Foreign Withholding Taxes – How to estimate the hidden tax drag on US and international equity index funds and ETFs

We have written several articles about foreign withholding taxes on the PWL Capital and Canadian Couch Potato blogs, including explanations of which fund structures are best held in which types of account. However, to our knowledge no one has quantified the costs of foreign withholding tax in a comprehensive way until now. As a result, investors may not have had enough information to make good decisions.

In this white paper, we discuss eight different fund structures, which we have labeled Type A though Type H. For each structure and each account type, we estimate the total cost of a representative fund by adding the fund’s fee to the foreign withholding taxes that apply.