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Hi David,
I live in Canada but I have an account with a U.S. online stock
broker. I buy and sell stocks through this U.S. account. I went
with a U.S. broker because the commissions are one third of any
Canadian brokerages. What are the consequences of a Canadian
trading stocks using a U.S. brokerage as opposed to a Canadian
brokerage. Are there additional steps I need to take in terms of
reporting capital gains and losses?
Thanks,
N XXXXXX
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david ingram replies.
If you have used a US address, your broker will not be
withholding US taxes of 15% on dividends.
If your broker is not withholding the tax, you need to file a
1040NR and report your dividends to the US and pay 15% tax in
accordance with Article X of the US / Canada Income Tax
Convention (1980).
If your broker is withholding, you will receive a 1042S reporting
form showing the 15% tax.
In either case, you have to report the US figures on your
Canadian tax return. In the first case, you would attach a copy
of the 1040NR showing the 15% paid to your Canadian Tax return.
In the second case, you would attach copy of the 1042S.
In spite of the fact that Article XI of the Convention states
that Canadians should pay the US 10% tax on interest,
Non-residents of the US do not usually pay any tax on interest to
the US if the interest is not connected with a trade or business
but is simply paid on deposits.
So, convert the US dollars to
Canadian and report the US interest on schedule 4 of your
Canadian return. If, by some fluke, you did have 10% tax
deducted, claim the tax on your Schedule 1 and your Provincial
Schedule (BC428)
The US does not tax non-residents and non-citizens on any stock
profits. No tax return is required for any capital gains. Just
convert to Canadian Dollars and file as part of Canadian Schedule
3.
.
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