| 3. | I am a Canadian citizen living in the United States. Can I buy Canadian-based mutual fund investments? |
| 4. | I am being offered an investment from a United Kingdom-based representative which has a monthly savings contract. How is this different from Canadian funds? |
| 5. | I am being offered a British Unit Trust from a U.K.-based representative. Is this the same as a Canadian mutual fund unit? |
| 6. | My Canadian broker says the only way he can deal with me offshore is if I use a Canadian address. Is this okay? |
There is no obligation for you to report any capital gains to the Canada Customs and Revenue Agency ("CCRA" formerly Revenue Canada) so long as you are a (factual) non-resident of Canada for tax purposes. Equity fund investments will return primarily capital gains so generally there is little or no tax withheld to cover interest or dividend income. The only tax obligation that you will have will be to the government of the country in which you are resident.
Tax payable to the government of Canada on certain deposits, bonds or bond funds would be withheld at source and remitted by the administrator on the investors behalf - i.e., Withholding Tax. Offshore funds have already paid any withholding taxes directly, so the return you receive will be net of this type of tax.
There is absolutely no reason to think that maintaining investments in Canadian-based mutual funds will threaten your non-resident status. In fact so long as you have properly established your non-residency you are now like any other non-resident investor - that is - free to buy those investments you wish with no obligation for income or capital gains tax to CCRA.
Under a recent ruling by the SEC you will now be able to trade in mutual fund securities only in your Registered Plans, however you will not be permitted to do so for investments made outside of these plans. CIC will help you deal with your RSP mutual fund investments.
A number of UK savings plans are tied into a contractual obligation with an insurance company. These are generally long term savings plans with fixed terms that offer little or no liquidity and do not post daily or weekly valuations. In our experience these plans are very expensive, having high initial and ongoing costs. So, the returns are often mediocre when compared to other investments and when it comes time to make changes the investor is faced with hefty termination charges for an early exit.
Investors that set up regular savings plans in Canadian-based funds have no long-term contractual obligations and are free to change or cancel the plan at anytime and at no cost.
Mutual Funds are most popular and are widely recommended for RRSPs, why? Because your money is pooled with other investors who have the same objectives. You own part of a broadly diversified portfolio of securities that you could never duplicate if your were investing on your own.
Using a Canadian address so that your broker can continue to deal with you while you reside offshore helps only your broker ! Having a Canadian address is a significant tie to Canada and may jeopardize your non-resident status for tax purposes. Your broker just doesn’t understand how to best help the non-resident Canadian; CIC has been assisting non-resident Canadians for 10 years - we know how to help! Your broker’s company just doesn’t want to be involved with the non-resident because that is not their main business and they don’t want to take the time to understand how to handle it. This is our niche - we have taken the time and we know the needs of the expat!
