Investing in Canada
Canadian Investment Accounts
TFSA (Tax-Free Savings Account)
Contribution room: $7,000/year for 2026 (cumulative lifetime room if 18+ in 2009: ~$102,000). No tax on dividends, capital gains, or withdrawals. Overcontribution penalty: 1% per month.
RRSP (Registered Retirement Savings Plan)
Contributions are tax-deductible (up to 18% of earned income, capped at $33,390 for 2026). Growth is tax-deferred. Withdrawals taxed as income. The Home Buyers' Plan (HBP) allows $60,000 tax-free withdrawal for a first home.
FHSA (First Home Savings Account)
Launched 2023: $8,000/year contribution room, $40,000 lifetime cap. Contributions are tax-deductible, growth is tax-free, and withdrawals for a first home are tax-free.
Non-Registered Account
Taxable account. Capital gains inclusion rate: 50% (66.67% for gains over $250,000 for individuals as of 2024 changes). Canadian dividends are grossed up and eligible for the dividend tax credit.
Canadian Stock Market
TSX (Toronto Stock Exchange): The 10th largest stock exchange globally. Heavy weighting in financials (~30%), energy (~15%), and materials (~12%).
TSX Composite Index: ~250 companies. Popular ETFs: XIC (iShares S&P/TSX Capped Composite), VCN (Vanguard FTSE Canada).
TSX Venture Exchange (TSX-V): Small-cap and venture-stage companies, especially mining and energy juniors.
Notable Canadian companies: Royal Bank of Canada (RY), Shopify (SHOP), Toronto-Dominion Bank (TD), Enbridge (ENB), Canadian National Railway (CNR).
Dividend Taxation
Canadian dividends receive the dividend tax credit — one of the most favourable tax treatments in the world. Eligible dividends from Canadian corporations are grossed up by 38% and a federal tax credit of ~15% is applied, often resulting in negative tax for low-income investors.
Foreign dividends (e.g., US stocks) have 15% US withholding tax in an RRSP (treaty-exempt in an RRSP for US stocks), and 15% in a TFSA (no treaty reduction).
Best Brokers for Canadian Investors
- Wealthsimple: Commission-free CAD and US stock trades. Tiered pricing (Premium: $10/month USD account, Generation: $100/month). Best for beginners.
- Questrade: Low commission ($0.01/share, min $4.95). Good for ETF investors (free to buy ETFs). Self-directed RRSP/TFSA.
- National Bank Direct Brokerage: Commission-free trades (on all Canadian/US stocks and ETFs) with no minimum. Hidden gem.
- Interactive Brokers Canada: Best for active traders, currency conversion, and international investing.
- TD Direct Investing: $9.99/trade. Full-service. Good for integration with TD bank accounts.
Key Considerations
- US Estate Tax: Canadian residents holding US stocks over $60,000 USD may be subject to US estate tax. Use Canadian-listed US ETFs (e.g., VUN, which holds VTI) to avoid this.
- PFIC Rules: Avoid holding non-North American mutual funds. Canada has no PFIC problem for Canadian residents, but Canadian residents holding foreign pooled funds should check CRA rules.
- Foreign Reporting: Foreign assets over CAD $100,000 cost basis require T1135 filing with CRA.
- Currency Conversion: Norbert's Gambit — use a dual-listed interlisted stock (e.g., RY on TSX/NYSE) to convert CAD to USD at spot rate, avoiding FX spread fees.