Investing

Investing while living outside Canada

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  • Aug 25th, 2021 5:52 am
[OP]
Newbie
Dec 20, 2015
8 posts
1 upvote
Ajax, ON

Investing while living outside Canada

Hello all!

Can't say how helpful this forum is for figuring out helpful strategies to improve our asset value and figure out innovative ways to make and save money.

Does anyone know what the rules are regarding investing in stocks, mutual funds, ETF's etc. while working and living outside the country. If you are not considered a Canadian resident for tax purposes and therefore do not pay income tax. If one starts investing with Canadian money how does taxation work? What about if your using a App based trading mechanism?

Thanks!
14 replies
Deal Addict
User avatar
Dec 8, 2010
2552 posts
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If you're not resident for tax purposes, it's nothing to do with Canada - you need to look into taxation in the country you're resident of.

Canada has numerous double taxation agreements (DTAs) that cover dividend withholding (ie, Canada-UK cuts the dividend withholding from 25% standard to 15% if I remember rightly).

If you're buying ETFs, you will be better off buying in the country you're living in, generally. In the EU, for example, you aren't as a small investor allowed to buy ETFs that do not have an EU compliant KIID (Key Investor Information Document, again IIRC).

In theory you should be declaring and paying cap gains/getting capital losses on any currency fluctuation. So say you live in the US, you convert $10k to CAD at par, then convert it back now at 1.35 or whatever the rate is - you lost like $2600 USD. Again this is all in the country you're living in - if you're non Canadian resident, the CRA have no jurisdiction over you.
Newbie
Jan 21, 2017
55 posts
31 upvotes
Hi dinodd, now back in Canada for 2.5 years after living overseas for 20. To add to dave:
1) Sounds like your current assets are in CAD, you need to move them outside Canada, otherwise if leave in Canada then, I believe you will pay 25% non-residence tax, which you could claim against taxes in your new country, if none then that a loss. Best place is USA as tax for non-Americans and non-US residents is zero. But I'm not sure if you can open an account in USA if you are outside USA. Suggest you contact Fidelity and TDAmeritrade in USA. If USA is a no-go then next best is your country of tax residence, if that's not good then you are looking at Singapore/Luxembourg etc, ask Fidelity for advice they have offices all around the world.
2) "App based trading mechanism" has nothing to do with taxation.
Newbie
Jan 21, 2017
55 posts
31 upvotes
PS: If want you can leave your RRSP behind intact, and no withholding taxes.
Deal Addict
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Dec 8, 2010
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CheeseForum wrote: Hi dinodd, now back in Canada for 2.5 years after living overseas for 20. To add to dave:
1) Sounds like your current assets are in CAD, you need to move them outside Canada, otherwise if leave in Canada then, I believe you will pay 25% non-residence tax, which you could claim against taxes in your new country, if none then that a loss. Best place is USA as tax for non-Americans and non-US residents is zero. But I'm not sure if you can open an account in USA if you are outside USA. Suggest you contact Fidelity and TDAmeritrade in USA. If USA is a no-go then next best is your country of tax residence, if that's not good then you are looking at Singapore/Luxembourg etc, ask Fidelity for advice they have offices all around the world.
2) "App based trading mechanism" has nothing to do with taxation.
1) That's not true at all. There is a *dividend withholding* tax. The US has the same.

And re the RRSP, 'true' from the Canadian side but it depends on the current country. The UK, for example, does not see the RRSP as a tax shelter because it isn't locked in. Not that there's much you can do about it (in the UK, you can convert to a RRIF and take money out slowly with no Canadian withholding and probably little tax the UK side assuming you've reset the ACB before leaving Canada).
[OP]
Newbie
Dec 20, 2015
8 posts
1 upvote
Ajax, ON
Thank you both for all this information. So would it be better to transfer USD to CAD into a Can bank and get into the trading market using CAD dollars, or should I keep USD in USA and trade in USA. I know whichever I choose there will be dividend tax aka capital gains tax correct? However I read that Can only charges this tax after 11K is earned?
Thanks all!
Deal Addict
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Dec 8, 2010
2552 posts
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If you're living in the US, convert all your CAD to USD and invest there.

The CRA will not tax you on capital gains if you are non resident. The only things, generally, the CRA has any interest in is real property in Canada and withholding on Canadian-source dividends, plus work performed in Canada when you are non-resident. You do not get your Canadian personal allowance if you are not resident.

If you are not in the US, where are you? Generally you want to be in the currency of the country you're in, assuming that currency is not subject to massive swings (ie, USD, CAD, GBP, EUR, SEK, CHF are all first-world currencies; I wouldn't want to keep significant amounts of my cash in Argentina, for example, if I wasn't absolutely certainly staying there forever, and even if I was.... yeah).
Newbie
Jan 21, 2017
55 posts
31 upvotes
dave, thanks on 1) but CRA says default is 25% on Canadian earned interest, dividends . . . not sure on stock/ETF Capital Gains, see section on Taxing Canadian-source income: https://www.canada.ca/en/revenue-agency ... -2016.html

This may be reduced if Tax Treaty with dinodd's new tax Residence country that he has/is moved to. For us there wasn't a tax treaty when we lived in Brunei or Syria or Qatar (was when lived in USA), which is partially why we moved assets out of Canada when left in 1996: https://www.fin.gc.ca/treaties-conventi ... e--eng.asp The other reason was to minimize ties with Canada as rules on non-residence are varied.

On RRSP, correct I should have said no Canadian Tax withheld. We sold our RRSP's off while overseas, and CIBC withheld 25% of proceeds.
Jr. Member
Jun 17, 2018
122 posts
97 upvotes
Hamilton, Bermuda
CheeseForum wrote: dave, thanks on 1) but CRA says default is 25% on Canadian earned interest, dividends . . . not sure on stock/ETF Capital Gains, see section on Taxing Canadian-source income: https://www.canada.ca/en/revenue-agency ... -2016.html
Yes, the CRA imposes a withholding tax on dividends and interests (not on capital gains) paid to non-residents. This tax is subject to any applicable tax treaty between Canada and other countries. Same concept applies for US-sourced dividends and interests paid to non-residents (of the US), but obviously the withheld money is then sent to the IRS.
http://taxsummaries.pwc.com/ID/United-S ... ding-taxes
Newbie
Jan 21, 2017
55 posts
31 upvotes
gparadis01, thanks for link, interesting that no listed tax agreement with Qatar. Yet, when we moved from Houston to Qatar, both Fidelity USA and TDAmeritrade USA said we could keep our taxable investment accounts with them and that no taxes.

Yet when we moved from Qatar back to Canada where retired, TDAmeritrade said have to shut down account, and Fidelity said could keep account but could only sell shares, no further purchases. So we close both and moved all assets to Canada.
Deal Addict
Jul 23, 2007
4685 posts
3625 upvotes
I don't know much about investing for Canadians living overseas, but I do know that Canadian Andrew Hallam of "Millionaire Teacher" fame has a couple of books that may be helpful. "The Global Expatriates Guide to Investing" and "Millionaire Expat: How To Build Wealth Living Overseas"
Newbie
Aug 22, 2021
4 posts
So this fits my situation. I just moved to the Isle of Man and need to figure out how things work here, and what platform to use as its technically not part of the UK. No capital gains tax. Ive only arrived a few months ago and have basically a couch potato portfolio across RRSP/TFSA, which of course are not recognized tax wrappers. So all dividends will be taxed in my current country.
1.Now this is what is confusing - how is VCN, XUU, XEF and XEC treated in a taxable account as a non-resident? Questrade will automatically withhold 25% on the dividends for ALL ETF's? It states on Canadian sourced income, do all these ETF's qualify?
2. So, basically not only will the international/US withholding tax be taken, but ontop of that the 25% Canadian tax?
If this is the case, then its a crazy amount of tax taken off on dividends. However, no capital gains tax in the isle of man and canada wont tax capital gains as non-resident.

Its actually confusing now living somewhere 'offshore', I was confident knowing how it works in canada. I looked into tradestation global, part of IB based in UK, that actually would allow me to do a fund transfer from questrade in kind. As all the ETF's are bought off the TSX, I assume canada will still withhold the 25% tax on ALL of them, even though I hold them with a UK broker?
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Dec 8, 2010
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maica1x wrote: So this fits my situation. I just moved to the Isle of Man and need to figure out how things work here, and what platform to use as its technically not part of the UK. No capital gains tax. Ive only arrived a few months ago and have basically a couch potato portfolio across RRSP/TFSA, which of course are not recognized tax wrappers. So all dividends will be taxed in my current country.
1.Now this is what is confusing - how is VCN, XUU, XEF and XEC treated in a taxable account as a non-resident? Questrade will automatically withhold 25% on the dividends for ALL ETF's? It states on Canadian sourced income, do all these ETF's qualify?
2. So, basically not only will the international/US withholding tax be taken, but ontop of that the 25% Canadian tax?
If this is the case, then its a crazy amount of tax taken off on dividends. However, no capital gains tax in the isle of man and canada wont tax capital gains as non-resident.

Its actually confusing now living somewhere 'offshore', I was confident knowing how it works in canada. I looked into tradestation global, part of IB based in UK, that actually would allow me to do a fund transfer from questrade in kind. As all the ETF's are bought off the TSX, I assume canada will still withhold the 25% tax on ALL of them, even though I hold them with a UK broker?
Don't know about IoM specifically. https://www.gov.im/categories/tax-vat-a ... greements/

https://www.canada.ca/en/department-fin ... -2011.html

You should probably talk to an IoM tax person.

Why are you talking about US withholding? The US has nothing to do with VCN. For Canadian-dom funds that hold foreign (non-Canadian) assets I'm not sure exactly, but I think there is double loss there - the underlying holdings are subject to the 15%, then the ETF is as well. Which is why it is usually better to hold things in the 'right' country.

You need to check - again I don't know about IoM - but under UK law if an ETF isn't 'UK reporting' they treat all divis and cap gains as *income*, which is much worse. Moving to the UK it is much better to ditch all the non reporting stuff (a very few non-UK, non-Luxembourg, non-Irish ETFs are UK reporting - there is a list on a UK gov site - but last I looked VXUS was one example).

TFSA - no tax from Canada anyway, you just have to work out IoM. RRSP - again don't know IoM specifically, but an RRIF (that holds only UK-reporting ETFs, or individual shares) is ok for the UK. RRSP you'd pay (or at least declare if necessary) divis and cap gains to the UK.

IoM is such a small jurisdiction though you're reeeeally going to have to talk to a local tax person.
Member
Dec 7, 2008
302 posts
476 upvotes
Toronto, Ontario
Just regular tax can be complicated, and once you touch taxes cross-border it can be downright painful - especially if you don't get the correct advice. I would strongly suggest talking to a qualified tax advisor about your situation - one who deals with cross-border tax issues for departing Canadians. Tax consequences depend a lot on the person's factual situation. And as far as I know no one here claims to be a tax expert - and you kinda need that to know the right questions to ask.

E.g., Just because you are living outside of Canada does not automatically make you a non-tax resident from Canada's perspective - which could mean you would continue to be subject to Canadian tax worldwide. And if you want to become a non-tax resident, you may have to pay a departure tax. https://www.canada.ca/en/revenue-agency ... rants.html

By all means get input from folks and do your own research. But always get things checked out by a tax professional and yeah - get my question/comment checked out by a tax professional - this is not tax advice!
Newbie
Aug 22, 2021
4 posts
Speaking to a local tax consultant is my next move once I figure out how ETF's/index funds/platforms work a bit more from here. So far, I have not been able to find one person into passive investing, no Manx forum, all financial advisors I have spoken to are pointing me to active/portfolio managed companies and seem clueless when I say I want to DIY platforms. I understand how I will be taxed mostly in the IOM, what I did not understand is the withholding taxes and how etf's are treating canada side in a taxable account (I know swap-based funds would be good but Questrade dont offer ones I want). I speak of US withholding because of XUU. I did speak to CI investing in Canada, who accept non-residents and have portfolio's setup specifically for them to reduce dividends as much as possible and focus on growth, they did inform me that when etf is on the TSX, it is classified as Canadian and dividends will be taxed at 25% ( after withholding taxes from other countries being taken first). So yes, double taxed on all ETF dividend amounts and I would have no tax to pay in IOM as max tax is 20% and no capital gains (so nothing when I sell). It feels so complicated now when it was so simple in Canada and cheaper to invest, and weirdly Questrade is listed in IOM platform offerings- I assume now that is solely for those wanting a piece of canada in an ETF and will only be taxed the 25% without treaty. Thanks for mentioning UK non-reporting ETF's, I best find out how IOM treats those being offshore. I am waiting for all the info to slot in and make sense. Thanks for the response!

Cheers

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