# Cost of Buying International Stock?!!!



## Justin1980 (Feb 23, 2013)

Does anyone here hold international stocks or currencies? I heard Kevin O'Leary discussing this the other day.

Of course you can buy the ADR via the NYSE etc, but O'Leary's point was that purchasing the shares on various other exchanges and holding additional currencies further diversifies you.

Tesco, for example, trades on the London Stock Exchange, and in pounds (GBP). Questrade however, does not allow you to hold GBP as cash however, and so if you want to purchase Tesco on the LSE, you will be charged a commission of 1% of the trade value (*minimum charge of $195*).

So this is my point, that's a very pricey commission. 

Does anyone know of another broker (or method, etc) for purchasing international stocks, for a much lesser fee?

Thanks everyone!


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## GoldStone (Mar 6, 2011)

Interactive Brokers.

https://www.interactivebrokers.com/en/index.php?f=1323

ADDED:

A better method to obtain international diversification is through international ETFs domiciled in Canada or US. You can buy them at Questrade without commissions.


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## Eclectic12 (Oct 20, 2010)

Justin1980 said:


> Does anyone here hold international stocks or currencies? I heard Kevin O'Leary discussing this the other day.
> 
> Of course you can buy the ADR via the NYSE etc, but O'Leary's point was that purchasing the shares on various other exchanges and holding additional currencies further diversifies you ...
> So this is my point, that's a very pricey commission ...


The question becomes at what cost, effort and extra bookkeeping does this become worth it compared to a Canadian company that operates a significant part of their business in that area or an internation ETF/Index fund.


Cheers


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## liquidfinance (Jan 28, 2011)

I will say one thing given your example of a UK listed company. 

If you buy the ADR inside a TFSA you will receive any dividend free of tax.

If you buy the sterling stock on the LSE you will be subject to tax at your full marginal rate. 

Of course this depends on the countries you are looking at but as you mentioned a UK stock I thought this was an important point to make.

TD also allows it 

http://www.tdwaterhouse.ca/products...ing/commissions-fees/index.jsp#global-trading

29 GBP a trade by the looks of it. Still expensive. Also consider that the majority of UK stocks are subject to 0.5% stamp duty on the value of the transaction. This does not apply to ADR's


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## humble_pie (Jun 7, 2009)

one also has to consider the source of the suggestion, kevin o'leary, ahem.

afaik ADRs & ADSs present both currency & offshore diversification. I don't know of any ADRs that are currency-hedged; i believe they all transmit the currency risk of their original host country currency.

as for diversification, literally thousands of ADRs trade in US markets every day. Representing every sector, almost every country on the planet. Surely this diversification is sufficient.

TDDI global trading comes with commish more or less equal to Interactive Brokers' overseas commish. Both - at something like $70-80 for london & hong kong trades - are far more reasonable than executing an overseas market trade at all other discount brokers.

but still - for the average retail canadian investor with no particular strong links to the geopolitics & economics of a foreign country - why go to foreign stock exchanges?

british ADRs can be held in USD in TFSAs with neither UK nor US withholding tax, as liquidfinance points out. The same is said to be true for hong kong ADRs.

one can also hold ADRs that pay zero dividends in TFSA, so thus one is holding US $$ in tax-free account but escaping all global taxation including canadian. For example, i have ING bank along with alcatel, the french telecom (it's true that ING looks as if it might be working up to resuming its dividend, which was stopped during the crash of 08/09).

goldstone's suggestion of purchasing international ETFs with no commission to buy at questrade is also a fine idea. Truly, with all these smart, simple, low-cost strategies for owning international stocks in one's portfolio, doesn't kevin o'leary's suggestion look quaint, costly & cumbersome?


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## Justin1980 (Feb 23, 2013)

Those are all great points you make, truth is, i quite simply didn't know most of the points you guys made. I really want to thank you all for your knowledge!
Just to clarify then: I can buy a british ADR through the NYSE, so it must be purchased with USD. But its treated as if it were a UK stock? I "assumed" it would be treated as an american stock, as far as taxation etc, but this is not the case, correct?

Regarding the ETF method mentioned for international exposure: is it true that as canadians, we are better off buying ETFs off the TSX, than the NYSE for tax reasons? (I THINK "domiciled" in Canada is the term?)

Q: If a Cdn, anD US ETF held the exact same companies, same everything Mer, etc etc, is there any reason one would ever choose the US version?

Thank you for your time and advice.


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## PuckiTwo (Oct 26, 2011)

Justin1980 said:


> Just to clarify then: I can buy a british ADR through the NYSE, so it must be purchased with USD. But its treated as if it were a UK stock? I "assumed" it would be treated as an american stock, as far as taxation etc, but this is not the case, correct?......


I have a related question: Just bought BP PLC (british) through TDDI, US$ side in my RRSP. Is it correct that because it is a UK stk there is no withholding tax and that the USA also does not claim any withholding tax because it is inside an RRSP?


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## Eclectic12 (Oct 20, 2010)

Justin1980 said:


> ... Regarding the ETF method mentioned for international exposure: is it true that as canadians, we are better off buying ETFs off the TSX, than the NYSE for tax reasons? (I THINK "domiciled" in Canada is the term?)


The cheaper MER used to be one reason to use the US ETF but with Vanguard opening Canadian domiciled ETFs, the MERs have been improving.
http://canadiancouchpotato.com/2013/12/09/ask-the-spud-when-should-i-use-us-listed-etfs/





Justin1980 said:


> ... Q: If a Cdn, anD US ETF held the exact same companies, same everything Mer, etc etc, is there any reason one would ever choose the US version? ...


In an RRSP - one might avoid losing the US 15% withholding tax ...
http://canadiancouchpotato.com/2012/09/17/foreign-withholding-tax-explained/
http://canadiancouchpotato.com/2013/12/09/ask-the-spud-when-should-i-use-us-listed-etfs/


Cheers


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## Xoron (Jun 22, 2010)

liquidfinance said:


> If you buy the ADR inside a TFSA you will receive any dividend free of tax.


I own STX (Seagate) in my RRSP, and I get witholding tax of the domiciled country (Ireland). So I'm not sure you're right on this one LF.


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## humble_pie (Jun 7, 2009)

Xoron said:


> I own STX (Seagate) in my RRSP, and I get witholding tax of the domiciled country (Ireland). So I'm not sure you're right on this one LF.


yes, incorporated in dublin ... but ireland is not part of the UK (only northern ireland) so it would be logical to find that ireland has its own NR withholding tax.

ps for record-building purposes - since there are many companies that have incorporated in ireland so as to enjoy favourable tax status plus open access to the European community - might we know ireland's rate of NR withholding?


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## humble_pie (Jun 7, 2009)

PuckiTwo said:


> I have a related question: Just bought BP PLC (british) through TDDI, US$ side in my RRSP. Is it correct that because it is a UK stk there is no withholding tax and that the USA also does not claim any withholding tax because it is inside an RRSP?



pucki it's sure to say that, because you are holding BP in rrsp, there will be no US withholding tax.

i'm also fairly sure that, if this stock were held in a non-registered USD account or in a TFSA, there would still be no withholding tax, because BP is a UK publicly-traded company & the UK does not impose NR withholding tax on dividends paid by its corporations to foreign shareowners.

following along, it is said that the US does not impose withholding tax either, for those ADRs - such as BP - whose host countries do not impose withholding tax.

here again is the link to the handy list of UK ADRs that trade in the US:

http://topforeignstocks.com/foreign-adrs-list/the-full-list-of-british-adrs/

please notice that this website also has a list of hong kong & chinese ADRs. It is said that hong kong SAR does not impose withholding tax either, therefore its US-traded ADRs are thought to be free of withholding tax in non-registered canadian accounts or in TFSA accounts. Further research is necessary, i believe.


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## Xoron (Jun 22, 2010)

humble_pie said:


> ps for record-building purposes - since there are many companies that have incorporated in ireland so as to enjoy favourable tax status plus open access to the European community - might we know ireland's rate of NR withholding?


The real $ calculations from my RRSP are 20% (but this may be due to the FX rates I get). But this link to a pdf says it's 15% (and that sounds about right).
https://repsourcepublic.manulife.com/wps/wcm/connect/repsourceformsmktg/marketingmaterials/investments/trs%20tax%20strategies/inv_trs_nonreswithholdingrates


As well, I held ABB as an ADR in my RRSP quite a few years back. It's a Swiss company, and it too had witholding taxes of about 15% IIRC


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## liquidfinance (Jan 28, 2011)

Xoron said:


> I own STX (Seagate) in my RRSP, and I get witholding tax of the domiciled country (Ireland). So I'm not sure you're right on this one LF.


As humble pointed out this is a Dublin registered company so subject to Irish tax law. I was only refering to ADR's of UK listed companies.


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## humble_pie (Jun 7, 2009)

thanx for the info. It would not surprise me that the broker would charge an FX fee of about 5% on the seagate dividend, tch. They are converting from euro to CAD i imagine? who knows, they might even move from euro to USD first, then from USD to CAD, FXing merrily as they go (please forgive intrusion of my pet rant about broker FX fees)

re asea brown boveri, the swiss NR withholding rate is supposed to be 35% for both dividends & interest, so if somehow they only withheld 15% either you were lucky (we won't tell) or the story might have some slight variation ...


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## Xoron (Jun 22, 2010)

humble_pie said:


> thanx for the info. It would not surprise me that the broker would charge an FX fee of about 5% on the seagate dividend, tch. They are converting from euro to CAD i imagine? who knows, they might even move from euro to USD first, then from USD to CAD, FXing merrily as they go (please forgive intrusion of my pet rant about broker FX fees)
> 
> re asea brown boveri, the swiss NR withholding rate is supposed to be 35% for both dividends & interest, so if somehow they only withheld 15% either you were lucky (we won't tell) or the story might have some slight variation ...


First, sorry I missed the part about UK dividends being exempt. I didn't know we had that agreement in place between Canada and the UK.

RE: the STX payout. My online broker tells me that the funds were in USD. I guess that makes sense as I'm buying STX on the US exchanges. So if there is a conversion of EUR -> USD, it's behind the scenes before I get my USD -> CAD payout. Best part is that I get dinged twice. I get the Full dividend (with bad FX rate) and then get charged a NR witholding tax on that amount. 

RE: the swiss rate, if you check the pdf I linked to earlier, it does say that dividends are taxed at 15%.


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## humble_pie (Jun 7, 2009)

Xoron said:


> RE: the swiss rate, if you check the pdf I linked to earlier, it does say that dividends are taxed at 15%.



xoron truly sorry to split hairs with trivia ... but i believe you are reading that linked PDF backwards. It's been thoroughly discussed in this forum before. Recently.

that list is *not* NR withholding taxes imposed by other countries upon investment incomes paid to foreign residents.

that list is about canadian NR withholding tax rates imposed - mostly by tax treaty or convention - by canada upon various forms of income including investment income when paid to residents of other countries.

when that list shows NR rates for switzerland, it means canadian NR rates for swiss residents, not the other way around.

the list came originally from a big accounting firm. IMHO their editors made a terrible mistake in not preparing a header that clearly states what the list is all about. 

not to worry, many people in cmf are getting it wrong at first. Even the inimitable HaroldCrump was fooled.

back to switzerland, its withholding rate is 35% on both swiss dividends & swiss interest payments. If you held the shares as ASEA (a swedish company) before the merger, it's possible that a swedish NR rate of 15% applied. Or your broker made a mistake. Or it didn't report clearly enough - brokers are still not reporting FX fees accurately to investors because the regulations don't require that they do so.

as for UK stocks, absence of UK NR withholding tax is not due to any tax convention with canada or with the US for that matter. Great Britain does not impose NR tax on any investment income leaving the sceptre'd isle for any foreign investor anywhere on the planet.

it's said that the american revolution, following a long series of unjust taxes & other grievances imposed by england upon her 13 colonies in the new world, taught the rulers of the-precious-stone-set-in-the-silver-sea a bitter & permanent lesson. Thus england learned to never again tax her nationals who had departed.

actually why actress elizabeth taylor took up british citizenship late in life. To escape US income taxes. But she didn't have to be domiciled in the UK. She became a british national living in california, therefore largely not taxable. Reportedly this feat is unbelievably difficult to accomplish.


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## Xoron (Jun 22, 2010)

humble_pie said:


> that list is *not* NR withholding taxes imposed by other countries upon investment incomes paid to foreign residents.
> .
> .
> .
> when that list shows NR rates for switzerland, it means canadian NR rates for swiss residents, not the other way around


Thanks for the info HP. I guess everyone gets their pound of flesh eventually.


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