Canadian Tax Laws on Stocks

Keep track of the exchange rates when trading stocks outside Canada.
Keep track of the exchange rates when trading stocks outside Canada. (Image: money of canada image by Lucy Cherniak from

The Canada Revenue Agency has several guidelines for taxation on a variety of stocks. In short, they are listed as capital gains for tax purposes and may include publicly traded shares, mutual funds, small business shares, and shares issued by a foreign corporation. In Canada, residents are required to report capital gains and losses, regardless of the origination of the shares.

Canadian Securities

Canadian securities include shares of a Canadian-controlled corporation, capital stock in Canadian resident corporations, shares of a mutual fund trust, or bonds issued by a resident of Canada. The tax obligation on these securities includes an allowable business investment loss that can be applied to other revenue streams. For 2009, the inclusion rate, used to determine how much loss or gain, is one-half.

Stocks from a Foreign Country

Capital gains and losses for stocks bought or sold need to be converted to Canadian dollars using the exchange rate at the time of the transaction for any transaction that occurred outside the country. There is no deferment option for capital gains from foreign transactions.

Eligible Deferrals

Capital gains and losses due to acquisition of shares from qualifying entities that meet the criteria of a Canadian small business may be deferred under Canadian tax law. It is especially applicable when the proceeds are used to acquire another small business investment where the investment is offset by the eligible gain. Deferment of taxation is also available to certain investment pools.

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