Offshore Investments Tax Reporting
April 6th, 2007
Question: Taxes on Mutual Funds, non-registered?
I’m having a hard time sorting out Canadian tax policy on investment funds.
I’m in some great offshore funds, which have been growing by about 12% a month throughout 2006. If things keep going as they are, I will realize a profit of about 400%, expressed in yearly terms.
I was told by a person at rev canada, that I would have to report any growth beyond my original investment as ‘capital gains’ on this. but that only seems to apply if i ‘take out’ money from the fund, sell shares, that is.
I want to leave the money in the fund, so that it grows even faster. I would expect that I have to pay interest on the growth anyway. Can anybody tell me what, if anything, I will have to pay on my growth this year, if I leave it all in the fund.
Answer: The fact your Mutual fund is non registered means that you will need to pay income tax on the gains every year. If registered, then you do not (meaning you hold this in an RRSP).
You see – the mutual fund is realizing a gain through interest, dividends and capital gains. The mutual fund manager is buying and selling investments inside this mutual fund on your behalf.
So – you should reveive a T5 slip (I think it’s a T5??), which summarizes your gains. So to answer your question – unfortunately, you will need to pay tax on your gains (whether its interest you make, dividend income or a captial gain).
Keep in mind though that the fist 50% of you capital gain is tax free!!
Business tax changes in the Budget
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