2 Best Tax-Efficient ETFs in Canada (June 2026)
The best tax-efficient ETFs in Canada include HXT.TO (~0.03% MER), HXQ.TO (~0.20%), HXS.TO (~0.10%), and ZDB.TO (~0.10%). These ETFs minimize taxable distributions and emphasize capital gains, making them ideal for non-registered accounts where reducing tax drag can significantly improve after-tax returns.
Tax-efficient ETFs in Canada are designed to minimize the amount of taxable income generated in non-registered accounts. Instead of focusing on high distributions, these ETFs aim to defer taxes and convert returns into capital gains where possible.
ETFs like HXT.TO and HXQ.TO use total return swap structures to reduce or eliminate taxable distributions, making them popular choices for taxable portfolios. The goal is to maximize after-tax returns rather than pre-tax yield.
In this guide, we break down the best tax-efficient ETFs in Canada and how to use them to reduce tax drag in your investment portfolio.
At a Glance: Quick Comparison
Side-by-side snapshot of fees, yield, and returns. Data updates daily.
| ETF | MER | AUM | Yield | YTD | 1Y |
|---|---|---|---|---|---|
Top HXT.TO Global X S&P/TSX 60™ Index Corporate Class ETF | 0.07% | $5.2B | — | +10.37% | +31.59% |
HXQ.TO Global X NASDAQ-100 Index Corporate Class ETF CAD | 0.25% | $1.3B | — | +22.71% | +42.60% |
What Is an ETF?
A tax-efficient ETF in Canada is designed to minimize taxable distributions by focusing on capital gains instead of interest or dividend income. These ETFs often use strategies like low turnover or total return swaps to defer taxes.
For example, HXT.TO (~0.03% MER) tracks the S&P/TSX 60 using a swap structure to reduce distributions, while HXQ.TO (~0.20%) provides Nasdaq-100 exposure with similar tax efficiency. HXS.TO (~0.10%) offers S&P 500 exposure, and ZDB.TO (~0.10%) focuses on tax-efficient bond strategies.
Tax-efficient ETFs are most useful in non-registered accounts, where reducing annual tax liabilities can significantly improve long-term after-tax returns.
The 2 Best ETFs: Ranked & Reviewed
Detailed breakdown of each pick with live data.
Global X S&P/TSX 60™ Index Corporate Class ETF
$92.28
+10.37% YTD
Returns
YTD
+10.37%
1Y
+31.59%
3Y
+23.13%
5Y
+14.63%
Global X NASDAQ-100 Index Corporate Class ETF CAD
$121.99
+22.71% YTD
HXQ seeks to replicate, to the extent possible, the performance of the NASDAQ-100® Index (Total Return), net of expenses. The NASDAQ-100® Index (Total Return) includes 100 of the largest domestic and international nonfinancial companies listed on The NASDAQ Stock Market.
Returns
YTD
+22.71%
1Y
+42.60%
3Y
+28.79%
5Y
+17.73%
Pros & Cons
Pros
- Minimizes taxable distributions in non-registered accounts
- Converts returns into capital gains, which are taxed more favourably
- Improves long-term after-tax performance
- Useful for high-income investors seeking tax optimization
Cons
- Swap-based structures add complexity and counterparty risk
- Not necessary inside TFSA or RRSP accounts
- May have slightly higher fees than basic index ETFs
- Tax rules and structures can change over time
Compare These ETFs Head-to-Head
Drill into a side-by-side breakdown of performance, AUM, and yield.
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Frequently Asked Questions
What is the most tax-efficient ETF in Canada?
HXT.TO is one of the most tax-efficient ETFs in Canada due to its swap-based structure, which minimizes taxable distributions and focuses on capital gains.
Are tax-efficient ETFs only for non-registered accounts?
Yes, they are most useful in non-registered accounts. In TFSAs and RRSPs, taxes are already sheltered or deferred, so tax-efficient structures provide little additional benefit.
Do tax-efficient ETFs eliminate taxes completely?
No, they defer taxes rather than eliminate them. Taxes are typically paid when you sell the ETF and realize capital gains, but this can still improve long-term after-tax returns.