However, the process may not be as simple as transferring securities between two Canadian financial institutions. It may take longer across the border, and there may or may not be a tax advantage.
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Tax implications of transferring investments
If your primary reason for transferring your investments, Meranda, is to defer tax, your tax residency will be important. If you are leaving Canada and ceasing to be a tax resident, you will have a deemed disposition for your investments. This means the securities will be treated as if you sold them at fair market value on the date you moved. As a result, transferring them to the U.S. will not save you tax. In fact, it may cost you.
When immigrating to the U.S., your original cost base for an asset becomes your cost base for U.S. capital gains tax purposes. This differs from Canada, where your investments’ market value when you immigrate becomes your adjusted cost base (ACB). As a result, if you are becoming a U.S. resident, especially for the long term, you may want to consider selling your investments before you move.
That said, you may be able to defer the tax payable on your deemed disposition. To do this, your tax owing must be more than $16,500 (or $13,777.50 for Quebec residents). You can make this election by filing Form T1244, Electionunder Subsection 220(4.5) of the Income Tax Act, to Defer the Payment of Tax on Income Relating to the Deemed Disposition of Property. You must provide adequate security to the Canada Revenue Agency (CRA) for the tax owing in order to defer it. Security could include pledging the assets themselves or a letter of credit from a Canadian financial institution.
As a U.S. resident, you may have disclosure requirements or adverse tax implications for any non-U.S. assets, including Canadian bank accounts, GICs, stocks, bonds, ETFs and/or mutual funds. So, this may be another reason to start fresh with U.S. investments.
If you are transferring the investments simply because you want to hold them at a U.S. brokerage, Meranda, and you remain a Canadian tax resident, there will not be any tax implications.
Canadians are taxed on their worldwide income, so holding the investments outside of Canada will not make them non-taxable.
As a Canadian resident, you will typically have a 15% U.S. withholding tax on the American securities you own, whether you hold them at a U.S. brokerage or a Canadian brokerage. This tax withheld can be claimed on your Canadian tax return as a foreign tax credit.
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