Sep 152016
 

So you’ve finally decided it’s too cold here, or you’re sick of Tim Hortons coffee, or some beautiful person has stolen your heart and keeping it hostage in another country. Whatever the circumstance you’re exiting Canada for an unspecified amount of time. But what do you do with your massive swollen nest egg all tucked away in the Toronto Stock Exchange?

Option 1: Don’t Change Anything, Freeze Your Account

If your brokerage allows it you can keep your investment accounts as-is after you leave and potentially avoid:

  • Transaction fees
  • Account closing fees
  • Wire transfer fees
  • Currency conversion fees
  • Realized gains/loses from selling your investments
  • Lost growth during the lag time between selling in Canada and re-investing in your new country

That’s a lot of fees that can be avoided. But they might be pennies compared to the financial disadvantages. Normally if you leave your account it will become FROZEN, meaning you can’t do anything except watch what happens. Some of the implications of a frozen account include:

  • No rebalancing
  • Dividends sit as cash
  • Complex cross-border taxes
  • No access to funds if they’re needed

What about selling everything and closing the account?

Option 2: Liquidate Accounts and Re-invest in Your New Country

Depending on your brokerage, selling might be your only option (Questrade, for example, does not allow non-residents to hold a margin account). Taking your money with you has some benefits:

  • Lower taxes (maybe)
  • Access to better investments
  • Simplified tax reporting
  • Avoidance of jail time and/or $10,000+ fines (your Canadian investments might be considered offshore tax evasion)

Of course the tax benefit won’t matter if Canada is still taxing your worldwide income, and that’s the first thing you need to check:

Continue reading »

Sep 202015
 

So you own a few ETFs and you’re ready to optimize your accounts. Especially you rich chumps and chumpettes with taxable accounts! Well swap ETFs are a crazy scheme with the primary benefit being tax savings. I mean, what’s with these governments! How dare they use our hard earned money to pay for roads, schools, and fundamental basic services! Even the so called “Tax Free Savings Account” is subject to some foreign withholding taxes.

Never fear, your crazy uncle has a scheme for those taxes!

 


Get to the point! What’s a swap ETF?

Well let me break it down for you wizards. A swap ETF essentially turns dividends or interest income into capital gains. Why would you want that? Because foreign dividends and interest are taxed at your full income tax rate, meanwhile capital gains are only half that. If you make over $138,586 your federal tax rates will be like so: Continue reading »