So you like Apple stock. Who can blame you? It is among the best performing stocks of the past decade.

The next question is where do you put that Apple stock? If you have a brokerage account, you can buy it in your taxable non-registered account. You can also hold it in your RRSP, RRIF, TFSA, RESP and pretty much any investment account. Does it even make a difference? Surprisingly enough it really does.

Since Apple Inc. started paying a dividend a couple of years ago, (current dividend yield is 1.6%) you now must think about the taxation of this dividend. In fact, given the huge stockpile of cash and equivalents that Apple holds (currently over $165 billion), it is very likely that the dividend payout will increase steadily and there might even be a sizable special dividend paid at some point.

The first thing to know about the Apple dividend, like all dividends on non-Canadian companies, is that, from a Canadian tax perspective, they are treated the same as interest income. There is no preferential tax treatment like we find on Canadian companies. When a Canadian company like Royal Bank of Canada pays a dividend, your likely tax rate on the RBC dividend will be roughly 15% to 25% lower than the tax rate on the dividend of a U.S. or non-Canadian company — no matter your income level.

This fact tells us that we should ideally hold the Apple stock somewhere outside of our taxable non-registered account. The other reason that we would ideally want to avoid this account ideally, is that Apple has a large capital gain for many investors. If held in a non-taxable account, this capital gain would not be taxed when the stock was sold.

So now we are left with other options of where to hold the stock, like our TFSA or RRSP.

While both of these accounts are tax free, one of these accounts is not quite like the other.

On U.S. stock dividends, our friends at the U.S. Internal Revenue Service (the IRS) like to ensure that they get their cut from Canadians. They do this by taking a withholding tax on the dividend. If you haven’t done the correct paperwork, this withholding tax could be 30%. Assuming you completed something known as the W8-BEN form then this withholding tax would be 15%.

Due to some tax treaties between Canada and the U.S. the IRS does NOT take this withholding tax from a registered account (RRSP, RRIF, LIRA, etc.), but DOES take the withholding tax from a TFSA. As an aside, U.S. dividends do have tax withheld in an RESP account.

Of course, for the past decade, you would have been happy holding Apple stock pretty much anywhere.

Ted Rechtshaffen is President and Wealth Advisor at TriDelta Financial, a boutique wealth management firm focusing on investment counselling and estate planning. tedr@tridelta.ca