Investment options for Canadian expats

Here are the pros and cons of investing in real estate and securities while living abroad

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Q: I’m a Canadian expat living and working in South Korea. I’ve been here for 12 years. I’m 40 years of age. What are two or three good Canada-based investment opportunities for someone in my position? I’m thinking of purchasing rental properties in Canada to be run by a property manager, but am keen to find other financial instruments.—Michael 

A: First off, Michael, there are different implications for a Canadian expat investing in Canada ranging from ownership restrictions to tax issues. I’ll try to keep this brief, but informative.

Property

A Canadian non-resident can certainly buy a rental property in Canada and can manage it themselves from abroad or have a property manager in Canada. The property manager could find tenants, collect rent, handle repairs and essentially be the landlord, for a fee. Fees typically range from one month’s rent to simply find a tenant to 20% of rent collected for more comprehensive property management. You’d likely benefit from a property manager in your case, Michael.

Non-residents are subject to income tax on their rental income. The tax rate on your net rental income (gross rent less eligible expenses) is 25% and there are various tax filings to make over the course of the year with the Canada Revenue Agency (CRA). South Korea and other countries typically have treaties with Canada to allow credit for any taxes withheld in the other country to avoid double taxation.

If your rental property is a short-term residential rental where people rent for less than one month at a time, like a ski chalet, or if it’s a commercial property leased by a business, you will also have to collect, remit and report the sales tax (GST/HST/QST) depending on the province where the property is located. Rates range from 5-15% and vary by province. Such a property may also have sales tax payable on purchase or sale.

If you sell Canadian real estate while you are a non-resident, you will have to claim the sale on a Canadian tax filing and may be subject to capital gains taxes. The proceeds are subject to withholding tax to make sure you don’t forget to report the transaction.

Other investments

Typically, a non-resident cannot contribute to a Tax-Free Savings Account (TFSA) while abroad. You can contribute to an RRSP if you have room carried forward from your time in Canada, but since contributions are only deductible in Canada against Canadian income, it may not be beneficial.

As a non-resident, you likely won’t be able to buy Canadian mutual funds either, but you can invest in Canadian stocks and exchange-traded funds (ETFs). Based on Toronto Stock Exchange (TSX) estimates, about 40% of the volume on the country’s main stock index comes from foreign investors.

Since you’re looking to buy two or three investments, I’d say that’s not enough to be able to build a diversified stock portfolio. So ETFs are probably your best bet, either on the TSX or another global stock exchange like the New York Stock Exchange (NYSE). I’d opt for a broad-based ETF rather than a sector-specific one.

The government in South Korea has introduced in recent years an exemption from capital gains tax on international equities and has made it easier to invest in foreign real estate in an effort to slow down the rise of their currency, the won. So you’re actually being encouraged to invest abroad while in South Korea, Michael.


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Ask a Planner

Leave your question for Jason Heath in the comment section below or email ask@moneysense.ca and he may answer it in an upcoming column.


You may be able to purchase Guaranteed Investment Certificates (GICs), but typically you need to have a Canadian bank account as well as a social insurance number to do so.

The withholding tax rate on interest income is typically 10% for Canadian non-residents, including those resident in South Korea. The rate is 15% on Canadian dividends. Capital gains on Canadian stocks and ETFs are typically not taxable in Canada for non-residents and while they are often taxable in your country of residence, it appears that you are exempt in South Korea.

If you have a modest amount of money to invest and you want to invest in any country in which you are a non-resident, I’d typically have a bias towards ETFs in order to keep it simple. If you have larger amounts of money to invest, a property manager for real estate or an investment firm that can take on non-resident investors for stocks and bonds could be considered as well.   

9 comments on “Investment options for Canadian expats

  1. Hello, nice quick piece. I’m curious, for the 15% withholding tax on dividends to non-resident Canadians, is there a way to recover that?

    Reply

    • I am a Canadian expatriate and 25% withholding tax is taken off by the brokerages for Canadian dividends and 30% for US dividends. The UK and Singapore have no withholding tax, Australia has franking credits, and companies are easy to research to determine the amount of credit you will receive. For example, Woolworths (WOW), is 100% franked, so no withholding tax is applied.

      Reply

      • Who do you use for investing? Scotia iTrade just told me they won’t keep any non-registered accounts open for me anymore as a non-resident and closed them. Suggestions?

        Reply

        • I’m an expat Canadian and I’ve been using TD Direct Investing. They are based in Luxembourg. They accept non-residents and there customer service is excellent.

          Reply

  2. Jason, my sister is an expat, currently in India, but has lived in 5 countries in last 10 years. She and her (French) husband want to buy/invest in a home with a mortgage in Ontario and have my family live in the home as tenants. Any smart/.tax efficient ways to do this? Can non resident siblings transfer ownership of property/cash without major tax implications?

    Reply

  3. Any one have information about non-resident investing in Canadian stocks from UAE?

    Reply

  4. I have a similar, but slightly different question.

    I was born and raised in Canada . . .moved to the US in 1962 . . . and became a US citizen in the 1990s. With that final step I had to swear my sole allegiance to the U.S.A; and during my next trip outside the USA, I also had to relinquish my Canadian passport, which I had carried with me, thinking it might be handy in an emergency if my husband’s U.S.A. passport did not suffice.

    Subsequently, I learned that while the US demanded my full allegiance, the Canadian government was more lenient. In fact, based on my birth and the number of years I had lived and worked in Canada before relocating to the USA, they issued me a Canadian Soc Security number and monthly OAS check.

    At this point, I still have a sizable bank account at CIBC, which is earning next to nothing in interest, but is too costly in terms of exchange rates, processing fees and taxes, to convert to US dollars. I’ve also been told that as a non-resident, I can’t invest in Canadian stocks. Your answer to the previous question seems to contradict that, or are the options mentioned only available to Canadian citizens living outside the country?

    Reply

  5. Stay compliant with Canadian tax filing requirements that must be filed for foreign reporting and special filings. Be aware that there are potentially large penalties for not being compliant with foreign reporting requirements.

    Reply

  6. I have a similar question as the original poster only I’m wondering what investment options are available if me and my wife go to Japan. I don’t see any good opportunities at Japanese banks or mutual funds, so are we limited to buying Canadian EFTs?

    So far I’ve used TD direct investing and I don’t know what third party options exist. With a small amount to invest, what would anyone recommend? Thanks to anyone who can answer.

    Reply

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