actually receive cash as they are given additional units instead which increases their adjusted cost basis (ACB). Also, often at year-end, an ETF may distribute units and then immediately consolidate the number of units back to what they were before the distribution. These are referred to as "phantom distributions".  They are also known as "notional" or "non-cash" distributions.  Effectively this process transfers tax liabilities (usually capital gains) from the ETF to unitholders and an adjustment will be made to the ACB, usually upwards, offsetting the tax liability transferred. Investors will receive a T3/RL-16 tax slip which would include the DRIP and phantom distributions (if any). There are various nuances (beyond the scope of this blog) which can impact taxes upon the sale of the investment which is why investors need to be diligent in tracking ACB values.

For more information on the taxes and distributions associated with a specific ETF, please refer to the ETF’s prospectus, your financial statements, or the Annual Financial Report for the ETF. It is also recommended that you contact a tax professional for additional information about taxes. You can also visit our Tax Resource Centre for more information. To view our entire ETF line-up, visit us at td.com/etfs.

本文所含信息由道明资产管理有限公司提供，仅供参考。信息出自我们认为可靠的来源。本信息并未提供财务、法律、税务或投资建议。具体的投资、税款或交易策略应根据每位投资者的目标和风险承受能力加以评估。

进行交易所买卖基金投资可能需要负担相关佣金、管理费以及支出。投资前请参阅招股章程和ETF情况概要。 ETFs are not guaranteed, their values change frequently, and past performance may not be repeated.交易所买卖基金单位在证券交易所按市场价格进行买卖，因此收益会因经纪人佣金的支付而减少。

本文档中的部分陈述可能包含预测性的前瞻性陈述（“FLS”），其中包含“预计”、“预期”、“打算”、“认为”、“估计”和类似的前瞻性表述或其否定形式。前瞻性陈述基于当前对未来普遍的经济、政治、相关市场因素（例如利率和汇率、股票和资本市场）以及普遍经营环境的预计和预测，并假定不发生税法或其他法律或政府管制方面的任何变动或灾难事件。对于未来事件的预计和预测本身受无法预见的风险和不确定性的影响。此等预计和预测可能在未来并不准确。前瞻性陈述并非对未来表现的保证。实际发生的事件可能与前瞻性陈述明示或暗示的事件存在实质差异。包括上文所述各项因素在内的多个重要因素均可能造成这种背离。您不应在任何程度上依赖于前瞻性陈述。

道明交易所买卖基金由道明银行（Toronto-Dominion Bank）全资子公司道明资产管理有限公司（TD Asset Management Inc.）管理。

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