Canadian Expat Abroad Needs Investing Advice Please

[AlanAbroad]

Hello all,

I am an early 40's Canadian guy working in the Middle East. My salary is decent, I have absolutely no tax obligations to Canada as I am a non-resident, and I am tax exempt where I am currently living.

My goal is to invest in an account/locale with an eye to retirement. I want to put X amount of dollars in each month, so that I can pull X amount per month at age 55-60 until I kick it.

Initially I looked at opening a Vanguard account as suggested on the MMM site, but the US Vanguard won't allow me to open an account as a Canadian, the Singapore Vanguard (where I hoped to open an account) does not allow individual investors, and I don't want to open an account in Canada because I want to cut ties with the country for tax purposes.

I am a raw novice at investing (outside of real estate) and would really appreciate any advice.

[daverobev]

Local brokerage account?

Interactive Brokers?

Find somewhere that deals in multiple currencies/exchanges (IB do). Buy ETFs.

[Captain and Mrs Slow]

First where every you invest you will get hit with withholding taxes on any dividend or interest income. Capital gains are usually free of (withholding) tax.

Now having said that I would simply open up an account with TD. Use a Canadian address than switch to your overseas address. The fees are reasonable and customer service is great.

Plus since you are new to investing do yourself a huge favour and read Millionaire Teacher by Andrew Hallman, it's about the only investing book you need to read.

[desertdweller]

I was a Canadian non-resident for several years, now resident in the UK.

While offshore I used a Lloyds Offshore Bank Account in the Channel Islands, which has relatively low fees for transferring funds between £, € and USD accounts. Also have debit cards in each currency. For larger amounts I use Moneycorp, which has been great.

I started an Interactive Brokers account as a non-resident and the fees for buying stocks are amazing low (as are the options trading fees).

I also have TDWaterhouse (UK) account which is very good, however the stock purchase fees are more than twice as expensive as IB.

Make the most of your time offshore! Best of luck and enjoy the travels!

[AlanAbroad]

First where every you invest you will get hit with withholding taxes on any dividend or interest income. Capital gains are usually free of (withholding) tax.

I hope to park my cash in a place that will at least tax gains lightly.

I am interested in Singapore right now. They have a Citibank Expat account but minimum opening balance must be $100,000 USD.

I'd like to make my money work for me while getting to that target.

Now having said that I would simply open up an account with TD. Use a Canadian address than switch to your overseas address. The fees are reasonable and customer service is great.

I'd like to reduce ties to Canada as much as possible so as not to give the government any pretense to claim that I am a resident for tax purposes. I'd also like to keep my money out of Canada as it makes it much harder for the government or anyone else (ex-wife) to touch it.

Plus since you are new to investing do yourself a huge favour and read Millionaire Teacher by Andrew Hallman, it's about the only investing book you need to read.

Cheers. Book's been noted!

I was a Canadian non-resident for several years, now resident in the UK.

While offshore I used a Lloyds Offshore Bank Account in the Channel Islands, which has relatively low fees for transferring funds between £, € and USD accounts. Also have debit cards in each currency. For larger amounts I use Moneycorp, which has been great.

I started an Interactive Brokers account as a non-resident and the fees for buying stocks are amazing low (as are the options trading fees).

Make the most of your time offshore! Best of luck and enjoy the travels!

Thank you!

Did you ever feel unsafe with your money being "offshore"? I am unfamiliar with it so if feels more risky.

Also, can you please advice how badly you were taxed on gains?

Local brokerage account?

Interactive Brokers?

Find somewhere that deals in multiple currencies/exchanges (IB do). Buy ETFs.

I am looking every days, thanks. Vanguard USA...closed to Canadians. HSBC Expat is minimum 60,000 pounds to open an account. Citibank Expat Singapore is $100,000 USD, etc.

I'm in the information gathering stage now...

[Captain and Mrs Slow]

I'd like to reduce ties to Canada as much as possible so as not to give the government any pretense to claim that I am a resident for tax purposes. I'd also like to keep my money out of Canada as it makes it much harder for the government or anyone else (ex-wife) to touch it.

That is a valid point since governments everywhere are looking to squeeze as much money with the least amount of complaining as possible.

I hope to park my cash in a place that will at least tax gains lightly.

There are two aspects to taxation. Taxes imposed by residency, I live in Germany and pay tax on my world wide income. Withholding taxes. Simple example, say I live in Canada and buy some US dividend stocks, I get $100 in dividends and the company will withhold 30% (15% with a W8 orm) and pass it on to the US Government, the fact I don't live in the US has no bearing on this what's so ever.

Now the interesting part is that, generally speaking, there is no withholding tax on capital gains. Sell you hot internet stock for a 1000% gain and all the money is yours. Of course you'll have to declare it on your own tax return.

So as you can see it doesn't matter where you hold the money the government will get it's share. It's just a matter of how much.

rob

[Captain and Mrs Slow]

After thought, of course the other side is to live in a low tax jurisdiction, but that's easier said than done of course.

[AlanAbroad]

After thought, of course the other side is to live in a low tax jurisdiction, but that's easier said than done of course.

I am very lucky to live in a no-tax jurisdiction at the moment, and hope to be here for a few years at least. I am also a non-resident for tax purposes in Canada, so I pay no taxes there.

The Canadian government has been known to get tricky on citizens who work abroad through. They recommend that you keep filing taxes and ask for their "opinion" about whether you owe taxes. Almost always, their "opinion" is that you don't. Then, if you ever return to Canada, no matter the fact that it was never your intention (maybe a parent dies, and you need to return to take care of the other), their OPINION changes and you have been a resident for tax purposes all along!

Not only that, but they have all your tax information and know exactly how much you owe.

Very slick...

That said, I really appreciate the book recommendation that you made. I will buy both of Andrew Hallman's books and have already discovered that Canadians can open up foreign market trading account in Singapore with DBS Vickers Securities.

I am very lucky as Singapore is one of my regular stomping grounds, and I have previously eyed it as a relatively stable place to possibly park and invest money.

If anyone has any other suggestions, I would still be very appreciative and I will update this thread if I open an account there.

Thanks so much again for the book recommendation; I will be reading as much as I can of what Mr. Hallman has to say...

[Shooter_D]

Andrew Hallam also has a new book out which is a guide to expat investing. Sounds perfect for you!

http://www.wiley.com/WileyCDA/WileyTitle/productCd-1119020980.html

His website also has some good resources.

http://andrewhallam.com/category/expat-investing/

Wish I could help you more specifically but best of luck!



Sent from my iPhone using Tapatalk

[AlanAbroad]

Andrew Hallam also has a new book out which is a guide to expat investing. Sounds perfect for you!

http://www.wiley.com/WileyCDA/WileyTitle/productCd-1119020980.html

His website also has some good resources.

http://andrewhallam.com/category/expat-investing/

Wish I could help you more specifically but best of luck!



Sent from my iPhone using Tapatalk

Thank you so much for the links.

I have a lot to read on this site and also from Mr. Hallam's. I will definitely get both of his books.

Through these leads, I already have my eye on a DBS Vickers account in Singapore and have made inquiries with Creveling and Creveling in Bangkok.

It feels good to finally get on this, and I appreciate all of the support and advice from the members here!

[Captain and Mrs Slow]

When we left Canada we applied to become non residents but we did keep our bank accounts and credit cards. Surprisingly TD has had not issue with European bank accounts. We did this not only for convenience (something I recommend) but that the wife has a locked in RSP. Being non residents we could have pulled the money out but it's my wife's pension money from her old job and I felt it was for our retirement.

As you mentioned double taxation agreements will apply to most places you'd move to. In my case the withholding tax on dividends is 15% and the German government gives me a tax credit for that amount.

For Alanaboard being in a low/non taxed country it could become an issue if somehow the government deemed him a resident. From my reading of the situation this usually happens when someone is trying to bend to rules too much. For example spending long periods in Canada (say visiting for the summer) or keeping a car/house in your name. Of course the rules are quite fluid benefiting the goverment.

This is a big problem in the UK where people move to Guernsey or one of the other "off shore" islands to claim residency but maintain strong ties to the UK so the government has moved aggressively to stamp this out.

[AlanAbroad]

There is no need to cut all ties with the Canada to avoid being a resident, regardless of the propaganda contained on the CRA website, assuming you live in a country with which Canada has a tax treaty.

Hi Cathy, I agree.

I still have a bank account in my name in Canada, life insurance, a credit card, and a driver's licence.

The life insurance was purchased before I left Canada and is too important for my kids to give up. I have a bank account (mainly for child support and the card payment), but I did have the bank designate it a non-resident account, however.

The credit card and driver's licence are just things that I really can't do without. I have lived in 4 different countries in the last 12+ years and the driver's licence is necessary for me as a secondary piece of ID. Many places that see the Canadian passport expect to see a second Canadian piece of ID. The credit card could pose a problem...but in the scheme of the "ties test" all of this pales in comparison to the ties that I have in every other country I have lived in.

Also, the form which you can use to request the CRA's opinion on your residency status is strictly optional. I am not aware of any good reason to ever file it.

When I left Canada, I never filed another tax return. On a visit back, I asked my mother's accountant whether I needed to file a tax return for the year that I left...even though it was in February. He said, "Technically yes, but don't bother. Leaving Canada and never filing another tax return clearly shows you have cut ties and don't intend to return..." :P

When we left Canada we applied to become non residents but we did keep our bank accounts and credit cards. Surprisingly TD has had not issue with European bank accounts. We did this not only for convenience (something I recommend) but that the wife has a locked in RSP. Being non residents we could have pulled the money out but it's my wife's pension money from her old job and I felt it was for our retirement.

As you mentioned double taxation agreements will apply to most places you'd move to. In my case the withholding tax on dividends is 15% and the German government gives me a tax credit for that amount.

For Alanaboard being in a low/non taxed country it could become an issue if somehow the government deemed him a resident. From my reading of the situation this usually happens when someone is trying to bend to rules too much. For example spending long periods in Canada (say visiting for the summer) or keeping a car/house in your name. Of course the rules are quite fluid benefiting the goverment.

This is a big problem in the UK where people move to Guernsey or one of the other "off shore" islands to claim residency but maintain strong ties to the UK so the government has moved aggressively to stamp this out.

I think that I am on pretty safe ground, but I prefer to be safe than sorry.

If the government even claims (even if it is a .0001% chance) that I am a resident for tax purposes they (a) don't easily know what I made and (b) can't easily track down and get a lock on any of my money.

I am willing to play by the "game", but would like to hold as many cards as I can.

[Captain and Mrs Slow]

just a note but can you update this thread rather than starting a new thread with what you end up doing for investing. You'll get a note saying that this thread is X days old please start a new one, but this way it will show up as a new reply, I'm not here that often so it would be easy to miss.

I think that I am on pretty safe ground, but I prefer to be safe than sorry.

Totally get it, I simply moved from one high tax jurisdiction to another so in the end, with double taxation treaties in place, it wouldn't really make much of a difference. Expect perhaps for the hassle. On the other hand your in a super low tax location so you have more to worry about.

Like I said update sometime down the road about where you ended up investing

[AlanAbroad]

just a note but can you update this thread rather than starting a new thread with what you end up doing for investing. You'll get a note saying that this thread is X days old please start a new one, but this way it will show up as a new reply, I'm not here that often so it would be easy to miss.

I think that I am on pretty safe ground, but I prefer to be safe than sorry.

Totally get it, I simply moved from one high tax jurisdiction to another so in the end, with double taxation treaties in place, it wouldn't really make much of a difference. Expect perhaps for the hassle. On the other hand your in a super low tax location so you have more to worry about.

Like I said update sometime down the road about where you ended up investing

I'll definitely keep this updated for people.

So far the scoop is this; I have downloaded both of Andrew Hallam's books to Kindle, and I've already almost finished the first (Millionaire Teacher). I am learning about Index Funds and am pretty sold on them so far.

I also have an appointment with DBS Vickers Securities in Singapore. They definitely accept Canadians and do USD and CAD currencies, among others.

They told me that I need to being in my passport and a copy of my bank statement that VERY clearly shows my residence.

I also contacted Creveling & Creveling, who are fee only wealth managers. They were very kind and responsive, but were way out of my league. If anyone wants to know their limits, please contact them direct. Out of respect, I won't post that info.

And so that is the update so far. The only other info is that I will still explore other brokerages and options as I won't keep all my eggs in one basket.

[Captain and Mrs Slow]

This might get posted twice as my fingers hit a funny key. Anyways I'm moving away from individual stocks to ETFs and in researching this two things came up. One is you’re investing in Canadian dollars than be aware that some ETFs hedge the CND dollar, which is good if it’s climbing, bad if it’s falling. Secondly if you build enough wealth you have the possibility of getting hit with the US estate taxes.

Another excellent site is Canadian Couch Potato, while not 100% relevant to you there is enough good stuff on indexing to make it worthwhile to visit.

[AlanAbroad]

This might get posted twice as my fingers hit a funny key. Anyways I'm moving away from individual stocks to ETFs and in researching this two things came up. One is you’re investing in Canadian dollars than be aware that some ETFs hedge the CND dollar, which is good if it’s climbing, bad if it’s falling. Secondly if you build enough wealth you have the possibility of getting hit with the US estate taxes.

Another excellent site is Canadian Couch Potato, while not 100% relevant to you there is enough good stuff on indexing to make it worthwhile to visit.

Thanks for letting me know about the Canadian Couch Potato site. I will check it out.

I also don't understand about hedging and currencies, etc, but will probably learn more about these things over time.

Regarding estate taxes on US stocks or index funds, Mr. Hallam recommends to buy into the US market through the Canadiand stock market. This way, you will get hit with 15% withholding tax at source (by Cdn gov.), but not 30% by the US government later.

Also Hallam and others have been talking about Horizen, a new product that does some kind of swap, so that NO Cdn income tax is charged. Mr. Hallam seemed a bit skeptical or apprehensive about the product, but in a recent interview he reveals that he now hold Horizen products in his portfolio. He didn't go all-in, however, seemingly to spread risk.

I also visited 2 brokerages in Singapore. One is DBS Vickers and the other is Saxxo (not sure about spelling as it is late @@). My accounts are soon to be set up...and I just need to look closer into their fees and services, and then I can comment more on the for others.

[daverobev]

Hedging = don't! It's pretty much that simple.

Keeping your Canadian driving license - not sure where you are, but for UK-Canada at least you can't drive in one for more than a few months without switching. I'd be very wary of driving abroad if you haven't lived in Canada a while. Might just be insurance. If you're staying put you should get a local license, I think. I guess it depends - VERY easy for UK->Canada, you just go to the MTO in Ontario, turn in your UK license and they send you an ON one.

[Captain and Mrs Slow]

Been spending some time on Canadian Couch Potato and they no longer recommend holding US listed ETFs instead holding CDN listed ones, mainly due to the hassle of re-balancing.

Of course if you're not a resident of Canada than I'd seriously look at investing in US dollars instead. Secondly some brokerages allow non resident accounts for example Options Express allows German but not Canadian residents. But having said that just keep in mind Withholding taxes and US Estate Taxes.

Regarding hedging it goes both ways, when the CDN dollar is falling it works for you, when climbing it works for you. What PWL (advisers behind the blog) suggest half and half.

[AlanAbroad]

Hedging = don't! It's pretty much that simple.

Keeping your Canadian driving license - not sure where you are, but for UK-Canada at least you can't drive in one for more than a few months without switching. I'd be very wary of driving abroad if you haven't lived in Canada a while. Might just be insurance. If you're staying put you should get a local license, I think. I guess it depends - VERY easy for UK->Canada, you just go to the MTO in Ontario, turn in your UK license and they send you an ON one.

Hey, sorry I haven't checked the thread in ages. For some reason, I am not getting notifications.

Regarding hedging, I don't even know what it is, so don't know how to get into it or avoid it.

And I have kept my Canadian drivers licence. On a ties test, it doesn't put me into the resident for tax purposes, so I have kept it. Realistically, I need it, and it also operates as a second piece of ID.

Been spending some time on Canadian Couch Potato and they no longer recommend holding US listed ETFs instead holding CDN listed ones, mainly due to the hassle of re-balancing.

Can you explain this please?

How is holding and rebalancing one any different than they other...

Of course if you're not a resident of Canada than I'd seriously look at investing in US dollars instead. Secondly some brokerages allow non resident accounts for example Options Express allows German but not Canadian residents. But having said that just keep in mind Withholding taxes and US Estate Taxes.

I was thinking the same thing about holding USD. The CAD means little to me one way or the other. I do have a few reasons for leaning towards holding CAD though. Hallam recommends that Canadians, even if they live abroad, hold a certain amount of funds/investments in their "home" currency. Also, the CAD is so low now that imagine/hope it can go up. Lastly, if I will buy into the US market through the Canadian market, I would be doing that in CAD...

Honestly, I have been a bit distracted with a move over the last few weeks and need to re-read these books and get up to speed again.

On a positive note, I opened accounts with both Saxxo and DBS Vickers in Singapore, both came through, and I am in the process or getting account funding information and an authentication USB.

I need to read the fine print for each of these brokerage houses though. Saxxo charges a $100 fee if you have no trades (i.e. a period of "inactivity") for X amount of time.

I don't know how I feel about that.

[daverobev]

Hi,

ok hedging... http://www.investopedia.com/terms/h/hedge.asp

You are trying to isolate *currency* movements from *stock market* movements. With perfect hedging, if the USD changes vs the CAD but the S&P 500 doesn't, nothing changes; if you are NOT currency hedged, then as the currency fluctuates, the value of your investment IN CAD changes, though the S&P 500 hasn't moved. See?

It sounds like you're making a rookie mistake - if you hold a CAD-denominated (unhedged) fund of a foreign index, or you hold a foreign-currency denominated version of that same index, it makes zero difference (except tax wise, sometimes). The value IN CANADIAN DOLLARS will remain the same, regardless of currency movements.

The same is true of holding Canadian investments in CAD or USD.

The only thing, if you want to return to Canada, is to hold things like *Canadian* bonds. Sure, hold 10% Canadian equity - hold that if you live in Canada or not, it doesn't matter (again, except tax wise - you get a break on dividends from Canadian companies if you are Canadian resident).

[AlanAbroad]

Hi,

ok hedging... http://www.investopedia.com/terms/h/hedge.asp

You are trying to isolate *currency* movements from *stock market* movements. With perfect hedging, if the USD changes vs the CAD but the S&P 500 doesn't, nothing changes; if you are NOT currency hedged, then as the currency fluctuates, the value of your investment IN CAD changes, though the S&P 500 hasn't moved. See?

It sounds like you're making a rookie mistake - if you hold a CAD-denominated (unhedged) fund of a foreign index, or you hold a foreign-currency denominated version of that same index, it makes zero difference (except tax wise, sometimes). The value IN CANADIAN DOLLARS will remain the same, regardless of currency movements.

The same is true of holding Canadian investments in CAD or USD.

The only thing, if you want to return to Canada, is to hold things like *Canadian* bonds. Sure, hold 10% Canadian equity - hold that if you live in Canada or not, it doesn't matter (again, except tax wise - you get a break on dividends from Canadian companies if you are Canadian resident).

Thanks for the explanation and link. I will have a look at it.

Basically, I am keeping currency fluctuations and rise in stocks completely separate.

I am thinking to invest in a mix of Canadian and American ETF's, but all through the Canadian market for tax reasons.

The only reason that I consider to hold in Canadian is for the sake of investing through the Canadian market.

Personally, I am not attached to one currency over another and see the USD as probably being more practical. The author Andrew Hallam has recommended that Canadians hold a certain amount of their investments in the Canadian market and to spread the rest through the US and international markets. I am just trying to pretty much follow this guideline.

And, as an aside, can anyone please tell me how to set the site so that I receive notifications?

I can't for the life of me find the way.

Thanks for any help...

[daverobev]

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[AlanAbroad]

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Thanks, so much!

I will keep everyone updated when I start funding the brokerage accounts...