Investing

How many stock traders aim to leave the country to avoid taxes?

  • Last Updated:
  • Jan 29th, 2019 3:54 pm
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB

How many stock traders aim to leave the country to avoid taxes?

EDIT: I said:
Apparently if you're out of the country for more than 6 months you can be deemed a non-resident and don't have to pay tax on any investment profits.

I should have said that once you're out of the country for 6 months you will be deemed a non-resident from the moment you left.

Of course one can't have any ties here like property, etc. Imagine somebody that is retiring soon and has basically all their income come from their investments. If they have anything sizable they are going to lose a big chunk to tax. They also read about how cheap life is in some tropical countries. Cheaper and tax free. Powerful incentives. But it doesn't have to be just for retired people. Younger traders have less ties and want to explore the world. Trading may give them an income they can live off, especially if they're spending most of their time in cheap countries of which there are many. Probably middle aged people are the least likely to do this because of extensive ties, kids in school, work commitments, etc. But after the kids have left the nest possibilities open up.
We all hate taxes, we all would like to spend much less on living costs, most of us would prefer tropical weather to Canadian winters....yet you don't see much of this. Maybe very few people can actually subsist on their trading profits and need employment income as well.
Your thoughts?
Last edited by redflagguy2u on Jan 31st, 2019 12:21 pm, edited 1 time in total.
21 replies
Penalty Box
Apr 27, 2015
1330 posts
255 upvotes
Apparently if you're out of the country for more than 6 months you can be deemed a non-resident and don't have to pay tax on any investment profits
Where did you get this info from?! When 8 years ago we were planning on relocation to US, I was talking to CRA and the process moving you home tax to another country is very complicated. You need to fill out huge questioner , send to CRA and they will determine if you can move your home tax to other country. There are no specific rules.... when I explained our situation , I was told that it's possible that CRA will allow it.
It depends not only on property you own, but also on your registered accounts, credit cards, relatives who lives in Canada and million of other things.

In theory, I was thinking to move back to Israel .... if it would be so easy, I'd be perfect as in Israel as returned citizen, I shouldn't pay ANY taxes from foreign income....
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Deal Fanatic
Oct 1, 2004
5844 posts
508 upvotes
Toronto
https://www.canada.ca/en/revenue-agency ... anada.html

As a non-resident of Canada, you pay tax on income you receive from sources in Canada. The type of tax you pay and the requirement to file an income tax return depend on the type of income you receive.

Generally, Canadian income received by a non-resident is subject to Part XIII tax or Part I tax.
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
Got it from reading online and talking to some people (some from CRA). But in no way were they necessarily experts, hence I wanted feedback here. Its very hard to reach CRA by phone anymore if you have business questions....twice I have been on hold for more than an hour for nothing. Then when they finally came on the line went dead. Our tax dollars!

Of course you have to divest yourself from all property, memberships, bank accounts (I think)....but if you're leaving you don't need anything here. Its just more to worry about. Hey, if you thought your relatives were financial misfits before, just wait til they start looking after your assets when you're gone! But one could keep bank accounts in the US without any worry as long as they aren't getting any interest. At least your money would be secure there.

This info may not be easy to extract from CRA since its not in their best interest for people to leave. That's another reason I thought to post here. If anything, we can all be united in our dislike of taxes!

I just thought that with internet trading being so common, with the ability to move money online being so easy, if most or all of your money comes from trading, why trade here instead of in a place that has warm weather all year? A lot of people living near the coast in the late fall/winter/early spring then move up to the mountains to avoid the rain, humidity and bugs of the rest of the year. Once you get to about 5000' its vastly different from the coast. No heating or air conditioning necessary.

They mention these sources of income: Note there is nothing about stock trading. One can easily trade stocks that have no dividends or make sure we're not holding them when the dividend date comes up.
dividends;
rental and royalty payments;
pension payments;
old age security pension;
Canada Pension Plan and Quebec Pension Plan benefits;
retiring allowances;
registered retirement savings plan payments;
registered retirement income fund payments;
annuity payments;
management fees.
So if you get CPP would you have to give that up I wonder? Not that it would make much difference for most of us.

You mention moving your "home tax". What if the country you moved in didn't tax foreign income? Many don't. The purpose of this is not to change your home tax, rather to be deemed a non-resident in the eyes of CRA.

Medical care would evaporate after 6 months abroad but there are tons of cheap places that offer stellar medical care with good plans. People always worry about medical care. Often its needless. People that move abroad usually say they like it better as it generally offers far more personal, attentive care.
Last edited by redflagguy2u on Jan 28th, 2019 1:24 pm, edited 1 time in total.
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
greg123 wrote:
Jan 28th, 2019 1:00 pm
https://www.canada.ca/en/revenue-agency ... anada.html

As a non-resident of Canada, you pay tax on income you receive from sources in Canada. The type of tax you pay and the requirement to file an income tax return depend on the type of income you receive.

Generally, Canadian income received by a non-resident is subject to Part XIII tax or Part I tax.
Now by "income from sources in Canada" I think that means things like rental of real estate or an active business. Of course you can't have any of that. But who would want to leave your precious assets in the hands of a klutz that doesn't care about something they don't own? Think of how badly apartment management companies run their buildings! Its not their money so they don't care. We're always advised to be close to our investments. I don't think "income from sources in Canada" means Canadian stock market activity as the government wants to encourage stock market investment from outside the country. Anyway, most Canadian investors prefer the US market so most would rather invest there anyway. And that is definitely not taxed if its from non-Americans outside the US.

So obviously this entails a complete dismemberment of all ties to Canada.
That whole document is about Canadian income. The whole point of this is to have no Canadian income. Its like they don't even acknowledge this. As if we have to have something here. Stay close to your assets!
You move keeping your money close like any sane investor. You invest in countries that don't tax foreign income and you live in countries that don't tax offshore income. Most don't. That is precisely why expats flock there. These parameters should be very easy to meet. The hard part of this is saying goodbye to all your ungrateful relatives! The next step is deciding if you'll tell them how nice it is at your new destination knowing at the slightest financial downturn they'll be camped on your doorstep begging for help, if they can afford the airfare that is.
Last edited by redflagguy2u on Jan 31st, 2019 10:26 am, edited 1 time in total.
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
I really wish our government would address stock trading specifically as non-residents (giving examples) as this can be done with absolutely no ties to Canada and more and more people are involved in it. But maybe they don't want to call attention to something that will result in less tax revenue. They take care in dispensing careful information and their reward is complete dissolving of all future revenue. Not an attractive scenario for them but a mighty good one for us.
Last edited by redflagguy2u on Jan 31st, 2019 10:27 am, edited 1 time in total.
Deal Addict
User avatar
Dec 8, 2010
2409 posts
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You've got it a bit backwards, OP.

If you move to a foreign country you cease to be Canadian resident. There are all sorts of tax treaties in place, so for many countries it is cut and dried.

The spirit of it is basically that you aren't Canadian resident, and not reaping the benefits thereof. So - no Canadian driving license, healthcare. You need a home that is not in Canada.

Bear in mind, there is an 'exit tax' - when you file your tax return for the year you become non resident, you are deemed to have disposed of all your assets. If you have a lot of investments you'll be paying cap gains even if you sold nothing. Foreign countries don't recognise the TFSA as a tax shelter.

You can keep some secondary ties (or be certain under a double taxation agreement).
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
I'm not sure if you need a second residency somewhere else to be a non-resident of Canada but that wouldn't be difficult if one was necessary. Maybe a mailbox would do or a friend letting you use their address. The government doesn't need you to buy property elsewhere, just to have an address.

Exit tax or just paying tax til you leave....is there a difference? Of course one needs to sell everything before leaving and when we sell we need to pay our taxes.

Registered accounts: Most of us don't consider the meager amounts we have in our TFSA to be of much significance but some people don't realize all the money they have accumulated in registered accounts that would need to be settled before leaving. For younger people this won't be so relevant. For older people, very much so. In fact this may be one of the biggest obstacles to them leaving. I wonder how many simply can't afford the tax if they cash out?
Last edited by redflagguy2u on Jan 31st, 2019 10:30 am, edited 1 time in total.
Deal Addict
Jan 20, 2016
2027 posts
1002 upvotes
Houston, TX
redflagguy2u wrote:
Jan 28th, 2019 11:46 am
Apparently if you're out of the country for more than 6 months you can be deemed a non-resident and don't have to pay tax on any investment profits. Of course one can't have any ties here like property, etc. Imagine somebody that is retiring soon and will have basically all their income come from their investments. If they have anything sizable they are going to lose a big chunk to tax. They also read about how cheap life is in some tropical countries. Cheaper and tax free. Powerful incentives. But it doesn't have to be just for retired people. Younger traders have less ties and want to explore the world. Trading may give them an income they can live off, especially if they're spending most of their time in cheap countries of which there are many. Probably middle aged people are the least likely to do this because of extensive ties, kids in school, work commitments, etc. But after the kids have left the nest possibilities open up.
We all hate taxes, we all would like to spend much less on living costs, most of us would prefer tropical weather to Canadian winters....yet you don't see much of this. Maybe very few people can actually subsist on their trading profits and need employment income as well.
Your thoughts?
In short - no.

You get it quite all wrong just to wrap it out.

6 moth is NOT enough to count as non resident for TAX PURPOSE, it was explained already and you can found more details easily on that. Snow-birding definitely is not enough to count as nonres.
And ALL your income from trading on TSX would be subject to tax, 25% of non -resident at least IF your brokerage will allow that (many if not all prohibit tradings in non-registered accounts for nonresidents)


Yes, there are some ways to "optimize" taxation , read Panama papers for that :) but you have to have quite big estate and pay very high fees to people who know how to do that.


P.s. you'd loose your "free" healthcare as well, and do you know that modern medicine is quite expensive , even in "tropical countries" ?
Make the face great again
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
> 6 months is NOT enough to count as non resident for TAX PURPOSE, it was explained already and you can found more details easily on that. Snow-birding definitely is not enough to count as nonres.

https://www.canada.ca/en/revenue-agency ... anada.html
This link says:
You are a non-resident for tax purposes if you:
do not have significant residential ties in Canada; and
you stay in Canada for less than 183 days in the tax year.

> And ALL your income from trading on TSX would be subject to tax, 25% of non -resident at least IF your brokerage will allow that (many if not all prohibit tradings in non-registered accounts for nonresidents)

This concerns: "If you receive Canadian income that is subject to Part XIII tax:"
Is stock trading Part XIII? It seems to be related to dividends and interest income. Any idea?

Also this seems to be if you're trading in a country with a tax treaty with Canada? Most 3rd world countries don't tax foreign income so there is no tax at involved. And the US doesn't tax profits from foreign income. They probably wouldn't have much foreign investment if they did!

> Yes, there are some ways to "optimize" taxation , read Panama papers for that :) but you have to have quite big estate and pay very high fees to people who know how to do that.

This is not about hiding from our beloved CRA. This is about knowing the time limits and pre-requisites they demand and abiding by them. I suppose some people attempt to move their money out of the country then act as a foreign investor incurring no tax but with internet security/technology so sophisticated they are probably taking an enormous chance of being caught. They have to initiate the trades here after all. It can be very hard to hide from a determined government these days. I know nothing about this as I've always thought it wrong, reckless and foolhardy so maybe there are lots of people evading tax this way. It just seems very dangerous.

> P.S. you'd loose your "free" healthcare as well, and you do know that modern medicine is quite expensive, even in "tropical countries" ?

Good riddance. :) All the more incentive to take care of myself and stay as healthy as possible. It sure would be a lot easier breathing fresh air all year, not this slop being artificially heated and cooled most of the year.

As for the expense, most places are very reasonable. Most expats don't give it a thought once they start using it. They claim they aren't herded into the office for the 5 minute/1 condition limit our doctors often work under. And you can buy medical plans which cost a lot less than ours if you want worry free coverage. If you drive much the likelihood of hospital care rises dramatically so one can weigh that. Most people with any money buy a car and then get someone to drive them around so they can be productive while in the car. Especially if they're in a city with lots of traffic and parking is a headache. Sort of like New York City except on a FAR cheaper scale. If they're stopped they can negotiate with the police a lot better than a foreigner. The resulting bribe will be a lot less. :)
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
I forgot to mention that the term snowbird refers to someone who is traveling for up to 6 months then returning. In this case the person doesn't expect tax free status until they have been out of the country for at least 6 months.
Last edited by redflagguy2u on Jan 31st, 2019 10:32 am, edited 1 time in total.
Penalty Box
Apr 27, 2015
1330 posts
255 upvotes
You mention moving your "home tax". What if the country you moved in didn't tax foreign income? Many don't. The purpose of this is not to change your home tax, rather to be deemed a non-resident in the eyes of CRA.
I remember that was reading that you should have home tax country, CRA won't let you gountil you prove that you changed your home tax .
This info may not be easy to extract from CRA since its not in their best interest for people to leave.
this is why they will do everything to prevent it :)
Of course you have to divest yourself from all property, memberships, bank accounts (I think)....but if you're leaving you don't need anything here.
A lot of people have LIRA, RRIF , RESP etc and you cannot just withdraw money from them and leave... you also need to have non-reg account if you want to trade and trading account. Or you want take out cash and open trading account in "tropical country" :)

And about your relatives ... afair, in CRA questionnaire was question if you parents, siblings stay in Canada .... CRA can do whatever they want, it's like government within government with their own court....they can decide whatever they want
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[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
gibor365365 wrote:
Jan 28th, 2019 2:54 pm
I remember that was reading that you should have home tax country, CRA won't let you gountil you prove that you changed your home tax .

In that Canada.ca link they say right in the beginning its about time spent away: 183 days. Of course this presupposes there is no income at all coming from Canada. Why would there be? The person has sold everything. Most of the document is concerned with income from Canada. I thought as a non-resident that was a non-issue. If you're a non-resident you have nothing here. No income, no assets. The question is if we invest in the Canadian stock market, will we be taxed on any gains made.

this is why they will do everything to prevent it :)

Probably!

A lot of people have LIRA, RRIF , RESP etc and you cannot just withdraw money from them and leave... you also need to have non-reg account if you want to trade and trading account. Or you want take out cash and open trading account in "tropical country" :)

I don't so I never thought of it. But its understandable and would certainly be a fly in the ointment. I thought divesting means selling everything. Selling everything means leaving by cashing out. Zero stocks/holdings. Cash is electronically transferred to your new bank to be invested from there. Sort of like switching brokers. You can let it drag on and on being detached from your investments for days or weeks or you can sell everything, move the cash and invest again. The 2nd is far quicker. But a lot of people aren't so liquid in their investments and have attachments...whatever that is to a financial instrument!

And about your relatives ... afair, in CRA questionnaire was question if you parents, siblings stay in Canada .... CRA can do whatever they want, it's like government within government with their own court....they can decide whatever they want
Not sure why they would care if we have family in Canada. I don't think they require us to drag our parasitic relatives away as well. That Canada.ca link seemed pretty simple. The beginning stipulates that with no ties you are a non-resident after 184 days. The rest deals with all the people that can't let go and have ties. We'll call them hanger's on. :) Probably the vast majority fight to keep as many ties as possible in case they ever return. I would just move my assets back to Canada if returning. Seems a lot simpler.
[OP]
Sr. Member
Jun 27, 2012
890 posts
92 upvotes
Winnipeg, MB
I'm curious how you were able to inject your response in your reply. Mine got enveloped in the last one I was replying to with quote. Did you just hit the return key more times then backtrack? I want to be able to reply just like you did. It keeps things in perfect order. Sort of like bottom posting like we used to do with email before top posting ruined everything. Please reveal your secret!
Deal Addict
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Dec 8, 2010
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Ugh guys come on, this is not that hard. I mean - it is - but it is a very step by step thing depending on the tax treaty with the country you move to.

Yes, you have to move somewhere. Your 'center of vital interests' must move. You have to be a tax resident of somewhere; if there is nowhere other than Canada, Canada will rightly keep on claiming you. But, if you are resident of somewhere else, that's it - there's nothing the CRA can do except dispute it, which is fine, but if you really have moved 'your life' that's it.

It isn't 'in six months...', it's when your 'life' has moved.

There is nothing saying you can't keep *rental* property in Canada. In fact there is nothing saying you can't keep a holiday home in Canada. You just have to spend more time somewhere else. You can keep a bank account (assuming the bank will let you register at a foreign address; some won't).

If anyone's serious - go and read the agreement with the other country, see what the residence tests are (there is a default set of rules which I believe is the basis for a lot of double taxation treaties).

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