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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Capital Gains and Losses
Satisfied Customers: 300
Experience:  Former IRS Revenue Agent
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If a non-Canadian non-resident (a foreigner) buys and sells

Customer Question

If a non-Canadian non-resident (a foreigner) buys and sells stocks using an account at a Canadian brokerage firm, and a capital gain results on sale, does the foreigner owe any capital gains tax in Canada? Or is the capital gain tax free, as it would be in the USA?
Submitted: 1 month ago.
Category: Capital Gains and Losses
Expert:  Dr. Fiona Chen replied 1 month ago.

Dear Customer,

1) In general, the capital gain from such trades should be excluded from Canadian tax. For specifics, please still consult with the tax authorities and with your specific trading firm.

p.s. capital gain earned in the U.S. is not tax free. The investor needs to report income in his/her own country. On the earning statement, as a general rule, dividends and interest paid by a US corporation are US source income. In some cases, interest paid by a foreign corporation or a foreign or domestic partnership is also US source income.


Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP

The following statement from Investopedia makes an good explanation.

"If you fall under the non-resident alien category and the only business you have in the U.S. is in investments (stocks, mutual funds, commodities) within a U.S. dollar-denominated brokerage firm or other agent, you are subject to the following tax guidelines. In terms of capital gains, non-resident aliens are subject to no U.S. capital gains tax, and no money will be withheld by the brokerage firm. This does not mean, however, that you can trade tax free - you will likely need to pay capital gains tax in your country of origin. In terms of dividends, non-resident aliens face a dividend tax rate of 30% on dividends paid out by U.S. companies. However, they are excluded from this tax if the dividends are paid by foreign companies or are interest-related dividends or short-term capital gain dividends. This 30% rate can also be lower depending on the treaty between your home country and the U.S., so it is important that you contact your brokerage firm to verify the rate. If you are a resident alien and hold a green card or satisfy the resident rules (183 days), you are subject to the same tax rules as any U.S. citizen.
Read more: I am a non-U.S. citizen living outside the U.S. and trading stocks through a U.S. internet broker. Do I have to pay taxes on the money I earn? | Investopedia"

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