# Becoming a non resident for tax purposes



## moneyhungry87 (Nov 11, 2016)

Hello everyone, i'm new here and looking for some advice. I'm 29, the *only** assets I own are stocks* in non registered, tfsa, and rrsp accounts. I'm heavily invested in junior resource stocks that are very cyclical so I must sell in the future or I will lose everything when the markets reverses. So, i'm expecting to pay at least 250k in capital gains taxes and I want to avoid this. I am considering becoming a non resident of Canada, and moving to a country like Panama or another tax haven. I have heard the CRA will make you sell all of your assets such as stocks and real estate and make you pay an exit tax. Is there a strategy for me to avoid this? such as moving my money out of the country 12 months before I declare non residency? Or are there other ways to avoid paying the tax with smart estate planning etc? I will become a non resident if I have too, but id like to know all my options! Even greatly reducing the amount I will owe the CRA. It just seems so inefficient to just simply sell abunch of stock without a plan, and pay the CRA. Theres gotta be a better way?


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## moneyhungry87 (Nov 11, 2016)

moneyhungry87 said:


> Hello everyone, i'm new here and looking for some advice. I'm 29, the *only** assets I own are stocks* in non registered, tfsa, and rrsp accounts. I'm heavily invested in junior resource stocks that are very cyclical so I must sell in the future or I will lose everything when the markets reverses. So, i'm expecting to pay at least 250k in capital gains taxes and I want to avoid this. I am considering becoming a non resident of Canada, and moving to a country like Panama or another tax haven. I have heard the CRA will make you sell all of your assets such as stocks and real estate and make you pay an exit tax. Is there a strategy for me to avoid this? such as moving my money out of the country 12 months before I declare non residency? Or are there other ways to avoid paying the tax with smart estate planning etc? I will become a non resident if I have too, but id like to know all my options! Even greatly reducing the amount I will owe the CRA. It just seems so inefficient to just simply sell abunch of stock without a plan, and pay the CRA. Theres gotta be a better way?


I'm unmarried and have no children as well forgot to mention that


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## OnlyMyOpinion (Sep 1, 2013)

Just to clarify your comment "I'm expecting to pay at least 250k in capital gains taxes", are you saying that taxes payable from the capital gains generated by selling equities in your non-registered account - net of any capital losses that will offset them - will be 250k? Or are you saying that you have 250k of gross capital gains?
If the former, good work (but I don't beleive it). If the latter, then remember that only 50% of the 250k of gains is taxable, and that you should be selling any losers so their losses will reduce your capital gains when applicable. If this is the case, then your actual tax bill (depending on your personal tax rate) could be anywhere from $0 to perhaps $60k. Remember that you can also sell these over multiple years to reduce the annual tax burden (athough as you pointed out, since you are not diversified you are at the mercy of the markets). 

Lots of us pay 2, 3, 4x that in a year. It is the price of doing well and living in Canada, a country that others love to be able to settle in. 
So I think your idea of becoming a non resident for this amount of tax is nuts.
Pay up and enjoy the fruits of your investing success.

PS. You mention simply selling without a plan. You are bang on there. You need to develop a financial plan* that includes your investing component. Your 'gambling' could have just as easily lost you that amount of money.

*Lots of resources out there. E.g. http://www.getsmarteraboutmoney.ca/en/managing-your-money/planning/financial-planning/Pages/What-your-financial-plan-should-cover.aspx#.WCXQZ8mznhk


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## Spudd (Oct 11, 2011)

There are no capital gains payable on the investments in your TFSA and RRSP. In the non-reg you only pay tax at your marginal rate on 50% of your gains. So in order to pay 250k in capital gains tax, you'd have to have made a million bucks in profit on your non-registered investments. If that's the case, you can afford to pay 250k in tax.


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## Plugging Along (Jan 3, 2011)

essentially you will pay one way or another. When you leave the country, or move your investments outs you will pay. Are you serious in becoming a non resident to save in tax dollars. This is usually done for those that have large amount of money in the millions.

Second, as others have said, you would have had to make over $1 mil in gains to be paying $250k tax. If that is the case, congrats, but you should not be cheating out on free advice and speak to a good accountant , and perhaps a lawyer to structure the sell. There may be some things that can be done in trusts, etc, but that take a lot of planning and resources to setup properly, if it evens applies. You still have to pay some taxes though, and there will be a cost to set up.


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## lonewolf :) (Sep 13, 2016)

Break off all financial ties with Canada & money can be taken out of RRSP @ 25% ? ( could be wrong on this so check out first)


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## AltaRed (Jun 8, 2009)

What the OP is forgetting in his/her taxable account is that the deemed gains on all investments will be taxed anyway upon exit from Canada (based on fair market value on date of exit). There is no escaping unrealized cap gains on investments in taxable accounts.


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## moneyhungry87 (Nov 11, 2016)

Let me clarify, yes in my non registered account im expecting 1M + in capital gains. I have maxed out my TFSA and am avoiding my RRSP. No, it is not my patriotic duty to pay these taxes. I took huge risks to make this money with money that was already taxed to begin with. I want to move abroad anyway , I will keep my citizenship but being a non resident makes sense as im not stuck here bc of kids or a job I need so what do I care.

So does anyone know if moving out of canada along with my assets say a year before I declare non residency will that allow me to avoid the tax? My plan is to go to a professional for advice anyways, so ya.


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## moneyhungry87 (Nov 11, 2016)

AltaRed said:


> What the OP is forgetting in his/her taxable account is that the deemed gains on all investments will be taxed anyway upon exit from Canada (based on fair market value on date of exit). There is no escaping unrealized cap gains on investments in taxable accounts.


yeah but what if I leave Canada and move my money out a year before I declare non residency? Or what about setting up a trust or some kind of sole proprietorship etc


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## OnlyMyOpinion (Sep 1, 2013)

How do you propose to move your 1M+ out of Canada though? You are going to be reported to FINTRAC for transactions over 10k.
Not that the rest of us would miss you.


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## moneyhungry87 (Nov 11, 2016)

OnlyMyOpinion said:


> How do you propose to move your 1M+ out of Canada though? You are going to be reported to FINTRAC for transactions over 10k.
> Not that the rest of us would miss you.


its not illegal to move money abroad. all I would have to do is open up a brokerage account in another country and move it. I'm not proposing to do anything illegal here. if I dont sell I don't owe anything unless I declare non residency.


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## OnlyMyOpinion (Sep 1, 2013)

I know, not suggesting you are. Just saying you can't easily escape eventual taxation of your gains.


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## AltaRed (Jun 8, 2009)

moneyhungry87 said:


> its not illegal to move money abroad. all I would have to do is open up a brokerage account in another country and move it. I'm not proposing to do anything illegal here. if I dont sell I don't owe anything unless I declare non residency.


You still have to declare all unrealized gains on worldwide assets for the year in which you depart the country and that is a 'deemed disposition' in income tax law. It does not matter where you hold said assets. You still have to declare the deemed gains on your final Canadian tax return, e.g. on your 2016 tax return in April 2017 for a move out of Canada occurring in 2016.

The point being is you cannot escape Canadian taxation of deemed capital gains no matter where you move the investments.


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## Eclectic12 (Oct 20, 2010)

moneyhungry87 said:


> Let me clarify, yes in my non registered account im expecting 1M + in capital gains.


Congrats on the big gains.

Aren't you looking at it from the wrong perspective? 
Taxes on employment/business/interest income of these amounts would be much higher (double from my estimates).

Spreading out the CG over a couple of years by selling a bit each year will make more personal exemptions available as well as any other credits or deductions.

Or you may want to look at relocating to a province/territory that has a cheaper CG rate (though there may be a period without medical coverage while establishing residence in the new province).




moneyhungry87 said:


> ... it is not my patriotic duty to pay these taxes. I took huge risks to make this money with money that was already taxed to begin with.


It isn't your duty to overpay but I am pretty sure CRA and the gov't will see it as your duty to pay the taxes owed, whether you move abroad or not. The only place I am aware of that having already paid income tax makes a difference is contributions to a TFSA.

The income tax forms as well the CRA and the income tax act are pretty clear that making a capital gain makes one subject to capital gains taxes, as I understand it.




moneyhungry87 said:


> its not illegal to move money abroad. all I would have to do is open up a brokerage account in another country and move it. I'm not proposing to do anything illegal here. if I dont sell I don't owe anything unless I declare non residency.


I have to pay Canadian taxes on my US stock held in the USA by a US agent so I don't understand why you think who holds the stock makes a difference as to whether Canada is taxing it.

One could hope to slip through the cracks but I am sure CRA would see it as tax evasion and illegal.




AltaRed said:


> You still have to declare all unrealized gains on worldwide assets for the year in which you depart the country and that is a 'deemed disposition' in income tax law. It does not matter where you hold said assets. You still have to declare the deemed gains on your final Canadian tax return, e.g. on your 2016 tax return in April 2017 for a move out of Canada occurring in 2016.
> 
> The point being is you cannot escape Canadian taxation of deemed capital gains no matter where you move the investments.


This is my understanding as well.


Cheers


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## Nerd Investor (Nov 3, 2015)

OnlyMyOpinion said:


> How do you propose to move your 1M+ out of Canada though? You are going to be reported to FINTRAC for transactions over 10k.
> Not that the rest of us would miss you.


Moving the money out of the country before declaring non-residency won't do anything to avoid the gain. When you become a non-resident, you have to report the disposition of capital property whether it's located in Canada or not. Short of not selling the shares or having capital losses to offset there isn't really anything you can do to avoid taxation of those gains once they're realized. 

To decrease them slightly, you could max your RRSPs if you did have unused room. 
If you have any charitable interests whatsoever you could donate some of the shares - this creates a double benefit of eliminating the gain on the donated shares and getting the offsetting tax credit. It doesn't magically solve your problem but depending how the numbers work out you may be able to give 1/3 of gain to a charity instead of 1/4 to the government.


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## moneyhungry87 (Nov 11, 2016)

so lemme get this straight...you guys are saying that even if I move myself and my money out say 2 years before i declare non residency I cannot escape the tax? I mean if I just stopped filing my income taxes since I wouldnt be earning money in Canada would the CRA even notice? I know the IRS is crazy and will terrorize you but the CRA seems to be very lax unless youre self employed or very wealthy and running a business with revenue in Canada.

I'll pull a Roman Polanski and never return lol or if I do return I doubt they would arrest me at the airport?


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## Spudd (Oct 11, 2011)

Nobody is going to encourage you to break the law. You have to pay 250k in tax. Yes, that's a lot of tax, but you earned a lot of money. 

See a tax lawyer if you want to find out if there are any legal loopholes you can use, or just man up and pay the tax.


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## Eclectic12 (Oct 20, 2010)

moneyhungry87 said:


> so lemme get this straight...you guys are saying that even if I move myself and my money out say 2 years before i declare non residency I cannot escape the tax?


As I understand it ... that is what CRA is directed to enforce and is what is in the legislation.




moneyhungry87 said:


> ... I mean if I just stopped filing my income taxes since I wouldnt be earning money in Canada would the CRA even notice?


I believe your question has been answered by the thread *Digital Nomad Living in Thailand for 5 Years Given Five Figure Notice of Assessment*. It seems clear they noticed without any substantial stock investments to attract their attention.




Spudd said:


> Nobody is going to encourage you to break the law.


+1




Spudd said:


> ... Yes, that's a lot of tax, but you earned a lot of money.


That's the puzzling part for me ... *earned a lot of money in a way that has a lot less of a tax burden* than regular employment income or interest. Never mind the suggestions of how to legally reduce the tax bill and that consulting a tax expert may reduce it even more.

It looks to me like missing the forest for the trees as I would be happy to have a reduced tax bill that I can by and large control when it kicks in ... but that's me.


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> That's the puzzling part for me ... *earned a lot of money in a way that has a lot less of a tax burden* than regular employment income or interest. Never mind the suggestions of how to legally reduce the tax bill and that consulting a tax expert may reduce it even more.
> 
> It looks to me like missing the forest for the trees as I would be happy to have a reduced tax bill that I can by and large control when it kicks in ... but that's me.
> 
> ...


Greed is a character flaw http://personalityspirituality.net/articles/the-michael-teachings/chief-features/greed/ or worse a psychological disorder http://www.thomhartmann.com/users/natural-lefty/blog/2010/10/greed-psychological-disorder


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## james4beach (Nov 15, 2012)

With this kind of wealth (over 1M in cap gains) why are you even asking us? Go find a good international tax expert and ask them. You'll have to ask them in any case -- this stuff is not easy, and the penalties are big.

If you're dealing with the USA at any point, then be damned careful, because the US makes tax residency complicated as hell. Each form you violate carries a minimum 10K penalty, and some offenses will land you in jail.

I don't even have 500 K net worth and I still went to a good international tax expert . I've paid around $2,500 in accounting & legal fees so far, and that's well worth it.


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## james4beach (Nov 15, 2012)

Going back to the original post, it sounds like his goal isn't really to move abroad, but to minimize his taxes.

Is this that hard? Let's say you have 500k in capital gains. Spread out the sales over a few years. Maybe use options or other hedging techniques to lock in gains if you're afraid the market will move against you. Perhaps over 5 years, that means you end up with 100k in capital gains each year.

If your tax return in a year only has 100k of capital gains and no other income, you only pay about 8% tax and keep 91k net (AB, BC, ON). Of that 500k total capital gain, you can keep 455k. Additionally the losses on your hedging vehicles, for example put options decaying to zero, will be losses that offset this partially.


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## twa2w (Mar 5, 2016)

Just curious how easy you think it will be to move your stocks from your Canadian broker to a broker in another country? 
First you may find that it is not so easy other than the US and even that is a pain.. Second, if you move the stocks to the US you will still owe tax in Canada when you depart plus the US will tax you on capital gains as well, based on your acquisition costs, if you are living in the US. You may be able to claim a foreign tax credit but you will need to spend some bucks on an accountant.
Third, my understanding is that when you transfer stocks from a Cdn broker to broker out of the country, this is reported to both Fintrac and CRA. And you possibly could face withholding tax.
Forth, the transfer will take some time even if you are able to do it, and your stocks will be in limbo for a time. What happens if the market reverses during that time and you are unable to transact a sale.
Good luck in Panama or where ever you end up.
There are some strategies to minimize tax on the rsp when you leave but this is specific to what country you move to, based on the tax treaty that applies.


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## janus10 (Nov 7, 2013)

Would gradually selling some of the stocks in the non registered account and acquiring stable blue chip dividend paying stocks help? 

I'm thinking off the top of my head, but at lower incomes, dividend income can be more tax favourable than CG in certain provinces.

It still would be a long process and the performance of what is rotated into may produce additional CG vs. leaving it as is, or could underperform which reduces CG but more importantly the value of the assets themselves. 

I understand and empathize with the mindset that the government takes away a sizeable portion of the gains (and it's probably not the percentage but the absolute value that is frustrating) of your gains for not doing anything to help with your success.

You bought stock A and not stock X and doubled rather than halved your money. The government didn't participate in that decision process yet they benefit.

What was that story told to children about an animal that wanted to make a cake from scratch and all of its animal friends were asked for help throughout the process? They refused each time but wanted to share the cake when it was finished despite not helping.

I'm assuming the OP feels a little exasperated in their personal situation. But, like in the TV series Billions (where the main character was facing a $1.6B fine but bragged they could make that back in months), if you have developed a successful process, then you pay your taxes here, move abroad to some country with low or no capital gains tax or tax on total assets, and make your seven figures again.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> Going back to the original post, it sounds like his goal isn't really to move abroad, but to minimize his taxes.


If one is not reading carefully or ignores the follow up questions/comments, sure. 

Where one reads carefully, the original posts is that he is aware of the departure tax when one relocates to become a NR where he wants to *avoid* the departure tax. When later in the thread, it is pointed out that legally - he can't avoid it, there is talk of trying to evade the taxes with the hope that CRA may not notice.

Like you, it seems more effective to focus on what can be legally done to reduce the CG taxes.




james4beach said:


> Is this [reducing one's CG tax bill ] that hard?


I don't think so as there have been several suggestions, including multiple to consult an expert.

The key looks to me to be whether the OP gets over his angst over not being able to completely avoid the CG taxes so that the suggestions/expert advice is acted on.

For example, the idea of spreading out the CG was mentioned in post # 14 but so far, the one response is more about "I *can't* avoid the CG tax? Then maybe I should go underground" versus any indication that the different suggestions being made will be acted on.


Hopefully the expert being consulted mentioned in post #8 is able to refocus the OP so that the baby doesn't go out with the bath water.


Cheers


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## Eclectic12 (Oct 20, 2010)

janus10 said:


> Would gradually selling some of the stocks in the non registered account and acquiring stable blue chip dividend paying stocks help?
> I'm thinking off the top of my head, but at lower incomes, dividend income can be more tax favourable than CG in certain provinces.


I'm not sure it would ... but it is another idea that may be of use. There's not enough info such as what source of income are already in play and what shifts can be made that fit the OP's objectives.




janus10 said:


> I understand and empathize with the mindset that the government takes away a sizeable portion of the gains (and it's probably not the percentage but the absolute value that is frustrating) of your gains for not doing anything to help with your success.


When looking at it from only this perspective - sure. 
As I say up thread, I think it's the wrong way to look at it. 

When I plug in $1 M in CG with only the personal exemption to a tax program set for BC, the tax bill is something like $205K. If I plug in $1 M in employment/interest income, the tax bill is $435K!


I am all for reducing reducing one's taxes to the minimum that one owes or can reduce it to. It seems a waste of time to focus on an *already low* tax bill as being outrageous then spend time wondering about evading taxes when there are suggestions that would reduce the CG taxes.

Looking at what fits one's objectives that will further reduce the tax bill seems far more productive, IMO.


Cheers


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## redsgomarching (Mar 6, 2016)

Even if you are a "non resident" you would still pay taxes on your Canadian sourced income.


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## kcowan (Jul 1, 2010)

and the tax withheld is claimable against taxes in your country of residence IF they have a tax treaty.


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## Eclectic12 (Oct 20, 2010)

kcowan said:


> redsgomarching said:
> 
> 
> > Even if you are a "non resident" you would still pay taxes on your Canadian sourced income.
> ...


All good info ... but as the whole idea of NR was to avoid the CG taxes, it is not clear how the OP will decide to proceed.
Even if NR is still pursued, it is also not clear that one of the criteria will be choosing a new country of tax residence that has a tax treaty with Canada. Maybe it will and maybe it won't.

For now the OP's likely focus that is beneficial is to put the NR part on hold to look at what the ways of reducing the already low CG taxes that have been suggested or that the expert being consulted may suggest.


Cheers


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## moneyhungry87 (Nov 11, 2016)

I will consult a professional for sure, I was just hoping someone knew the answer definitively from personal experience etc. My plan is to move to Panama ( well become a resident for tax purposes and live anywhere I choose)

Unfortunately for me bc of the nature of my investments I have to dump them all in a pretty short period of time at most 2 tax years. Reason is they are very volatile when a bear market hits you can lose 50% of your portfolio in a matter of months.

so what type of professional should I consult with? For example for general accounting you go to your run of the mill accountant I need someone specific for my situation....appreciate all the feedback!


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## AltaRed (Jun 8, 2009)

A cross-border tax accountant. Most big accounting firms have specialists in cross-border taxation.


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## humble_pie (Jun 7, 2009)

cross-border chartered accountants, at least the good ones, are expensive.

me i don't think hungry should sell his stock. No sale = no capital gains = no problem.

hungry you could just ride the stock gently down to a mere 10% or 15% capital gain, since you say it's a junior resource & it is going to collapse for sure. Easy peasy. With a small capital gain plus the 50% taxable exemption, you won't even notice the small top dressing of extra income tax.

after that, move to panama. Don't forget to formally sever all your links to canada. There's even a form to fill out.

once established & living in panama, do it all again. Invest. Win. Collect capital gain. No income tax. Invest. Win. Collect. No tax. Investwincollectnotax. World without end. Best of luck.

.


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## redsgomarching (Mar 6, 2016)

humble_pie said:


> cross-border chartered accountants, at least the good ones, are expensive.
> 
> me i don't think hungry should sell his stock. No sale = no capital gains = no problem.
> 
> ...


humble even if he establishes residency and qualifies for clean break to panama he will still be taxed on canadian sourced income in canada. he has to see if there are tax treaties or extra provisions between canada and wherever he wants to move and possibly wait to sell the investments.


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## humble_pie (Jun 7, 2009)

redsgomarching said:


> humble even if he establishes residency and qualifies for clean break to panama he will still be taxed on canadian sourced income in canada. he has to see if there are tax treaties or extra provisions between canada and wherever he wants to move and possibly wait to sell the investments.



he's said he wants to move to panama to escape canadian taxation.

he's also said he's a wizard at picking stocks for capital gains. Canada has no withholding tax on capital gains paid to investors in other countries, so from tax-haven panama our youthful wiz could pick the winners & he'd be home-free, taxwise.

also from panama, he'd want to avoid canadian dividends, as these have NR withholding tax. There are canadian stocks that don't pay dividends. There are more of these dividend-free stocks stateside, buffett's berkshire is always the prime example of those. British stock dividends have no NR withholding tax either. All in all, from panama he'd have a good selection.

when it comes down to NR tax on interest payments, both canada & the US have certain interest-bearing vehicles with no withholding tax to foreigners. Again, from panama he'd have a good selection.

me i don't see why our moneyhungry young friend should wait. He could either sell his million dollar stock now & pay the tax before quitting the country, or else he could ride the cyclical investment back down into zilch, in which case there' be no tax.

i have a slight whiff from this thread, though, that the numbers may not be quite as grandiose as our young friend is making out. There may be a soupçon of exaggeration in the story ...


.


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## redsgomarching (Mar 6, 2016)

humble_pie said:


> he's said he wants to move to panama to escape canadian taxation.
> 
> he's also said he's a wizard at picking stocks for capital gains. Canada has no withholding tax on capital gains paid to investors in other countries, so from tax-haven panama our youthful wiz could pick the winners & he'd be home-free, taxwise.
> 
> ...


ahh yes I see what you mean, thanks for clarifying. Don't worry - I believe your sense of smell is on point


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## Manitoba (Dec 17, 2016)

The OP might be able to avoid future capital gains as a non-resident but when he becomes a non-resident he is deemed to have disposed of his assets at fair market valus and must pay capital gains. It is also called a departure tax.

If he does not become a non resident he can simply move to Panama, but would be a tax resident of canada and so would be taxed on his world wide income including future capital gains.

The tax might not be withhold but would still be self reportable and payable.

Bottom line there is no legal way to avoid paying the capital gains on both past and future earnings.


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