# Retiring overseas and living off capital gains, dividends. Tax rate?



## K Moore (11 mo ago)

I'm planning to retire in a couple of years, at age 54. My wife is Thai, so I plan on living as a permanent resident in Thailand. The only thing I'm going to own in Canada is my bank account, and my RRSP, TFSA, and margin account for investments.
Once I live in Thailand, my only income will be capital gains/dividends from my investments. I plan on collecting CPP when I'm 60.
My question is: Will I have to pay any tax on my capital gains on my investments? Also, will there be a dividend withholding tax on my Canadian dividends? I have quite a lot of my investments in Cdn banks, utilities, pipelines, etc. I read somewhere that there is no capital gains tax if I'm living in Thailand, but a 25% withholding tax on my Cdn dividend stocks. I'm just wondering if this is true.


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## m3s (Apr 3, 2010)

This stuff gets very complicated and the rules are always changing with foreign countries especially lately. Everyone's situation is also very different

If you become a non-resident of Canada you can maintain TFSA and RRSP but the rules change. I believe there would be a withholding tax on any RRSP income and exit tax on your margin account.

You should look up nomad capitalist. He puts a lot of free information out on foreign tax residency and specific advice for clients


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## ian (Jun 18, 2016)

We looked at something similar when I first retired. Leaving Canada, and leaving the Canadian tax system. Reviewed same with our accountant at the time. 

First off it can be tricky. I was told that to prove we had moved we would have to move most accounts out of the county. That meant crystalizing the gains and paying the tax. Cannot remember about RSPs.

Now, IMHO, is exactly the time that you should start thinking about this and actioning where required. You would do well to seek the advice of a tax professional who is well versed in this. 

When we looked at the CA that we dealt with gave us the basics. She recommended that if we wanted to take this further that we engage one of her colleagues who was very knowledgeable in this area for a consult. Then, should we decide to move forward, we would have, hopefully, have a bullet proof tax plan that would pass the CRA sniff test.


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## m3s (Apr 3, 2010)

ian said:


> First off it can be tricky. I was told that to prove we had moved we would have to move most accounts out of the county. That meant crystalizing the gains and paying the tax. Cannot remember about RSPs.


Yes because they look at any financial accounts as financial ties when they assess your tax residency. If the vast majority of your wealth is in Canadian bank, TFSA and RRSP and you have some monthly living money in Thailand.. you don't want to leave it open to interpretation

Malaysia seems to be a popular place to set up tax residency in SE Asia but rules changed a lot for the worse during the pandemic. Thailand might be different when married to a citizen but generally they just let you stay there on a temporary golden retirement visa with limitations

Golden visa usually means you are bringing wealth to the country some way not leaving it all in RRSP back home. Generally you are buying RE or moving funds into their currency and bank account. For Thailand you either buy the Thai Elite visa or bring a large sum of capital


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## ian (Jun 18, 2016)

m3s said:


> Yes because they look at any financial accounts as financial ties when they assess your tax residency. If the vast majority of your wealth is in Canadian bank, TFSA and RRSP and you have some monthly living money in Thailand.. you don't want to leave it open to interpretation
> 
> Malaysia seems to be a popular place to set up tax residency in SE Asia but rules changed a lot for the worse during the pandemic. Thailand might be different when married to a citizen but generally they just let you stay there on a temporary golden retirement visa with limitations
> 
> Golden visa usually means you are bringing wealth to the country some way not leaving it all in RRSP back home. Generally you are buying RE or moving funds into their currency and bank account. For Thailand you either buy the Thai Elite visa or bring a large sum of capital


Our CA at the time told us that CRA can get very picky over this. A dispute has the ability to cost you a fair amount in legal and/or consulting. We were told that CRA 'may' look at everything, not just financial. Health care cards, DL's, real estate, safe deposit boxes etc. You to do it right, without any ambiguity. 

It can be done but if you want something that will stand the test of a CRA test you will need to be thorough IMHO.


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## m3s (Apr 3, 2010)

ian said:


> It can be done but if you want something that will stand the test of a CRA test you will need to be thorough IMHO.


Extremely thorough because CRA has the benefit to decide what they want and then it's even harder to make them admit otherwise

I've had enough issues with CRA and RQ while working abroad for the government itself. The left hand does not even care what the right hand says if it means less money for them

Nowadays I include a cover letter to explain my situation because even if things are very clear they can easily mess it all up when living aboard


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## AltaRed (Jun 8, 2009)

You need to consult with a cross-border tax accountant preferably versed in Thai taxation to be sure. At the very least, you need to dig into the Cdn-Thai tax treaty to educate yourself.

At the very least, you will have deemed to have sold all your non-registered assets at FMV based on their market value on the date of your departure. You will pay cap gains tax to CRA in your final tax return. Any gains after that departure should no longer attract Cdn tax since you will have become a non-resident of Canada for tax purposes. That assumes you have broken sufficient ties with Canada per the tax treaty to now become a resident of Thailand for tax purposes. As a minimum, I would think that includes a long term housing lease in Thailand or ownership of your home, Thai health care and Thai drivers license.

There will be a withholding tax on RRSP withdrawals as a non-resident, probably CPP and OAS as well, and on your investment income per the tax treaty. It is called Part XIII tax for non-residents 

Canada will not let you escape without paying some taxes on your Canadian sourced income. It is often a reason why retirees only live out of country part time rather than breaking residential ties to Canada. It can be rather expensive to do so.


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## james4beach (Nov 15, 2012)

K Moore said:


> I'm planning to retire in a couple of years, at age 54. My wife is Thai, so I plan on living as a permanent resident in Thailand. The only thing I'm going to own in Canada is my bank account, and my RRSP, TFSA, and margin account for investments.


Are you going to have any kind of residence in Canada? Do you own a house? Do you think you might return to Canada? These are important questions when determining whether you want to do the full departure and become a non-resident.

You're going to have to be a tax resident *somewhere*, so you are going to be filing and paying taxes (including on all your investments) in some jurisdiction. The question becomes, which jurisdiction. If you're going to be a Thai tax resident, then you're going to need an expert in that system to help you figure out how to properly pay all your taxes. In foreign countries with language barriers, this may turn out to be hard. When I lived in the US, I discovered that even coordinating with the Canadian system was pretty tricky. And this was with the same language, in countries that are about as close as any two countries can be.

As @AltaRed described nicely as well, you should think about overall effort and costs. It may be less expensive and less complicated to continue being a Canadian tax resident.

I have an American friend who is currently living in an Asian country and trying to get away with not paying tax on some of his income. He thinks the governments won't find out. Just make sure you don't do that. (I've actually stopped doing business with this guy because I fear the IRS is going to nail him, and I don't want to get swept up in his problems.)


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## AltaRed (Jun 8, 2009)

Deleted


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## ian (Jun 18, 2016)

After seeking out professional advice it took us all of two minutes to decide that this was not the best option for us. But...our situation and our plans may have been different.

I would expect that you need to have some degree of certainty to you plans given the efforts and expense that you will have to expend getting your affairs organized.. I have to wonder what, if any, CRA impact there will be if you subsequently decide two or three years later to re-locate back to Canada.


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## m3s (Apr 3, 2010)

ian said:


> I have to wonder what, if any, CRA impact there will be if you subsequently decide two or three years later to re-locate back to Canada.


Probably at least a random audit every year 😅


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## TomB16 (Jun 8, 2014)

K Moore, I would like to suggest the folks who responded here are the ones who took a look and weren't committed enough to think it was worth it. If you ask ex-Canadians in Thailand, you will probably get the opposite response: Oh yeah... easy... worth it... have a pad krapow...

Congratulations on your retirement and best wishes to you on your new life.


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## gardner (Feb 13, 2014)

The O/P appears to have ghosted us, but this thread has me thinking about the idea anyway. IMO, with the OP's (or my) income sources in mind -- CG + eligible dividends -- the tax burden in Canada would be pretty light. My main tax hit would be sucking down the RRSP at the most advantageous rate possible.

For folks considering living mainly or entirely overseas, is it difficult/awkward to just maintain tax residency in Canada? Which province do you nominally reside in? Can you pick?


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## Numbersman61 (Jan 26, 2015)

gardner said:


> The O/P appears to have ghosted us, but this thread has me thinking about the idea anyway. IMO, with the OP's (or my) income sources in mind -- CG + eligible dividends -- the tax burden in Canada would be pretty light. My main tax hit would be sucking down the RRSP at the most advantageous rate possible.
> 
> For folks considering living mainly or entirely overseas, is it difficult/awkward to just maintain tax residency in Canada? Which province do you nominally reside in? Can you pick?


You don’t pick a Province - you just pay a surtax of 48% of the federal tax 





TaxTips.ca - Canadian residents and non-residents - Who pays tax in Canada, and on what income?


TaxTips.ca - Canadian residents, non-residents, deemed residents and part-time residents - how to determine residency




www.taxtips.ca


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## TomB16 (Jun 8, 2014)

You are an amazing resource, Numbersman61. Thank you for what you do.


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## londoncalling (Sep 17, 2011)

When I first decided to move to DIY I devoured a ton of material on all sorts of topics. For some reason I remember Alex Doulis's books on residency and taxation.Home (alexdoulis.com) The information is likely very outdated but I found the reading both informative and humourous.


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## K Moore (11 mo ago)

Numbersman61 said:


> You don’t pick a Province - you just pay a surtax of 48% of the federal tax
> 
> 
> 
> ...


Thanks for the link. Some great info there.


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## james4beach (Nov 15, 2012)

I'm not at retirement age so maybe I have this all wrong, but I don't fully understand why someone who's stopped working would pay so much tax, even if a resident of a province. (I'll ignore RRSP and CPP since that seems a ways off)

For the sake of argument let's say they have $1 million in non-registered investments in a diversified balanced portfolio. That's going to have maybe 1.8% yield, about half is interest and half dividends. So far that's $9000 dividends and $9000 interest income.

Let's say on top of that they liquidate another 25K to generate more retirement income. This is a very crude estimate but there may be something like a 15,000 capital gain associated with that. It's only going to be some fraction of the liquidation amount because _only the increase_ versus the ACB is taxed.

Entering those into a tax estimator for an Ontario resident, I see miniscule taxes due and an overall tax rate of just 1.86% (about NIL)

What am I missing here? Maybe everyone here is a lot richer than me but it looks like you can retire and live off $1 million without any tax burden, even as a tax resident of Canada.


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## Eclectic21 (Jun 25, 2021)

K Moore said:


> I'm planning to retire in a couple of years, at age 54. My wife is Thai, so I plan on living as a permanent resident in Thailand. The only thing I'm going to own in Canada is my bank account, and my RRSP, TFSA, and margin account for investments ....


Those who have moved to the US report having problems keeping the cash accounts/margin accounts. Maybe the Thai rules mean that the Canadian brokerage won't care. I'd ask in the time you have left before moving.



K Moore said:


> ... Once I live in Thailand, my only income will be capital gains/dividends from my investments. I plan on collecting CPP when I'm 60.


I suspect you have the twenty years of Canadian residence required to receive OAS, as a non-resident who is out of the country more than six months. For GIS, my understanding is that being out of Canada more than six months means GIS stops being paid.






Old Age Security: While receiving OAS - Canada.ca


Old Age Security (OAS) provides monthly payments to seniors who are 65 years or older, are or were Canadian citizens or legal residents, and have resided in Canada for the required number of years.




www.canada.ca












Understanding GIS (Guaranteed Income Supplement) - Retire Happy


GIS is a monthly non-taxable benefit that is paid to eligible pensioners, in addition to the basic monthly Old Age Security (OAS) amount.




retirehappy.ca








K Moore said:


> ... My question is: Will I have to pay any tax on my capital gains on my investments?


Assuming enough residential ties were cut when leaving so that CRA agrees you are non-resident - the capital gains tax to pay is the departure tax. Essentially Canada wants it's slice up to the day you leave. After that, my understanding is that from a Canadian tax perspective, there is no capital gains tax on investments. As above, the bigger issue may be finding a brokerage willing to let you keep the cash/margin account.






Determining your residency status - Canada.ca


Information for individuals on residency for tax purposes.




www.canada.ca





Leaving Canada ... see "Departure Tax" for the capital gains tax when leaving





Leaving Canada (emigrants) - Canada.ca


Information for individuals who leave Canada to settle in another country and who are considered emigrants for income tax purposes.




www.canada.ca








K Moore said:


> ...Also, will there be a dividend withholding tax on my Canadian dividends? I have quite a lot of my investments in Cdn banks, utilities, pipelines, etc. I read somewhere that there is no capital gains tax if I'm living in Thailand, but a 25% withholding tax on my Cdn dividend stocks. I'm just wondering if this is true.


Non-residents of Canada with Canadian income paying investments pay a default 25% withholding tax (called Part XIII tax). This may be reduced by a tax treaty with the country of tax residence. 

For example, the Canada - US tax treaty reduces the 25% withholding tax to 15% for a US resident. Keep in mind that the same treaty reduces the US withholding tax of 30% to 15% for a Canadian.






Non-residents of Canada - Canada.ca


Information about the income tax rules that apply to non-residents of Canada.




www.canada.ca





I'd recommend checking if there is a Thai - Canada tax treaty.


Some other things to keep in mind. For the TFSA, it remains Canadian tax free so that only the Thai taxes will matter. Before you leave is the last you can contribute to the TFSA as becoming a non-resident means managing the TFSA and withdrawals are all that are available to you.

For the RRSP, periodic payments might have a lower withhholding tax than lump sum withdrawals. If there is a tax treaty and what is in the tax treaty matters. For example, there is a Canada - UK tax treaty but the UK tax authority has a bulletin that says RRSP lump sum withdrawals _are_ double taxed.


Cheers


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## londoncalling (Sep 17, 2011)

Here is a link on International Double taxation which may be of value to the OP.

Double Taxation - Oveview, Categories, How To Avoid (corporatefinanceinstitute.com)


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