RRSPs RRIFs and TFSAs
Stocks, Bonds etc. -> Investments inside vs outside the RRSP

Which investments should be held inside vs outside the RRSP?

If you have investments both inside your RRSP and outside of your RRSP,  investments with income taxed at the highest rates should be held inside the RRSP.

If you own any of the following investments, they should be held inside your RRSP, because 100% of the income is taxed:

The following investments are suitable for inside or outside of your RRSP:

There is no withholding tax deducted from dividends received on shares of U.S. corporations held in an RRSP, as per the Tax Treaty between Canada and the U.S., Article XXI paragraph 2(a).  Sometimes, withholding tax (at varying rates, depending on the country) is deducted from dividends paid by foreign non-U.S. corporations, even when they are in an RRSP.  These withholding taxes paid by the RRSP are not recoverable.

If shares in U.S. or other foreign corporations are held in a non-registered account or a Tax-Free Savings Account (TFSA), withholding tax will be deducted from dividends received.  When the withholding tax is paid from a non-registered account, it can be partially or fully recovered via the foreign tax credit.  Withholding taxes paid by the TFSA are not recoverable.

If you have investments outside of your RRSP, your first choices should be

Dividends from Canadian corporations and capital gains from any source attract the least tax.  There is a dividend tax credit which reduces tax on Canadian dividends, and only 50% of a capital gain is taxable.  The marginal tax rate for dividends eligible for the enhanced dividend tax credit is almost always lower than the marginal tax rate for capital gains.  For taxpayers in the lower tax brackets in many provinces, receiving eligible dividends will reduce their taxes payable.  For some higher income taxpayers in a few provinces, it may be more beneficial to receive capital gains than eligible dividends.  Every province and territory has different tax rates, and each person's situation differs.  Use our calculators to compare different scenarios, and see our tables of marginal tax rates to find your marginal tax rate on different types of investment income.