# after someone leaves Canada, what foreign income do they report for the final T1?



## user (Sep 21, 2009)

Starting the day after someone leaves Canada, does the non-resident have to declare (for that year's T1):
- interest from bank accounts held outside Canada? 
- dividends from foreign stocks held outside Canada?
- dividends from foreign stocks held in Canadian brokers? 
- capital gains from foreign stocks held outside Canada?
- capital gains from foreign stocks held in Canadian brokers? 

I assume Canadian-sourced income (interest/dividend/capital gains) always have to be included (please correct me if I'm wrong).


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## AltaRed (Jun 8, 2009)

All worldwide income received up to the date of departure must be included in the T1 for that tax year. Additionally, all deemed capital gains on capital property must be declared with the 'deemed' selling price being the Fair Market Value of those securities on the date of departure, particularly if that individual is leaving Canada to become a tax resident of another country (there are exceptions for temporarily absent for a year or two where an individual continues to be a tax resident of Canada).

After date of departure, the individual becomes a tax resident of his/her new country of residence and is responsible for paying taxes in his/her new country. There are certain provisions in the tax treaty between Canada and the new country of residence on how to handle specific issues and to mitigate double taxation. It is recommended the OP engage the services of a good cross-border tax accountant to avoid making major mistakes.


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## user (Sep 21, 2009)

Since foreign income of a non-resident would no longer be taxed, I assume the answer to the original question is that none of the aforementioned items would be included in Canada's T1 after the departure date. 

I think that means a non-resident can hold foreign (eg. U.S.) stocks in Canadian brokers, and pay no capital gains tax in Canada on their sale (presumably the non-resident would pay capital gains tax where he lives). So if the non-resident lives in a country with no tax on capital gains, he would pay no capital gains tax on such stocks held in Canada (please correct me if I'm wrong), unless capital gains would be withheld by the broker. Does anyone know of any withholding tax being applied to capital gains on U.S. or international stocks? I know there can be a 30% withholding tax on U.S. dividends to non-residents, but I don't know of a withholding tax on U.S. capital gains.


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## Eclectic12 (Oct 20, 2010)

From CRA's link ... http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/lvng-eng.html



> Part of the tax year that you WERE a resident of Canada
> 
> Report your world income (income from all sources, both inside and outside Canada) on your Canadian tax return.
> Part of the tax year that you WERE NOT a resident of Canada
> ...


So I'd expect that after the date, one would only be reporting the foreign income on whatever country they have moved to and not the Canadian return.




user said:


> .. I think that means a non-resident can hold foreign (eg. U.S.) stocks in Canadian brokers, and pay no capital gains tax in Canada on their sale (presumably the non-resident would pay capital gains tax where he lives).


Don't forget that as one was a Canadian resident to setup the Canadian brokerage account then buy the US stock, becoming a NR means one is deemed to have sold the US stock on the date of departure at FMV. 
http://www.theglobeandmail.com/glob...the-departure-tax-when-going/article22032765/

So where the new country does not have a CG tax, it is more likely that future CG will be avoided as opposed to all CG taxes.

Withholding tax for US dividend income I expect would at least stay at 15% but may at some point be bumped up to the more normal 30%, if one is deemed to no longer be Canadian. Or is it Canadian residency that gets this reduction?


Regardless, my key point is that moving to another country will not avoid any CG that has not been captured yet by the Canadian gov't.

Cheers


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## AltaRed (Jun 8, 2009)

user said:


> Since foreign income of a non-resident would no longer be taxed, I assume the answer to the original question is that none of the aforementioned items would be included in Canada's T1 after the departure date.
> 
> I think that means a non-resident can hold foreign (eg. U.S.) stocks in Canadian brokers, and pay no capital gains tax in Canada on their sale (presumably the non-resident would pay capital gains tax where he lives). So if the non-resident lives in a country with no tax on capital gains, he would pay no capital gains tax on such stocks held in Canada (please correct me if I'm wrong), unless capital gains would be withheld by the broker. Does anyone know of any withholding tax being applied to capital gains on U.S. or international stocks? I know there can be a 30% withholding tax on U.S. dividends to non-residents, but I don't know of a withholding tax on U.S. capital gains.


After you leave Canada and become a non-resident of Canada for tax purposes, you owe Canada no further taxes EXCEPT for withholding taxes on Canadian sourced income, e.g. 15% on dividends or whatever the tax treaty provides for, withholding tax on interest on a similar basis, any rental income you may have from property you own in Canada. It is called Part XIII NR tax and should be automatically withheld by the financial institutions once they know of your non-Canadian address. Until you change those addresses, you would have to complete Part XIII NR tax returns to Canada. Obviously, it is much easier to change your mailing address and have the financial institutions do that that for you.

There is no withholding tax by Canada on any capital property sales after departure from Canada, whether that is Canadian or US or International stocks. That is because you will have owed capital gains taxes to Canada on ALL capital gains of ALL worldwide property based on the day of departure. Example: You held RY bank stock and JNJ stock while living in Canada. The ACB of RY is $1000 and the ACB of JNJ is $10000. On the day you depart from Canada such as May 2016, the fair market value of RY is now $3000 and the fair maket value of JNJ is $12000. You wll need to file a 2016 tax return to Canada and pay cap gains tax on $2000 of gains on the RY stock and cap gains tax on $2000 of gains on the JNJ stock, regardless of not having sold them. Canada deems them to be sold and that is how Canada gets its pound of flesh based on the time you lived here. 

If and when you sell that RY and JNJ stock in the future, you will owe no more cap gains tax to Canada, but you will however owe cap gains tax on those 2 stocks to whichever country you now reside in... if that country taxes cap gains. If it has no cap gains tax, then there are no further taxes due when those stocks are sold.


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## user (Sep 21, 2009)

Eclectic12 said:


> So where the new country does not have a CG tax, it is more likely that future CG will be avoided as opposed to all CG taxes.


It makes sense that residents will pay the taxes due in the year of departure. I was only thinking about the long term.



> Withholding tax for US dividend income I expect would at least stay at 15% but may at some point be bumped up to the more normal 30%, if one is deemed to no longer be Canadian. Or is it Canadian residency that gets this reduction?


I think reduced withholding rates are based on current residence, not citizenship: "withholding agents may apply reduced rates or be exempted from withholding tax (WHT) at source when there is a tax treaty between the foreign person's *country of residence* and the United States." http://taxsummaries.pwc.com/uk/taxsummaries/wwts.nsf/ID/United-States-Corporate-Withholding-taxes



AltaRed said:


> After you leave Canada and become a non-resident of Canada for tax purposes, you owe Canada no further taxes EXCEPT for withholding taxes on Canadian sourced income, e.g. 15% on dividends or whatever the tax treaty provides for,


And it's 25% if there's no treaty: http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html




> If it has no cap gains tax, then there are no further taxes due when those stocks are sold.


Trading U.S. stocks can be more expensive overseas so it could be more efficient to hold stocks here. One concern I have now is the U.S. withholding tax on dividends: up to 30% applies to ordinary dividends, but what about returns of capital? For example someone living in a non-treaty country uses a Canadian brokerage to buy an US ETF for $1000. Assuming no change in price, if the ETF company liquidates the holding and returns the money, would the investor get back $1000 or $700?


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## AltaRed (Jun 8, 2009)

user said:


> Trading U.S. stocks can be more expensive overseas so it could be more efficient to hold stocks here. One concern I have now is the U.S. withholding tax on dividends: up to 30% applies to ordinary dividends, but what about returns of capital? For example someone living in a non-treaty country uses a Canadian brokerage to buy an US ETF for $1000. Assuming no change in price, if the ETF company liquidates the holding and returns the money, would the investor get back $1000 or $700?


Not sure how that is treated for a non-resident of Canada (using a Canadian brokerage account). Canada itself does not care since that person is not a tax resident of Canada. I think though it would be a rare instance of capital (buy/sell) transactions being subject to any withholding anywhere (except by the tax regime in the country of residence). What you are describing is not really 'return of capital'. It is really a capital sale of the ETF units.


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## user (Sep 21, 2009)

AltaRed said:


> I think though it would be a rare instance of capital (buy/sell) transactions being subject to any withholding anywhere (except by the tax regime in the country of residence). What you are describing is not really 'return of capital'. It is really a capital sale of the ETF units.


Not being taxed on the proceeds would be ideal, but I haven't read much about it. If anyone can share some articles that address differences in withholding for different types of distributions, I'd appreciate it.


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## Eclectic12 (Oct 20, 2010)

user said:


> It makes sense that residents will pay the taxes due in the year of departure. I was only thinking about the long term.


Fair enough.





user said:


> I think reduced withholding rates are based on current residence, not citizenship ... And it's 25% if there's no treaty: http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html ...


For US stocks paying dividends, the first level is going to be the US. Canadians get a reduction from the more usual 30% down to 15%. The dividends are US source income so I am not sure that the Canadian NR tax rates would apply ... unless maybe it generates NR taxable interest?




user said:


> Trading U.S. stocks can be more expensive overseas so it could be more efficient to hold stocks here. One concern I have now is the U.S. withholding tax on dividends: up to 30% applies to ordinary dividends, but what about returns of capital?


From a US tax perspective ... I believe only the change from 15% to 30%, when I would think that the Canadian broker rescinds the W8-Ben form that was used to claim the US - Canada tax treaty benefits.

The CG is reported on a Canadian tax return while one is a Canadian tax resident. Should the country being moved to have no CG - I would think that would be the end of the story.

Of course the other question is whether the regulations would allow the Canadian brokerage account holder to keep trading beyond what is in the account. For example, when one becomes a NR - I seem to recall reading that one is no longer granted TFSA contribution room and one can no longer make contributions. Withdrawals will become contribution room but one has to become a Canadian tax resident to make use of the contribution room.

There may be a limit on how long one can trade ... but I'm not an expert and have only what I've read to go by.




user said:


> ... For example someone living in a non-treaty country uses a Canadian brokerage to buy an US ETF for $1000. Assuming no change in price, if the ETF company liquidates the holding and returns the money, would the investor get back $1000 or $700?


RoC is only the tax classification for income paid by the ETF ... I would understand it to be irrelvant.

The ETF company winding up then passing the proceeds back would be the same as if the investor sold the units, I would think. It should then be the full $1K as what is being paid is not a dividend or income. It may depend on how the windup is registered with the US gov't and their tax laws.


Cheers


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## Eclectic12 (Oct 20, 2010)

user said:


> Not being taxed on the proceeds would be ideal, but I haven't read much about it. If anyone can share some articles that address differences in withholding for different types of distributions, I'd appreciate it.


It is easy to find the income part ... though the articles are written from the perspective of a Canadian tax resident so the proceeds are taxed by Canada as a run of the mill CG.

http://www.taxtips.ca/personaltax/investing/taxtreatment/etfs.htm (Note that US ETFs apparently are not all the same.)

Then too ...
http://www.taxtips.ca/personaltax/usestatetax.htm


Likely one should do a thorough investigation of the US tax situation as well. Some green card holders are surprised to learn that losing their PR status does not necessarily mean they have stopped being a US tax resident (where world wide income is taxed), where for some - they have to file a US tax return for up to ten years after becoming a NR.

http://www.nolo.com/legal-encyclopedia/visa-green-card-holder-pay-taxes-29639.html


It likely does not apply but does show that the US does things differently.


Cheers


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## user (Sep 21, 2009)

Eclectic12 said:


> For US stocks paying dividends, the first level is going to be the US. Canadians get a reduction from the more usual 30% down to 15%. The dividends are US source income so I am not sure that the Canadian NR tax rates would apply ... unless maybe it generates NR taxable interest?


I think those were two separate things: without a treaty, Canadian dividends are withheld by Canada at a rate of 25% (Part XIII), while US dividends are withheld by the US at 30% (US withholding tax).



> Of course the other question is whether the regulations would allow the Canadian brokerage account holder to keep trading beyond what is in the account. For example, when one becomes a NR - I seem to recall reading that one is no longer granted TFSA contribution room and one can no longer make contributions. Withdrawals will become contribution room but one has to become a Canadian tax resident to make use of the contribution room.


In the context of my question I was only thinking about non-registered accounts in Canada. I have not read about any limits regarding the amount a non-resident can have in non-registered accounts.



> RoC is only the tax classification for income paid by the ETF ... I would understand it to be irrelvant.
> 
> The ETF company winding up then passing the proceeds back would be the same as if the investor sold the units, I would think. It should then be the full $1K as what is being paid is not a dividend or income. It may depend on how the windup is registered with the US gov't and their tax laws.


Since return of capital is a Canadian tax term, I'll avoid using that term in general ways. My broker refers to the proceeds as "liquidation" in the statement when an ETF I held was wound up. I haven't read an article about withholding tax (or the lack of it) on liquidation from the perspective of a non-resident person holding US stock.


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## Eclectic12 (Oct 20, 2010)

user said:


> I think those were two separate things: without a treaty, Canadian dividends are withheld by Canada at a rate of 25% (Part XIII), while US dividends are withheld by the US at 30% (US withholding tax).


My point is that as I read it ... once the NR has reported to their Canadian brokerage they are a NR, whatever mechanism will not that. This will mean that Canadian dividends like BCE that used to have nothing withheld will have the Canadian rate withheld.

The Canadian broker will presumably notify the US, where the US withholding rate may change.

At the end of the day, only one withholding rate will be applied where it depends on where the dividends are sourced.


As the focus was the US stock, I don't see any reason the Canadian NR withholding rates would come into play.




user said:


> ... In the context of my question I was only thinking about non-registered accounts in Canada. I have not read about any limits regarding the amount a non-resident can have in non-registered accounts.


 ... and I am pointing out that there are restrictions on at least one registered account so it would be worth your while to check this out. There may not be any restrictions but finding out for sure seems the better way to go.




user said:


> ...Since return of capital is a Canadian tax term, I'll avoid using that term in general ways ...


Since when?

This article seems to be talking about US ETF taxation as it talks about for equity/fixed income types, the short term Capital Gains tax is 39.60% while long term is 20%. These are definitely not Canadian CG rates.

It also talks about:


> ... the passing of the Patient Protection and Affordable Care Act, singles with an adjusted gross income (AGI) over $200,000 and married filing jointly with an AGI over $250,000 are now subject to an additional 3.8 percent Medicare surcharge tax on investment income, which includes all capital gains, interest and dividends.


As I understand it, married filing jointly and Medicare are US tax things.


In the section marked "Taxation of Distributions":


> Besides taxes on capital gains incurred from selling shares of ETFs, investors also pay taxes on periodic distributions paid out to shareholders throughout the year. These distributions can be from dividends paid out from the underlying stock holdings, interest from bond holdings, *return of capital* or capital gains—which come in two forms: long-term gains and short-term gains.


It is dated 2014 so unless something has changed recently, it seems that both Canada and the US use RoC.

http://www.etf.com/sections/white-papers/21207-definitive-guide-to-2014-etf-taxation.html


Cheers


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## Eclectic12 (Oct 20, 2010)

user said:


> ... My broker refers to the proceeds as "liquidation" in the statement when an ETF I held was wound up. I haven't read an article about withholding tax (or the lack of it) on liquidation from the perspective of a non-resident person holding US stock.


NR or Canadian resident does not matter. The only way the proceeds would attract US with holding tax is if it was considered income. If this was the case, the US ETF that you previously had wound up should have had the US 15% withholding tax reducing it (reduced from 30% to 15% for a Canadian).

My thought was that wind up = selling = an accepted buyout. If you can confirm that the stated proceeds = what you received at your Canadian broker, I think this confirms that a NR would receive the same treatment.


Cheers


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## user (Sep 21, 2009)

Eclectic12 said:


> As the focus was the US stock, I don't see any reason the Canadian NR withholding rates would come into play.


In that post I was just expanding on AltaRed's post that non-residents owe Canada no taxes except for witholding taxes on Canadian sourced income, in which case Canadian withholding applies. 



> ... and I am pointing out that there are restrictions on at least one registered account so it would be worth your while to check this out. There may not be any restrictions but finding out for sure seems the better way to go.


Yes if anyone knows any limits for non-residents' non-registered accounts, please inform. It's more well known that the CRA has targeted TFSA accounts that are too large or trade too frequently for their liking, but I'm not concerned about that.




> Since when?


I meant to say it's a tax term used in Canada. Other countries probably use it too -- Wikipedia says ROC refers to payment that "exceed the growth (net income/taxable income) of a business or investment." 

I just wanted to say "when I get the money back". As it was pointed out, I conflated return of capital with the sale or liquidation of a fund.



> This article seems to be talking about US ETF taxation as it talks about for equity/fixed income types, the short term Capital Gains tax is 39.60% while long term is 20%. These are definitely not Canadian CG rates.


Yes but I didn't find something that mentioned withholding taxes specifically. I think the section about the taxation of distributions is talking about income tax, not withholding tax per se.



> The only way the proceeds would attract US with holding tax is if it was considered income. If this was the case, the US ETF that you previously had wound up should have had the US 15% withholding tax reducing it (reduced from 30% to 15% for a Canadian).


It's true that this liquidation must not be considered dividend income by the US government since there was no 15% withholding. It's also true that as a Canadian resident I incurred no withholding on this amount. But I'm not sure that this alone shows that a non-resident would receive the same treatment. Hypothetically, the treatment might have been different had I used a foreign address and a different W8-BEN form (I have no evidence to suggest that's the case).

The following discussion mentioned that the US-Canada treaty entitles the Canadian resident to a withholding rate of 0% on capital gains (Article XIII):
http://www.financialwisdomforum.org/forum/viewtopic.php?t=102381

The US-Canada treaty is here, but it's not clear to me what the corresponding rate is for non-treaty countries:
http://www.fin.gc.ca/treaties-conventions/usa_-eng.asp


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## Eclectic12 (Oct 20, 2010)

user said:


> ... Yes but I didn't find something that mentioned withholding taxes specifically. I think the section about the taxation of distributions is talking about income tax, not withholding tax per se.


I was quoting the article to show RoC was used by the US for US tax residents as well.

There won't be any withholding tax on the income for a US tax resident on US dividend income as this is reported on the US tax return ... just like a Canadian is not subject to the Canadian withholding tax on Canadian company dividends that a US tax resident is charged.




user said:


> ... It's true that this liquidation must not be considered dividend income by the US government since there was no 15% withholding. It's also true that as a Canadian resident I incurred no withholding on this amount. But I'm not sure that this alone shows that a non-resident would receive the same treatment.


As a Canadian filing just a Canadian tax return when the US ETF was liquidated ... aren't you a US NR?

Being a NR for a different country likely only means that whatever benefits a Canadian NR gets (ex. dividend withholding tax reduced by 15%) will be replaced by whatever the US to country of residence tax treaty allows or nothing, if there is no tax treaty. Assuming of course that when you notify the Canadian broker your new country of residence, the broker rescinds the W8-BEN or files a new one with your new country of residence.




user said:


> Hypothetically, the treatment might have been different had I used a foreign address and a different W8-BEN form (I have no evidence to suggest that's the case).


In terms of treaty benefits, which is what the W8-BEN is electing to claim ... sure. 
In terms of what is proceeds/capital gains and what is dividends subject to NR withholding tax, AFAICT the usual situation is the source country to withhold taxes on the income and leave the capital gains taxation to the country of residence.

Perhaps it is in your best interest to consult a tax specialist who is familiar with the US, Canadian and preferred country of residence laws?




user said:


> The US-Canada treaty is here ...


Won't becoming a NR of Canada throw away the benefits in this treaty?
Wouldn't the key tax treaty to be between the US and the new country of residence?
I would expect that worst case, as soon as broker rescinds the W8-BEN, the US rules for countries that don't have a tax treaty would kick in.


Cheers


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## Eclectic12 (Oct 20, 2010)

user said:


> ... if anyone knows any limits for non-residents' non-registered accounts, please inform ...


Nothing to prove for sure but this American who has moved to Canada says trading as a Canadian resident in the US non-registered account is no longer allowed. http://canadianmoneyforum.com/showthread.php/90641-Short-term-bond-funds-in-taxable

Nothing I am aware of forces Canada to go the same route but so many things are similar across the two countries that it would not be shocking if Canadian brokerages did the same thing.


Cheers


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## user (Sep 21, 2009)

Eclectic12 said:


> As a Canadian filing just a Canadian tax return when the US ETF was liquidated ... aren't you a US NR?


By non-resident I meant a non-resident of Canada, as opposed to a Canadian resident who benefits from the Canada-US treaty. 



> In terms of what is proceeds/capital gains and what is dividends subject to NR withholding tax, AFAICT the usual situation is the source country to withhold taxes on the income and leave the capital gains taxation to the country of residence. Perhaps it is in your best interest to consult a tax specialist who is familiar with the US, Canadian and preferred country of residence laws?


That is our impression here so far. I'd like to do my part to gather available information first. I've found that a lot of accountants don't have specific information like this first hand. (If anyone knows a tax professional with definite knowledge in this area, feel free to let me know)



> I would expect that worst case, as soon as broker rescinds the W8-BEN, the US rules for countries that don't have a tax treaty would kick in.


That's the information I'm looking for: the prescribed rate of withholding on capital for non-treaty countries. The signs suggest 0% or no withholding, but where exactly do the U.S. rules say that? And also where do the Canadian rules say that?



> Nothing to prove for sure but this American who has moved to Canada says trading as a Canadian resident in the US non-registered account is no longer allowed.


Good idea, I'll ask some brokers if trading by non-residents is even allowed. If not, this would be a moot discussion!


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## Eclectic12 (Oct 20, 2010)

user said:


> By non-resident I meant a non-resident of Canada, as opposed to a Canadian resident who benefits from the Canada-US treaty.


Unless you believe the writers talking about the Canada-US tax treaty missed the treaty granting an exemption from paying US CG taxes ... I suspect it is relatively safe to think that a non-resident of the US does not have to CG taxes to the US for run of the mill US stocks.

I say run of the mill as I have seen articles saying that things like certain limited partnerships are charged 40% withholding taxes so there may be exceptions.




user said:


> That is our impression here so far. I'd like to do my part to gather available information first. I've found that a lot of accountants don't have specific information like this first hand. (If anyone knows a tax professional with definite knowledge in this area, feel free to let me know)


I am not sure you are providing enough information. Those working in the US while maintaining Canadian tax residency have complained they have had difficulty finding experts. AFAICT, you'd like an expert in US to an unknown country plus the Canada to the same unknown country. Over and above that, you need to know what limits - if any, the Canadian brokerage is going to place when they are notified that the account holder has dropped their Canadian tax residency to become a tax resident of the unknown country.

FWIW ... some of other threads about dropping Canadian tax residency by moving to another country said when the poster did it, two years out of Canada was required for CRA to approve the change. I have no info as to whether this is an old situation or is still in effect.




user said:


> That's the information I'm looking for: the prescribed rate of withholding on capital for non-treaty countries. The signs suggest 0% or no withholding, but where exactly do the U.S. rules say that?


Investopedia says basically this, as long as one has not passed the substantive presence test.
http://www.investopedia.com/ask/answers/06/nonusresidenttax.asp
https://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test

I believe having a green card would do the same thing as the substantive presence test.


An IRS publication adds that to be taxed on CG, one has to be present for 183 days (though I suspect having a green card will do the same thing) for a CG tax to apply. 

There are some exceptions like CG on the disposal of timber, coal, or domestic iron ore with a retained economic interest. Another exception is on the sale or exchange of original issue discount obligations (I am confident the exception for patent/copyright sales won't apply :biggrin: ).

https://www.irs.gov/publications/p519/ch04.html#en_US_2015_publink1000222345


Confirming the Canadian rules should be a lot easier.


Cheers


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## user (Sep 21, 2009)

Eclectic12 said:


> I say run of the mill as I have seen articles saying that things like certain limited partnerships are charged 40% withholding taxes so there may be exceptions.


Exceptions are good to know. Sounds like there's a 39.6% withholding tax from partnerships with "income effectively connected with a U.S. trade or business":
https://www.irs.gov/Individuals/International-Taxpayers/Partnership-Withholding
https://www.irs.gov/Individuals/International-Taxpayers/Effectively-Connected-Income-(ECI)



> I am not sure you are providing enough information. Those working in the US while maintaining Canadian tax residency have complained they have had difficulty finding experts. AFAICT, you'd like an expert in US to an unknown country plus the Canada to the same unknown country. Over and above that, you need to know what limits - if any, the Canadian brokerage is going to place when they are notified that the account holder has dropped their Canadian tax residency to become a tax resident of the unknown country.


Not having a treaty would generally be the worst case at the U.S. side, so that'd be a baseline (besides something like sanctions I suppose). One broker told me that I wouldn't be able to keep my old account if I move but I can start a application for a new account; not yet sure if they meant a new account with at the same Canadian branch or a different national branch. 



> FWIW ... some of other threads about dropping Canadian tax residency by moving to another country said when the poster did it, two years out of Canada was required for CRA to approve the change. I have no info as to whether this is an old situation or is still in effect.


Do you still have the link? It helps to have more precedents. My impression so far is that tax residency in Canada involves multiple factors so there may be some grey area.



> Investopedia says basically this, as long as one has not passed the substantive presence test.
> http://www.investopedia.com/ask/answers/06/nonusresidenttax.asp
> https://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test
> 
> ...


Good find, I like Investopedia's definite wording: "non-resident aliens are subject to no U.S. capital gains tax, and no money will be withheld by the brokerage firm." It's not a legal document but it's good to know. Thanks!

I haven't found something specific about the Canadian rules either so I'd appreciate info on that too. I'm generally more interested in U.S. ETFs though, due to the selection available.


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## Eclectic12 (Oct 20, 2010)

user said:


> ... One broker told me that I wouldn't be able to keep my old account if I move but I can start a application for a new account; not yet sure if they meant a new account with at the same Canadian branch or a different national branch.


Some have branched out into other countries so that may be a possibility. 

If they mean "another Canadian based account", I am not sure why there would be a need. To have Canada charge the correct Canadian NR withholding, one reports the new country of residence to the broker. The broker then knows what adjustments, if any, need to be passed on to the US gov't. The rules/process may not make sense though. 





user said:


> ... Do you still have the link? It helps to have more precedents. My impression so far is that tax residency in Canada involves multiple factors so there may be some grey area.


It was in one of the other threads here in the Taxation section where some were saying one needs to let CRA know for sure the departure date. Someone who had become a NR for years then came back to Canada posted that when they left, the notification was made but that one had to be NR for two years before the one finally became a NR.

I can't recall if anyone had a more recent experience ... though once the tax season has finished so that it is easier to get through to CRA, one could call to inquire.


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> It was in one of the other threads here in the Taxation section where some were saying one needs to let CRA know for sure the departure date. Someone who had become a NR for years then came back to Canada posted that when they left, the notification was made but that one had to be NR for two years before the one finally became a NR.
> 
> I can't recall if anyone had a more recent experience ... though once the tax season has finished so that it is easier to get through to CRA, one could call to inquire.


The departure date is supposed to be always in the last T1 return (which is also the return in which cap gains on deemed disposition of property is also paid) so that is a known, e.g. someone who left Mar 1, 2016 would put that date in the 2016 T1 Return when it was filed April 2017. CRA would typically question when someone returns within about a two year period (from departure date)...considering it a 'temporary' absence rather than a 'permanent' absence, but it would be the tie-breaking provisions in the tax treaty between Canada and Country X that would determine tax residency in the intervening period.

I agree that financial institutions generally know what withholding taxes need to be deducted from Canadian sourced income IF the owner of the accounts has provided the FI with a proper out-of-country mailing address. Most FIs deal with this sort of thing all the time, at least the major institutions (banks and brokerages) do. I wouldn't trust the smaller players such as credit unions to necessarily know what to do.


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## user (Sep 21, 2009)

Eclectic12 said:


> Some have branched out into other countries so that may be a possibility.


The broker informed me that non-residents can't have accounts with their Canadian entity, but opening a new account with another entity would be fine using the new address (they didn't say if their U.S. entity would be handling it). Not sure if this restriction is due to Canadian legislation or individual business practice. I'll check if other brokers are the same.


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