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Can I invest in international stocks without being taxed? Add to ...

Dear Nancy

Can I invest in international equities or stocks without being taxed?

Thanks,

Ted


Dear Ted,

It depends whether you mean growth or income. The income from companies that are not headquartered in Canada or the U.S. is subject to non-residency withholding tax. This is imposed by the country where the company is based. The percentage amount of the withholding tax varies, and it depends on whether or not Canada has a tax treaty with that country. 

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Here comes the tricky part: If the company is headquartered in the U.S. and the stock is held in an account deemed for retirement purposes such as an RSP or RIF, then there is no withholding tax. If the stock is held in a regular cash account, RESP or TFSA, then the income will have a non-residency withholding tax of 30 per cent or 15 per cent if you sign a W8-BEN IRA form and have your financial institution file it.

People are often confused by companies who trade on the NYSE. Just because the stock trades there does not ensure that it is exempt (when owned in an RSP for example). The stock may be a foreign company whose shares are an American Depository Receipt or ADR. An example is SONY. It trades on the NYSE but is not an American company.

If you are talking about an international stock's gain, then it is not taxed when owned in a TFSA. If owned in a RSP or RIF, the gain will eventually be de-registered as income and taxed as such, but the actual realized gain is not taxed when sold within the registered account. As always, the capital gain is subject to tax when realized in a regular cash investment account.

Please be sure to seek professional advice to know the tax implications for any investment to utilize the best strategy for you.

 

Nancy Woods is an associate portfolio manager and investment adviser with RBC Dominion Securities Inc. Visit her website www.nancywoods.com or send an email request to asknancy@rbc.com. You can send your questions to asknancy@rbc.com as well.

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