A Reader Question: How Can I Minimize my Taxes?
“I’m Canadian, and I’m confused about taxes and how to optimize my investments from a tax perspective. If we’re ineligible for RRSPs, where should our investments be kept to reap tax benefits?”
Please note that I not a tax expert and that the best advice I could give you is to consult with an international tax accountant who is familiar with the specifics related to Canadian tax laws.
Cut Those Ties to Canada!
That said, since you don’t live in Canada you should not be doing things like applying for GST rebates or investing in your RRSP because if you want to avoid paying taxes on your income earned abroad, you really should be staying off the radar of the Canadian revenue agency. Additionally, if you don’t have any money invested in Canada, you don’t need to efile tax returns when you are living abroad. This will save you considerable time and effort.
Don’t forget to minimize the amount of primary ties you have such as a house, and secondary ties such as health care coverage, a car or furniture (more details about residency status here). If you move back to Canada and the government decides that you were a factual resident of Canada during your time abroad, you’re going to be dinged, and for a lot. So, that should be your biggest priority, way above worrying about losing a bit of money on your investments due to taxes.
Taxes on Investments While Abroad
That said, investing to minimize taxes while living abroad is an extremely complicated subject and I only touch on it very briefly in my book, The Wealthy English Teacher: Teach, Travel, and Secure Your Financial Future.
Even Andrew Hallam doesn’t give a lot of detail about it in The Global Expatriate’s Guide to Investing: From Millionaire Teacher to Millionaire Expat, perhaps because it is just so difficult to give specific advice due to the massive number of variables (where you are from, which brokerage you choose, what investing instrument you use, your income level, etc, etc).
The most helpful thing I’ve found online that I could direct you to is the section for Canadians on Andrew Hallam’s website. Check out the comments below where he (along with a few others) talk taxes for Canadian expats. It’s by far the best information that I’ve found on the topic.