A company that wants to raise capital and go public will issue stock that can be sold on a stock exchange. For example, an American company will normally sell stock on either the NASDAQ or New York Stock Exchange.
Foreign countries will often have their own stock exchanges, but sometimes companies want to seek a larger investment base by attracting American investors. To do this they use American Depository Receipts, which are American stocks that represent shares of a foreign company.
An American bank will hold a certain number of shares from the foreign company and divide those shares into American Depository Receipts, which then get traded on the American stock exchanges. These receipts are typically bought by American and Canadian investors. It is very easy to buy an ADR on these American exchanges relative to the complexity of buying the stock on a foreign exchange where there could be different languages, taxation and purchasing barriers.
If an American or Canadian investor makes a dividend income profit while holding the ADR investment, they will always owe federal taxes. Often investors from Canada and the United States will have taxes automatically deducted by the foreign country of the ADR. This is called a withholding tax and the rate varies depending on the country in which it is incorporated. Usually there are tax credits for paying that tax and there are usually tax friendly options that the ADR itself will offer.
If the money is contained in a government Registered account, you would not receive a tax credit for the the foreign tax paid.
From a tax perspective, ADRs are considered foreign equity. In Canada, they are not eligible for the dividend tax credit.
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