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Finance 101

Financial advice for Canadian expats who want to invest

November 21, 2017

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Financial advice for Canadian expats who want to invest

Finance 101

Canadian expats have a big need for financial advice. But that advice probably isn’t readily available. That’s a problem.

After all, investing for retirement isn’t something you want to ignore until you get back. You’re living the dream, but still want to invest for your future. So for now, you’re working as a teacher or other professional. You’re seeing the sights. But someday, you plan on coming back to live and eventually retire in Canada.

When you go to ask your fellow expats about investing options, they give you conflicting advice. For instance, as an expat, can you legally invest while you’re still working abroad? What are the tax implications? Do you have to pay extra fees, or is there a way around that?

To help provide financial advice for Canadian expats who want to invest for their future, we’ve pulled together these important pieces of advice. They’re based on the most commonly asked questions we get.

Financial advice for Canadian expats who want to invest

“As a Canadian non-resident, can I even invest using a Canadian financial institution?”

We’ve helped hundreds of Canadian expats invest.

However, many financial institutions won’t or can’t work with you due to regulatory or legal burdens. For a whole host of boring legal and technical reasons, many financial firms will not serve expats. It adds an extra layer of complexity and expense to their business. And for that reason, they won’t work with Canadian expats. We do.

Financial advice for Canadian expats who want to invest

“What kind of accounts can I use to invest my money I’m earning overseas?”

If you were already contributing regularly to a TFSA or RRSP account before you went abroad, you’re in luck. We can manage the money you left behind in these kinds of registered accounts, no problem.

But now we’re talking about new money that you want to save and invest. Well, we’ve got non-registered investment accounts to handle that, for Canadian non-residents living abroad, outside the U.S.

We have a wide range of ETF investment options available that deliver competitive performance while offering better protection from volatility in the market. These investment portfolios allow expats like you to grow your money even while you’re away.

If you’ve only invested previously in registered accounts like an RRSP, you might not be aware that non-registered accounts actually come with a few benefits. For instance, they have no contribution limits. One other benefit: in most cases, Canadian non-residents don’t need to pay capital gains tax on the investment. Which leads us a deeper discussion of factoring in taxes.

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“For Canadian expats who want to invest, are there tax liabilities for that investment?”

Yes, but they’re pretty straightforward. According to the Canada Revenue Agency, as a non-resident, any income you earn in Canada is subject to Canadian tax. So, if you earn income from your investments, you’ll have to pay something to the government.

The income from our portfolios is treated as Trust Income and is subject to an automatic non-resident withholding tax of up to 25%. You may be eligible for a reduced tax rate. That depends on the tax treaty your country of residence has with Canada.

This pay-as-you-go approach means you don’t have to file a tax return in Canada if your only income here is from your investments. That’s convenient. Even better: as a non-resident you will not have to pay any capital gains tax in Canada when you sell your investments. However, you may have to pay tax in your local country of residence.

We’re not tax professionals, but we can walk you through it. The CRA lays this out in glorious detail on their website, along with a helpful tax calculator.

Now, there are exceptions to the rules, depending on where you are. As ‘Millionaire Teacher’ Andrew Hallam (an expert on this topic) has noted, there are some jurisdictions which don’t charge tax on capital gains: “The Isle of Man, Singapore, New Zealand, Hong Kong, Luxembourg, Belize, Egypt (for holding periods exceeding one year), Kenya, Jamaica, Malaysia, Russia, Sierra Leone. The list goes on.”

If you’re in one of those places, you might simply avoid the tax on capital gains that we discussed above. But that’s also just one factor in your total return and tax optimization strategy. Certainly, you want to keep taxes as low as possible, but as an investor, you’re looking for a portfolio that maximizes your overall return.

“I’ve heard that expats have to pay extra sales fees or experience lock-in periods when they try to invest.”

You shouldn’t need to but, for some wealth management firms and banks, this can be the case. So it’s important to research the fees you’d be charged and compare (as is always the case for any service).

Make sure to ask about sales fees, ongoing management expenses and lock-in periods (this is the period of time where you can’t access your investments. As the name would indicate, those funds are just locked in and unavailable to you for a long time, barring a prohibitively high withdrawal penalty).

There have been instances where investors have had their money locked away for 10 or even 20 years. To withdraw from these arrangements earlier than the required lock-in period, investors may pay extraordinary penalties. These investment companies may try to justify the high commissions they charge by arguing that their service offers tax advantages, but often, the fees and penalties can outweigh the benefit.

Of course, we don’t do that. Our pricing and terms are the same for all investors. No lock in periods. No hidden fees. Ever.

Financial advice for Canadian expats who want to invest

“As a Canadian expat, what do I need to prepare so that I can open an investment account?”

We take care of all the red tape and paperwork. Your part is actually pretty easy, though you will need to have a Canadian bank account. Sign up for a WealthBar account online, just the same as if you were on the Internet in Canada.

You will require two electronic documents to verify your identity (We take privacy and security very seriously). We’ll follow up with you to get any other information that we might need, depending on the country you’re in and the rules that apply there.

Interested in investing with WealthBar?

You can sign up for a WealthBar account on your own in minutes online. Or, book a call and we can get you started on your financial plan from wherever you are. Even better, you get unlimited financial planning and advice for your monthly fees. That’s helpful in complex situations that expats like you have. We’re here for you, wherever you are.

A few minutes today could save you thousands tomorrow.
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19 Comments
  1. Bums On Da Beach

    When will WealthBar expand its list of supported ETFs to include capital gains only funds such as HBB and HXDM for Canadian non-residents?

    • Jonathon Narvey

      Hey there! There is no set timeline for introducing those funds into our list of supported ETFs. That said, we are constantly reviewing the ETFs and funds included in our portfolios and these types of investments are certainly on our radar.

  2. phil cooper

    If the income from your funds is Trust Income, does this mean that any interest income in bond funds is converted to trust income and becomes subject to withholding tax even though there is normally no wht on interest ? ( And the same comment for any embedded capital gains ) Thanks for your help.

    • Jonathon Narvey

      Yes, that is correct - to both comments, according to one of our expert financial advisers. Happy to help!

  3. Jay

    I am a non-resident and will be retiring next year and return to live in Canada. My savings are primarily as deposits and I am looking for a steady income when returning to Canada. Would like to know the options available if I bring the money with me to Canada

    • Jonathon Narvey

      Hey Jay. We can definitely help you with that, but I think we need a bit more detail. Best to book a call with one of our licensed Financial Advisers, so we can give you the best advice possible. Click the 'Chat with an adviser' button on the WealthBar homepage to get in touch and book a time!

  4. Henry Collins

    Very helpful tips for investing money. Thank you!

  5. J Eliot

    Thank you for the account suggestions! Great list of advices, 10 minutes ago I had no idea of what I was dealing with.

  6. Chris

    Hi, I'd just like some confirmation. I'm living abroad at the moment and would like to open up a non-registered investment account in Canada. Is it legal to do this if living outside of Canada and declared a non-resident for tax purposes?

    • Jonathon

      Hey Chris. As mentioned in this blog post, we've got non-registered investment accounts for Canadian non-residents living abroad, outside the U.S. Not all financial firms even work with expats, but we do. Feel free to start a chat with one of our financial advisers to get more specific answers.

  7. Jennifer

    As a Canadian living in the UK, do you pay capital gains tax on selling a Canadian property that was also purchased during the time that I was a non-resident?

    • Clayton Brown

      Hey Jennifer. You will need to file and pay taxes with the CRA. Check out the CRA's own web page on "Disposing of or acquiring certain Canadian property"

  8. Eddie

    Hi, I’m a Canadian citizen, but soon I am planning to live in Brazil as a Canadian non-resident. I have a house and will sell it this summer, probably I will get 550k for it. I would like put this amount of money into a passive investment such as a Vanguard index fund or another ETF here in Canada, but I don’t know if this is possible or how much tax I will pay. I do not want to lose my non-resident status. Would I be better off investing in Canada, the U.S., or elsewhere? I’m not sure I will be moving back to Canada when I retire but have no plans on giving up my Canadian citizenship. I’d appreciate any advice you could give me.

    • Clayton Brown

      Hey Eddie. If the home you are selling is your principal residence, then you may not owe any tax on the sale (assuming you didn’t own another property and claimed the principal residence exemption on that property). You can read about it on the CRA site in an article titled "Reporting the sale of your principal residence for individuals (other than trusts)." Now, one could invest the proceeds in one of our ETF Portfolios and they would pay tax on the investment income. This account alone should not impact non-resident status. So for example, if you invested $500,000 and your annual investment income was 3%, this would mean you have $15,000 of investment income. Of this amount, 25% would go to CRA on your behalf, and the remainder ($11,250) could be left in your investment account to be reinvested and continue to grow. It would be important to keep a Canadian Bank Account open, in order to fund the account and to have somewhere to send the withdrawals.

  9. Kathi Black

    Is it possible to earn dividend income on funds that are invested abroad?

    • Clayton Brown

      Hey Kathi. If we're speaking purely hypothetically and in the most general terms, the answer is yes. However, another important question would be, "Is this a good idea for what I'm trying to achieve financially?" You would probably want to talk to a financial advisor. We'd be happy to take a call and answer your question with a bit more specifics.

  10. Christina

    As a Canadian living in Europe would I need to fist convert my funds to Canadian dollars to invest or am I able to invest funds in Euros through Wealthbar?

    • Cecilia

      Hey Chris, you can re-invest in Canada if you have a Canadian bank account. The investment is purely for Canadian Citizens only. The higher the term of investment the higher the rate of interest you would earn. So consider investing for longer terms so that you can enjoy a higher rate of interest.

  11. Cecilia

    I am canadian living in UK. However I have a house in Canada which is rented out for an year for now. Should I have to pay NRI taxes or resident taxes. If NRI taxes how to file the taxes and how to pay the taxes. Iam planning to sell the house this year but however I do not want to move the funds to UK. I am planning to return to Canada after retirement. So I want to hold the sale proceeds to make an investment or purchase in future. Which financial institution could offer a better investment scheme and interest to grow my funds. I would like to make a saving for retirement and a regular income for my retirement. Please advise.

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