Korean Job Discussion Forums

[Boon]

O.K. we've got the resident non-resident debate out of the way and we're not paying tax in Canada because we know we're not residents. Now that we're earning the bucks in Korea where do we put our money to grow and avoid tax when we return to Canada?

I'm being sold on mutual funds with a life assurance wrapper by someone at HSBC that somehow makes things tax efficent. That I'm told will allow me to return to Canada but not pay tax as the funds grow. Do I even need to put it in any wrapper? There are big fund management fees for this kind of thing. Vanguard has low fees but their offshore funds require a minimum US$100 000.

Who's got a good offshore place to put money?[/b]

[Gord]

With non-resident status, you don't pay tax on your income during the time period you out of the country. You could make a million dollars in three years and return home where you would owe nothing in Canadian taxes.

However, you may wish to consider financial investments such as mutual funds will expose you to a unexpected tax burden if you cash out after returning to Canada as that money is suddenly 100% income with no income credit from when you invested. Anything you invest in here you will have to cash out before returning to Canada to avoid that tax issue.

Bringing back stacks of cash (and remember to declare it) is fine, and you won't owe tax on if you qualify for non-resident status.

[Stunted Wookie]

You're only taxed on mutual funds when you withdraw. So there would not be much benefit to having an offshore account now as even in canada you are not taxed on them..they are tax deductable in fact.
As long as you re-invest you don't pax taxes.
(RRSP, RSP)

The real benefit to offshore is not to claim at all!
Remember when you start to draw the cash out you will have to claim that on your taxes..are you sure you won't be in Canada when you need to use it?

You are supposed to claim all foreign income and investments..check on the revenue Canada site if foreign investments are tax deductable....You may be a non resident now but that's not the point...the gov. gets their money later on.

The big ploy with Mutuals is that you get this compound interest over so many years + you get a tax break on your working years...
However presently those drawing on their funds are paying around 30% tax right off the top.
Do mutuals look that exciting as your 10-15 forecast is only 15% give or take?

Now of course the tax breaks are an incentive, however you are in your working prime now so why do you need that? When you retire in 40-50 years then you want the easy life eh'
I remember hearing someone mention that the high tax is ok when you retire as your standard of living drops and you become less active....
What the hell?
I want to enjoy my retirement not suffer because my check didn't come in yet!
Another thing to consider is the cost of inflation. 30% tax now....what happens in 40 years?

My suggestion..screw that and do not register anything in Canada at all; find a country where there is privacy protection and keep it there...try a safe haven (Panama, Bermuda, etc...)
Or keep it in a shoe box under your bed!
I wouldn't even mention it to Revenue Canada.

[The Lemon]

Gord - The OP's question's a good one, one I'd been wondering about myself. Your point about not being able to cash in investments once returned to Canada's also good. Therefore, what investments can one make? What do smart ex-pats do with their money, given that they're living outside the world of RRSPs?

[Gord]

The easy way is to do your investments while in Korea and then cash them out when heading home. Once back in Canada, pour the money back into investments. You'll get a tax credit (specifically, you'll have your net income for the year you arrive back in Canada listed as a negative that you can carry over into future years). When you cash out down the road, you'll just pay tax on the increase in value for the investment verses the entire amount withdrawn if the investments are initiated outside of Canada and withdrawn in Canada.

It also works both ways. Since I closed and liquidated my store after coming to Korea, I was able to save over $10K in taxes legally while maintaining possesion of a considerable amount of electronics of value (i.e. bigscreen TV) which I may have had to pay income tax on had I remained in Canada and chose to close the store while I was there. In theory, this could be abused over and over thus ensuring one never has to pay taxes ever again if so desired if one if willing to become an expatriate and sever all ties with Canada during the duration of the liquidation of investments.