QUESTION: A friend of mine, a foreign diplomat currently residing in Canada,
recently approached me regarding the prospect of investing in Canada. He
would like to set up a discount brokerage, or perhaps a full-service
brokerage account, here in Canada and use it to buy a mix of Canadian and
European stocks. He inquired as to what the tax implications of such a
decision would be given that he currently declares all his income in his
native country xxxxxxx?
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david ingram replies:
Although most countries have treaties with Canada, this country does not.
However, he or she is granted the tax benefits of a diplomat anyway and is
treated as a non-resident of Canada for tax purposes and any salary paid to
him as a diplomat is not taxed in Canada.
However, the same consideration does NOT apply to tax on investments.
He or she is taxable at 25% on interest and dividends and should declare to
any bank or financial institution they are dealing with to treat them as a
non-resident of Canada and deduct 25% of any dividends, interest or
royalties.
If he or she was a diplomat from the US as an example, the tax paid to
Canada would be 10% on interest and 15% on dividends.
In either case, there is no tax on capital gains for publicly traded stocks
as a non-resident.
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