ETFs

By Tony Dong, MSc, CETF on September 8, 2025
Estimated reading time: 8 minutes

By Tony Dong, MSc, CETF on September 8, 2025
Estimated reading time: 8 minutes

How taxation of ETFs works in non-registered accounts, and some fund suggestions that will allow you to keep more of your gains.

One difference I’ve noticed when speaking with Canadian and U.S. investors is how much more focused the latter tend to be on taxes.

Chalk that up as a win for Canadians. Between the tax-free savings account (TFSA), registered retirement savings plan (RRSP), and first home savings account (FHSA), Canadians have ample room to shelter gains from the Canada Revenue Agency (CRA). These registered accounts offer more flexibility and contribution room than Americans get with comparable 401(k) and Roth IRA plans, and they can go a long way if you use them wisely.

That said, whether from windfalls or diligent saving, some Canadians do manage to max out their registered accounts. Once that happens, and until new room opens up in January, the challenge becomes how to keep more of your investment income and gains from getting taxed in a non-registered account.

Some exchange-traded funds (ETFs) are better than others for this. Here’s a guide to how ETF tax efficiency works in Canada and which types of ETFs work best in taxable accounts.

In a nutshell, ETF taxes work a lot like the taxes on stocks or bonds, because most ETFs are just collections of those underlying investments. If you’ve ever received a T3 or T5 slip, the categories will look familiar.

The easiest way to see how it works in practice is to check the ETF provider’s website for a tax breakdown. We’ll walk through an example using the BMO Growth ETF (ZGRO), a globally diversified asset-allocation ETF that holds about 80% equities and 20% fixed income.

If you scroll down to the “Tax & Distributions” section on ZGRO’s fund page, you’ll see a table that breaks down the composition of distributions by year. The most recent data for 2024 shows the ETF paid out $0.467667 per unit in total distributions, made up of several different tax........

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