How to determine if a stock is RRSP eligible

You may currently have up to 20% of your RRSP investments in foreign content. That will be increased to 25% for fiscal 2000 and 30% after that. But how can you tell if a stock qualifies as Canadian content (i.e.: is 100% RRSP eligible)?

Difficulty Level: average      Time Required: half hour

Here's How:

  1. Stocks listed exclusively on U.S. stock exchanges are foreign content, even if they are Canadian. A stock must be listed on a Canadian stock exchange for 100% eligibility.
  2. Most stocks listed on Canadian exchanges are 100% RRSP eligible.
  3. Stocks listed on a Canadian exchange are foreign content if "the value of the shares of the corporation may reasonably be considered to be derived, directly or indirectly, primarily from portfolio investments in property that is foreign property".
  4. If a company listed on a Canadian exchange is headquartered in the U.S. or other foreign country (i.e. - a foreign company also listed on a Canadian exchange), it is probably foreign content.
  5. Shares in Canadian subsidiaries of foreign companies are 100% RRSP eligible.
  6. Some borderline companies elect to meet certain conditions to make the company RRSP eligible or obtain rulings from the CCRA and publicize them in press releases. Check out specific company press releases at Carlson Online using our Company Research Page. (See links below.)
  7. If in doubt, ask your broker or ask the company's Investor Relations Officer.
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Tips:

  1. For every dollar invested in a qualifying small business or labour sponsored mutual fund, you are allowed to invest an extra $3 in foreign investments to a maximum of 40%. That will rise to 45% for fiscal 2000 and 50% after that.
  2. You can increase your foreign content to 100% by investing in foreign clone mutual funds - mutual funds that invest in foreign companies through derivatives. (They invest in Canadian debt securities and use them as collateral to invest in foreign stocks.)
  3. The foreign content limit is measured by the cost or book value of your investments, not their current value, so if your foreign investments grow faster than your Canadian ones, you will not be penalized.
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