Ask Allan Forum
Get expert answers to your tax questions straight from Allan, our owner and experienced CPA. It’s free, direct, and designed to help you make the best decisions when it comes to your taxes.
Hi Allan, I am a Canadian Citizen who lives abroad, the resident country has high taxes on capital gains if they are short term. I was wondering if it makes sense to trade stocks as a business in Canada. I expect to make around 80K CAD before taxes, and my local taxes would be around 40K. Could you please let me know? Thanks.
Hi Shelly,
Thank you for your message and for outlining your situation.
As a non-resident of Canada, it is possible to incorporate a Canadian company to trade stocks, but there are several important tax considerations to keep in mind:
🔍 Key Tax Implications
✅ Non-CCPC Corporate Taxation
A Canadian corporation controlled by a non-resident is classified as a non-Canadian-Controlled Private Corporation (non-CCPC). The tax treatment depends on how the trading activity is classified:
- If the corporation is actively trading (frequent trades, intention to earn a profit), the CRA may treat this as business income, taxed at ~26%.
- If the corporation passively earns capital gains (occasional trades, long-term holdings), the tax rate drops to ~13%, due to the 50% capital gains inclusion rate.
✅ Dividend Withholding Tax
- Dividends paid by a Canadian corporation to a non-resident are subject to a 25% withholding tax (which may be reduced under a tax treaty).
- You may also owe income tax in your resident country on those dividends, although a foreign tax credit may apply for the Canadian withholding tax.
⚠️ Illustrative Outcome
Suppose your Canadian corporation earns $80,000 in business income:
- Canada levies 26% corporate tax = $20,800
- After-tax profit of $59,200 is distributed to you
- Canada withholds 25% on the dividend = $14,800
- You receive $44,400, which may be further taxed in your home country
📌 The total tax burden can exceed 50%, depending on your local tax rates and treaty relief availability.
✅ Recommendation
Incorporating in Canada may not be tax-efficient in your case, especially when factoring in:
- Canadian corporate tax
- Dividend withholding tax
- Local country tax on foreign income
Instead, it may be worth exploring:
- Whether treaty planning or other jurisdictions provide better outcomes
- Your local country’s treatment of foreign corporate income and dividends
📅 I recommend booking a 30-minute consultation to evaluate your residency, treaty benefits, and tax exposure in full.
👉 https://madanca.com/contact-us
💵 Fee: $140 + HST
Looking forward to assisting you further.