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My question is: Applicable to both US and Canada
QUESTION: I would like to open a trding account with OptionXpress to trade stocks and Options. Being a Canadian citizen will I be charged any USA taxes as the OptionXpress office is in Chicago.
OptonXpress tells me that I will not be charged any Taxes but I may have holdings according to the Tax treaty.
Could you please explain how it works.
Regards.
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david ingram replies:
First of all, I think that you are nuts to trade options.
However, if you are a Canadian resident and NOT a US citizen living in Canada, there are no capital gains taxes payable on gains from trading in US Publicly traded stocks to the US government. There is also no US tax on interest you receive for any money on deposit in the account or any bonds or other indentures you might own.
However, there is a 15% withholding tax on any dividends that the stock pays you when you are holding it.
Now that you know you do not have to pay tax to the US on interest and capital gains, they are both taxable in Canada along with the dividends.
Any profit on your stock must be reported on your Canadian Income tax return and any dividends and interest will be reported on your Canadian Tax return. In the case of the dividends, you can claim credit for the 15% tax paid to the US by filling in fields 431 and 433 on Schedule 1 of your Canadian Return and the corresponding fields on the provincial tax calculation form.
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