The Global X Canada Tax-Efficient ETF Portfolio for Non-Registered Accounts

Congrats. You’ve maxed out your RRSP, using up 18% of your income each year. Your TFSA is full, including the 2025 room of $7,000, and maybe you’ve even cashed out your FHSA for a down payment on your first home. So now what?

The next step for most investors is a non-registered account. These don’t have contribution limits or income restrictions and can be opened at any Canadian brokerage. The flexibility is great, but the trade-off is tax exposure.

Any interest, dividends, or capital gains you receive are taxable, and at different rates too. Canadian dividends get a credit, capital gains are only half taxed, but bond interest and foreign dividends get taxed at your full marginal rate.

The best strategy for taxable accounts is to reduce, defer, or eliminate distributions entirely. But most stocks pay dividends, and avoiding them is tough. Berkshire Hathaway is a famous no-dividend stock, but you won’t get broad diversification with just one holding.

Fortunately, Global X Canada offers a small suite of swap-based corporate class ETFs. These are built specifically for non-registered investors, and are designed to avoid paying taxable distributions altogether. Here’s it all works, and the three I’d use to build a tax-efficient global equity portfolio.

What is a corporate class, swap-based ETF?

The corporate class structure means multiple ETFs are housed under the same legal corporation. Instead of each fund being a standalone trust, they’re just different share classes of one larger entity. This setup allows income to flow between funds more efficiently and helps minimize taxable distributions.

But the real magic comes from what these ETFs hold. Unlike traditional ETFs that hold actual stocks or bonds, swap-based ETFs hold a financial contract called a total return swap. This is an agreement between the ETF and a big Canadian bank (the counterparty).

The ETF pays a fixed fee, and in return, the bank agrees to pay the total return of a benchmark index, meaning both the price change and any dividends the index generates. This setup gives you synthetic exposure to the index. You’re getting the same returns as if the ETF held the stocks directly, but it doesn’t actually own any of them.

Global X Canada can also strategically settle swaps at a loss with the counterparty in order to realize a capital loss. These losses can be carried forward and used to offset future taxable gains, further enhancing tax efficiency for investors.

Moreover, the corporate class structure allows for pooling of income and expenses across all ETFs within the umbrella. Since each fund is a share class rather than a separate entity, income from one fund can be offset by expenses from another, helping reduce the need to distribute taxable income.

With these ETFs, if you’re smart about when and how you rebalance your portfolio, you can theoretically defer capital gains until you sell. This gives you far more control over your tax bill.

It’s not risk-free, though. The biggest one to watch for is counterparty risk. That’s the risk that the bank on the other side of the swap can’t make good on its promise.

ETF providers manage this by requiring the bank to post collateral. If the ETF has more cash collateral than its net assets, there’s no counterparty exposure. If the bank owes the ETF money, then the ETF has exposure to that risk, which is usually a small percentage of assets.

There’s also regulatory risk. These ETFs operate within existing tax rules, but there’s always a chance the government could tighten the rules around corporate class structures or swap contracts. That’s something to be aware of, but one that falls more on tax lawyers and lobbyists.

Which ETFs to use

For this portfolio, I'm sticking with a simple and time-tested mix: 50% U.S. equities, 25% Canadian equities, and 25% European equities. This gives you global diversification while keeping things tax-efficient for a non-registered account.

For the U.S. allocation, I’m using the Global X S&P 500 Index Corporate Class ETF (HXS). It delivers synthetic exposure to the S&P 500 through a swap, with a 0.11% management expense ratio (MER), a 0.29% trading expense ratio (TER), and up to a 0.50% swap fee.

On the Canadian side, the Global X S&P/TSX 60 Index Corporate Class ETF (HXT) makes the most sense. It’s one of the cheaper ETFs in Canada, with a 0.08% MER, no TER, and a swap fee of up to 0.20%.

To round things out with European exposure, I’m going with the Global X Europe 50 Index Corporate Class ETF (HXX). It tracks 50 of the largest European companies and charges a 0.19% MER, 0.31% TER, and up to a 0.50% swap fee.

Here’s how this portfolio would have performed from January 2017 to July 2025 with no rebalancing. I disabled rebalancing in this backtest because rebalancing in a non-registered account usually requires selling, which can trigger capital gains.

A better approach is to use new contributions to rebalance over time. Even without rebalancing, this portfolio delivered a compound annual growth rate of 12.68%, turning $10,000 into $27,858, while completely avoiding taxes on distributions.

With this combo, you’re getting broad exposure to large- and mid-cap U.S., Canadian, and European stocks with no distributions to worry about. It does leave out emerging markets like China and India, as well as some Pacific regions like Australia and Japan, but no ETF portfolio is perfect.

So far, most of these corporate class, swap based ETFs have successfully avoided making taxable distributions. However, it’s not guaranteed, which is why the distribution frequency for each fund is listed as “at manager’s discretion.”