Canada’s Tax-Free Savings Account (TFSA), as the name implies, offers tax-free contributions, interest, dividends, and capital gains. It can be withdrawn tax free. But what if it contains foreign investments? Would these be taxed? The answer is that it depends. The TFSA guide list “permitted investments.” Any security not on the list is not qualified. The best way to find out if you are safe is to check this list: https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-17e.pdf.

Key Takeaways:

• If the investments you’re considering are listed on the approved list of designated exchanges, then you’re good as long as they remain listed.
• Consider your situation. Would a U.S. dividend-paying investment make more sense in your RRSP, RRIF, or open account, where you can recover the U.S. withholding tax?
• There are plenty of qualified investments in Canada, so you don’t need to risk a penalty by accidentally placing a non-qualifying investment in your TFSA.

“If an investment becomes delisted and moved to over-the-counter (OTC) then it no longer qualifies, with the exception being Canadian public companies, which can become OTC and still be considered a qualified TFSA investment.”

Read more: https://www.moneysense.ca/save/investing/tfsa-taxes-penalties-investments/