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Jimone

Tax on shares

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Jimone

Not sure if this is the right place to post this, but I have a question in regards to tax on shares. If I move to the Philippines, and my investment in a listed company makes a profit, a capital gain not a dividend, where do I stand as far as paying tax on the profit. I am an Australian and am lead to believe that as long as I have moved to another country before the profit was made, and remain out of the country for two years, the profit is not taxable in Australia... Does anyone have experience with this?? 

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MickyG

Being a resident in the Philippines but not a citizen allows you to be tax exempt from local taxes on overseas earnings, be it income or capital gains. Ax for your tax position in Australia where the income and capital gains are sourced that is probably best directed at your accountant there. An Australian manager of a call center here does not pay income tax on his aussie salary as he is overseas and receives the payment here.

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mikewright

As I understand it, as far as the Australian Tax Office is concerned, it depends on whether you are considered by the ATO to be an Australian resident for income tax purposes. If you are, you still pay tax on all your income, whether derived in Oz or overseas. The ATO website states.

As an Australian resident, you are taxed on your worldwide income. This means you must declare all income you receive from foreign sources in your income tax return.

Foreign income you receive as an Australian resident may be taxed in both Australia and the country from which you received it. If you have paid foreign tax in another country on foreign income you received, you may be entitled to an Australian foreign income tax offset.

The fact that a person is living overseas does not in itself exempt the person from tax on Australian income, including capital gains. A person can residue overseas, but still be domiciled in Australia.

As MickyG says, best to direct this question to an accountant in Oz.  It’s a very complex area, and you don’t want to get it wrong; changing status from Australian resident to non-resident for tax purposes can result in a “deemed” disposal of all your assets, potentially triggering capital gains tax on all assets, even though the shares etc have not been sold or disposed of.

 

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Davaoeno
16 minutes ago, mikewright said:

It’s a very complex area,

very much so !!   Amateur tax " lawyers" can get you into a lot of trouble on this one ! 

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mikewright
38 minutes ago, Davaoeno said:

very much so !!   Amateur tax " lawyers" can get you into a lot of trouble on this one ! 

Quite! Unfortunate that some people claim  to be non-residents for tax purposes, but when returning to Oz still tick the "Resident returning to Australia" box on their incoming passenger cards, or the "Australian resident departing temporarily" box on their outgoing passenger cards, not realising that this information can be used by the ATO.

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Oz Jon
Posted (edited)

A couple of points about Australian Residency

It seems that every different Aus Govt Department has their own definition of "residency" and it's implications.

Immigration, ATO,, Centrelink ... all different! .... you need to consult an expert.

On the question of Capital Gains tax. Gains are only taxable if/when you actually sell a stock ( the fact that a stock has gained in value but you haven't sold it - is not a taxable capital gain).

If you do have a capital gain, that gain is added to your annual taxable income. However, if you have owned the stock for more than 12 months, only 50% of it is added to your taxable income.

I'm an Engineer, not an Accountant! - my verbal/internet advice is worth the paper it's written on! - Lol!

So simple! .... go talk to a good Accountant!

 

 

 

Edited by Oz Jon
typos
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mikewright
2 minutes ago, Oz Jon said:

A couple of points about Australian Residency

It seems that every different Aus Govt Department has their own definition of "residency" and it's implications.

Even the ATO has four separate residency tests.  Again, from the ATO website:

The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and don't need to apply any of the other residency tests.

If you don't satisfy the resides test, you'll still be considered an Australian resident if you satisfy one of three statutory tests:

  • The domicile test: You're an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.
  • The 183-day test: If you're actually present in Australia for more than half the income year, whether continuously or with breaks, you may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here.
  • The superannuation test: This test applies to Australian government employees working at Australian posts overseas and who are members of the CSS or PSS schemes. It does not apply to members of the PSSAP scheme.
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Oz Jon
Posted (edited)

As MickeyG, Davaoeno, Mikewright and I have said - this is a dangerous business, fraught with nasty traps for the unwary.

Get good professional advice before doing anything.

Then double check it! 

Some errors can be financially very nasty!

 

Edited by Oz Jon
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mikewright
Posted (edited)
On 4/12/2018 at 9:52 AM, Jimone said:

 I am an Australian and am lead to believe that as long as I have moved to another country before the profit was made, and remain out of the country for two years, the profit is not taxable in Australia...

 

On 4/12/2018 at 6:31 PM, MickyG said:

An Australian manager of a call center here does not pay income tax on his aussie salary as he is overseas and receives the payment here.

Two very good examples of why you need professional advice. Both of these could be correct, depending on the particular circumstances of the individual taxpayer, but not correct for most people.

Edited by mikewright
hypo/grammer
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Jimone

Thanks for all the advice so far, I will defiantly see a professional before making any decisions. I have not made enough as of yet to be worth doing anything, but a friend that has the same investment, another Australian, has moved to Taiwan, his wife's home land, on his accounts advice. He thinks he will end up with a capital gain of over a million AUD if things go to plan, I only have half the exposure that he has, so even if it all goes to plan it might not be worth it for me. Will let you all know what I find out... 

Cheers Jim 

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Oz Jon

Yes, good financial advice is imperative! and timing is very important.

Just the simple expedient of splitting the capital gains over 2 tax years could save you a small fortune.

Well worth the expense of a good accountants time.

 

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Contango
On 12/04/2018 at 9:52 AM, Jimone said:

Not sure if this is the right place to post this, but I have a question in regards to tax on shares. If I move to the Philippines, and my investment in a listed company makes a profit, a capital gain not a dividend, where do I stand as far as paying tax on the profit. I am an Australian and am lead to believe that as long as I have moved to another country before the profit was made, and remain out of the country for two years, the profit is not taxable in Australia... Does anyone have experience with this?? 

Where will you be a tax resident? Also keep in mind that if you intend to become a Philippines tax resident, leaving Aust will be a CGT event and all taxes will need to be paid regardless of whether an asset has been sold.

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Davaoeno
3 hours ago, Contango said:

Where will you be a tax resident?

That is the million dollar question !  The tax courts are full of cases discussing that question . 

3 hours ago, Contango said:

if you intend to become a Philippines tax resident,

intention is not the only consideration  [ possibly not a consideration at all ! ]

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MickyG

BIR confirmation shown below of how they treat foreigners under section D. Makes no difference as to whether you are temporary or permanent resident.

 

Your country of origin will have different definitions and process of how they exempt you from their taxation if you go overseas. Some countries have no exemption as they tax you on your citizenship not your residency status

RN 2017-017870
 
 
 
 
Dear  Sir/Madam:
 
Greetings! Thank you for communicating with the BIR Customer Assistance Division.
 
In reply, please be guided by the taxation on income based on the National Internal Revenue Code:
SEC. 23. General Principles of Income Taxation in the Philippines. - Except when otherwise provided in this Code:
(A) A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines;
(B) A nonresident citizen is taxable only on income derived from sources within the Philippines;
(C) An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income derived from sources within the Philippines: Provided, That a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade shall be treated as an overseas contract worker;
(D) An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines;
(E) A domestic corporation is taxable on all income derived from sources within and without the Philippines; and
(F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines.
 
 
For other inquiries, you may contact us to 981-7003;  981-7020;  981-7040; 981-7046; 981-7030 or visitwww.bir.gov.ph. We appreciate your continued support.
 
 
 
Sincerely,
 
The BIR Customer Assistance Division
 
 
 

 

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Contango
5 hours ago, Davaoeno said:

That is the million dollar question !  The tax courts are full of cases discussing that question . 

intention is not the only consideration  [ possibly not a consideration at all ! ]

With Australian tax residency there are some absolutes, some things that can be done to ensure that you either are a tax resident or not....intentions are what they are and have little relevance, its what one actually does that determines residency. maintaining a principle place of residency thats not in Aust for a start and then spending most of your time there and having family members that live there.

The ATO has an online residency test.

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