Repatriation and Capital Gains

Hello,

I am currently working in the UAE and I am considering opening an account with an online investment dealer. I'm confident that I am considered a non-resident for tax purposes so not worried about that. What I'm concerned with is repatriation.

Let's say I buy a stock today for $100. Suppose it moves to $125 and I sell before repatriating to Canada. I'm fairly confident that I will not be taxed on the $25 capital gains up to this point. However, what if I don't sell my stock? And suppose it moves to $150? Will I be taxed on the full $50? Or just on the $25 it earned since repatriation? This is unclear to me. This is not too much of a problem because, I could just sell the stock before moving and then buy it back when I repatriate.

What concerns me more is when the stock declines in value. Let's suppose the stock declines in value to $50 just before repatriating to Canada. However, I have a buy and hold mentality and believe that the market will eventually correct this pricing so I do not sell it. A year later the stock is trading at $150. Will I pay the capital gains tax on $50 (the amount gained since I purchased) or on $100 (the amount gained since repatriation)?

Any advice would be most appreciated!

Ron

CRA applies the deemed acquisition rule on any "newcomer". Any investment (other than Cdn real esate) held at the time of repatriation is considered to have been sold and bought back the day before you arrived, regardless of the physical location of the brokerage. This is applied uniformly, regardless of past performance and is not an election.

Be careful in your confidence at being a non-resident. The Canada UAE treaty makes it very difficult to break Cdn taxation unless you are a UAE citizen. Therefore, any activity in Canada during your absence, as well as any ties other than passport can make you liable for Cdn tax for the entirety of your sojourn abroad. Couple this with your intent to 'eventually' return to Canada, and CRA could easily win a court challenge.

Only an NR73 determination of non-residency (and no subsequent changes in your situation) can make one 'confident' of such a claim.