Trade stocks as a Business.

Question

6 views10 minuteutes ago

0

Anonymous Posted 13 hours ago MadanCA Team edited answer 10 minuteutes ago

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.

1 Answer

You are viewing 1 out of 1 answers, click here to view all answers.

score 0 · Answer 1 · 2025-05-23T22:00:08+00:00

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.

Trade stocks as a Business.

1 Answer

Mississauga's Thought Leader

REQUEST A FREE CONSULTATION

Pin It on Pinterest