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roberb7


Apr 10, 2018, 8:33 AM

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Problems with Canadian bank accounts

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Last Fall, I made the mistake of giving Scotia iTrade my Mexican address, and the result was, they told me they were going to liquidate my accounts there, except for the RRIF.
To make a long story short, I transferred my acounts there (RRIF, TFSA, and brokerage) to TD. TD has a Canadian address for me. However, I just received a letter from TD Direct Investing asking me to complete and return a "Tax Residency Self-Certification for New Clients" form, even though I'm not really a new client. The form says that if my permanent resident address is not in Canada or the US, I have to provide a "reasonable explanation". Examples of reasonable explanations are student, diplomat, teacher... and "retiree" is not one of them.
I definitely don't want a repeat of what happened with Scotia. Has anyone else here run into this situation? And advice?

P.S. I found this in Qtrade's customer agreements and disclosure documents: "In the event a client becomes a non-resident of Canada, automatic rebalancing of the account will be suspended and and only sell transactions will be permitted." So, it's not just Scotia iTrade, and it sounds like becoming a non-resident of Canada is a bad idea.


(This post was edited by roberb7 on Apr 10, 2018, 9:29 AM)



yTABDGdW

May 9, 2018, 11:43 AM

Post #2 of 10 (2379 views)

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Re: [roberb7] Problems with Canadian bank accounts

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If you decide to be non-resident of Canada, I believe you cannot use a brokerage account, contribute to RRSPs etc. It's not just Scotia iTrade or whatever. It's nationwide.

As a non-resident of Canada, you would file and pay taxes to Mexico not Canada on all your income. Mexico taxes world income. As a resident of Mexico, you could open a brokerage account in Mexico and trade that way.

I assume, however, that you want to keep your money in the stable Canadian system as opposed to the volatile Mexican peso?

In that case, I would look into being a "factual resident of Canada for tax purposes" which means you would file and pay taxes to Canada and maintain a Canadian address on your bank accounts. In that way, perhaps you could keep your brokerage accounts active in Canada.

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html

Another alternative is to designate your Canadian bank accounts as non-resident accounts. You can keep your money in your Canadian non-resident bank accounts, but you still won't be able to trade with a brokerage account. If you don't want your brokerage account in Mexico, you could look at getting an expat brokerage account like Internaxx in Luxembourg. The other option is that you can get a brokerage account in Canada with TD as a non-resident, but you have to show up physically to open the account.

http://td.intelliresponse.com/cbaw/?requestType=NormalRequest&source=3&id=7711&question=I+do+not+reside+in+Canada.+Can+I+open+an+account+at+TD+Direct+Investing

http://profitmoose.com/moving-out-of-canada-part-1/

https://mexlaw.ca/becoming-non-resident-canada-tax-purposes/


(This post was edited by yTABDGdW on May 9, 2018, 12:06 PM)


roberb7


May 9, 2018, 1:23 PM

Post #3 of 10 (2366 views)

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Re: [yTABDGdW] Problems with Canadian bank accounts

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First, thanks for the response.

> As a non-resident of Canada, you would file and pay taxes to Mexico not Canada on all your income. Mexico taxes world income.

What I've been doing is filing tax returns to Canada every year, because that's where most of my income comes from. (It took 11 months to receive my refund last year. This year, I owe them money, because of the capital gain from selling my Scotiabank stock.)

> I assume, however, that you want to keep your money in the stable Canadian system as opposed to the volatile Mexican peso?

No, I think I could trust Actinver (to give one example) with my assets. There are several other issues.

1. I have a lot of long term common stock holdings. Transferring them from a brokerage account in one country to a brokerage account in another country would be a nuisance. It might not even be possible.

2. I have some Canadian mutual funds. They wouldn't transfer at all.

3. There's also GIC's. When Scotiabank started talking about "liquidation", one of the first thoughts that came to mind was, who's going to pay the early withdrawal penalties when those GIC's are liquidated? My guess is, not them.


sanjuan

May 24, 2018, 10:49 AM

Post #4 of 10 (2194 views)

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Re: [yTABDGdW] Problems with Canadian bank accounts

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In Reply To
If you decide to be non-resident of Canada, I believe you cannot use a brokerage account, contribute to RRSPs etc. It's not just Scotia iTrade or whatever. It's nationwide.

As a non-resident of Canada, you would file and pay taxes to Mexico not Canada on all your income. Mexico taxes world income. As a resident of Mexico, you could open a brokerage account in Mexico and trade that way.

I assume, however, that you want to keep your money in the stable Canadian system as opposed to the volatile Mexican peso?

In that case, I would look into being a "factual resident of Canada for tax purposes" which means you would file and pay taxes to Canada and maintain a Canadian address on your bank accounts. In that way, perhaps you could keep your brokerage accounts active in Canada.

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html

Another alternative is to designate your Canadian bank accounts as non-resident accounts. You can keep your money in your Canadian non-resident bank accounts, but you still won't be able to trade with a brokerage account. If you don't want your brokerage account in Mexico, you could look at getting an expat brokerage account like Internaxx in Luxembourg. The other option is that you can get a brokerage account in Canada with TD as a non-resident, but you have to show up physically to open the account.

http://td.intelliresponse.com/cbaw/?requestType=NormalRequest&source=3&id=7711&question=I+do+not+reside+in+Canada.+Can+I+open+an+account+at+TD+Direct+Investing

http://profitmoose.com/moving-out-of-canada-part-1/

https://mexlaw.ca/...canada-tax-purposes/



As a non resident Canadian you file your income tax in Canada not Mexico. You do not have to maintain a Canadian address.



(This post was edited by sanjuan on May 24, 2018, 10:50 AM)


yTABDGdW

Jun 1, 2018, 2:58 AM

Post #5 of 10 (2094 views)

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Re: [sanjuan] Problems with Canadian bank accounts

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I dont think so. If you are a non-resident of Canada and a resident of Mexico you file in Mexico on your world income (which includes your Canadian income). As a non-resident, any income obtained in Canada will be automatically deducted at a 15-25% rate at source. Non-residents of Canada do not file Canadian tax returns.


sanjuan

Jun 1, 2018, 4:30 AM

Post #6 of 10 (2088 views)

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Re: [yTABDGdW] Problems with Canadian bank accounts

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yTABDGdW you have it backwards. Non Residents of Canada file in Canada. I have been one for years. The accountant here who does my returns is an expert on this as he did tax returns in Ontario for over 30 years. I am a Permanent Resident of Mexico and we definitely do not file in Mexico.


sanjuan

Jun 1, 2018, 4:33 AM

Post #7 of 10 (2087 views)

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Re: [yTABDGdW] Problems with Canadian bank accounts

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Another thing you say Non Residents automatically have tax deducted in Canada (usually) so obviously they have to file in Canada.


yTABDGdW

Jun 2, 2018, 11:55 AM

Post #8 of 10 (2057 views)

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Re: [sanjuan] Problems with Canadian bank accounts

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It's possible that we may both be right. It seems it depends on the kind of income to determine whether you file something in Canada or not.

I don't know what you may or may not be doing, but this is what you're supposed to do.

When you decide to become a non-resident of Canada, you are supposed to state that fact on your last tax return and pay a capital gains exit tax on whatever you sell before you leave (house, stocks, etc).

You are also supposed to notify your banks that you are now a non-resident of Canada (you are also now no longer able to contribute to RRSPs, brokerage accounts, etc).

Income type 1:

Any pensions funds, RRSP funds, dividends, stock sales etc. etc. are taxed at a 25% rate at source by the bank or brokerage account. If there is a tax agreement with the country you are now resident in (Mexico) you will only be taxed at 15%. Luckily, this is the case for Mexico, so you should only be taxed at 15%. There is no need to file a tax return with Canada because the tax has already been deducted at source.

I don't know if Mexico would still want you to file (since you're a resident of Mexico and Mexico taxes world income). Probably, perhaps. If you did, you would show you paid the tax and that would be that.

Income type 2:

If you earn employment income, business income, sale of a property income, etc. in Canada then, yes, you would file a Canadian tax return for that income.

When you file your Mexican taxes (as a resident who is taxable on world wide income) you would show that you paid X % of tax on the income in Canada. Mexico will determine the tax % you would owe to Mexico. If what you paid in Canada is less than what you would pay in Mexico, you will have to pay the difference to Mexico. If what you paid is more than what you would pay in Mexico, you can apply to Canada for a refund of the difference.

If you are a retiree who is getting all their income from pensions, RRSPs, dividends, etc. you do not have to bother filing a tax return and you would only be taxed at 15% (because of the tax agreement between Canada and Mexico) which is a pretty sweet deal.

Why are you filing tax returns in Canada San Juan? If I were a retiree with only pension, RRSPs, investment income etc. I would just be deducted at source and be done with it. No need to file.

Link: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4058/non-residents-income-tax-2016.html#P83_5491

Taxing Canadian-source income
As a non-resident, you are subject to Canadian income tax on most Canadian-source income paid or credited to you during the year unless all or part of it is exempt under a tax treaty. Canada's income tax system uses the following two methods to calculate the tax payable on Canadian-source income you receive.

Method 1 - Non-resident tax

Canadian financial institutions and other payers have to withhold non-resident tax at a rate of 25% on certain types of Canadian-source income they pay or credit you as a non-resident of Canada. The most common types of income that could be subject to non-resident withholding tax include:

interest;
dividends;
rental payments;
pension payments;
old age security pension;
Canada Pension Plan or Quebec Pension Plan benefits;
retiring allowances;
registered retirement savings plan payments;
pooled registered pension plan payments;
registered retirement income fund payments;
annuity payments; and
royalty payments.
However, if there is a tax treaty between Canada and your country of residence, the terms of the treaty may reduce the rate of non-resident tax to be withheld on certain types of income. To find out if Canada has a tax treaty with your country of residence, see Tax treaties.


Method 2 - Tax on taxable income

Certain types of income you earn in Canada must be reported on a Canadian tax return. The most common types of income include:

income from employment in Canada;
income from a business carried on in Canada;
the taxable part of Canadian scholarships, fellowships, bursaries, and research grants; and
taxable capital gains from disposing of taxable Canadian property.
You may be entitled to claim certain deductions from income to arrive at the taxable amount. You can also claim a credit for any tax withheld at source or paid on this income.

If there is a tax treaty between Canada and your country of residence, the terms of the treaty may reduce or eliminate the tax on certain types of income. To find out if Canada has a tax treaty with your country of residence, see Tax treaties. If it does, contact the CRA to find out if the provisions of the treaty apply.

By completing the return, you determine whether you are entitled to a refund of some or all of the tax withheld or you have a balance of tax owing for the year. Once we assess the return, we will issue you a notice of assessment to tell you the result.


(This post was edited by yTABDGdW on Jun 2, 2018, 12:05 PM)


sanjuan

Jun 2, 2018, 2:38 PM

Post #9 of 10 (2045 views)

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Re: [yTABDGdW] Problems with Canadian bank accounts

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I showed that to my accountant here (a Canadian who had an income tax return business in Ontario for many years) and who does many tax returns for Canadians here in Mexico and he says there is a lot there that is not factual.


yTABDGdW

Jun 2, 2018, 2:56 PM

Post #10 of 10 (2044 views)

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Re: [sanjuan] Problems with Canadian bank accounts

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What isn't factual about it?

It is right from the CRA website.
 
 
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