How to Invest in Canada as a U.S. Citizen

Living in Canada as a U.S. expat opens the door to new investment opportunities—whether you’re interested in real estate, mutual funds, or starting a business. Canada’s stable economy, close ties to the U.S., and diverse markets make it an appealing place to invest, but U.S. expats need to navigate a unique set of legal, tax, and practical rules. This guide will walk you through what you need to know to invest in Canada with clarity and confidence.

Legal framework: Who can invest in Canada?

Can you invest in Canada as a non-resident? The good news is, yes—Canada generally welcomes foreign investors, including U.S. citizens living abroad. There are no blanket prohibitions against non-residents opening investment accounts or purchasing Canadian stocks, bonds, or real estate. However, there are some important rules and practical hurdles to keep in mind:

• Residency status: As a U.S. expat, you’re considered a non-resident for Canadian tax purposes unless you have significant ties to Canada (like a home, spouse, or dependents there). This status affects how your investments are taxed and reported.
• Account opening requirements: Canadian financial institutions must comply with strict anti-money laundering and “Know Your Client” (KYC) regulations. You’ll need to provide identification, proof of address, and possibly additional documentation as a non-resident. Some banks and brokerages may have their own policies about serving non-residents, so it’s wise to shop around.
• Investment restrictions: While most types of investments are open to non-residents, certain registered accounts (like TFSAs and RRSPs) may have restrictions or tax consequences for U.S. citizens. 
• Individual brokerages: Individual brokerages may have their own restrictions; some will not open accounts for U.S. residents due to FATCA/CRS compliance.

Understanding the U.S.-Canada tax treaty and double taxation rules

One of the biggest concerns for U.S. expats is double taxation—paying tax on the same income in both countries. Thankfully, the U.S.-Canada Tax Treaty helps prevent this, but it doesn’t eliminate all complexities.

• Tax residency: As a U.S. citizen, you’re taxed on your worldwide income by the IRS, no matter where you live. Canada taxes non-residents only on Canadian-source income (like dividends from Canadian companies).
• Withholding taxes: Canada typically withholds 15% on dividends and 10% on interest paid to U.S. residents, thanks to the treaty. You can usually claim a foreign tax credit on your U.S. return for these amounts, reducing your U.S. tax bill.
• Capital gains: Non-residents are generally not taxed by Canada on capital gains from Canadian stocks (unless the investment is in real estate or certain resource companies). However, you must report and pay U.S. tax on all capital gains.
• Tax credits and reporting: The Foreign Tax Credit and Foreign Earned Income Exclusion can help offset double taxation, but investment income is not eligible for the exclusion—only the credit. Accurate reporting is essential to avoid penalties.

Canadian investment account types: RRSPs, TFSAs, and non-registered accounts

Understanding the main types of Canadian investment accounts—RRSPs, TFSAs, and non-registered accounts—is essential if you want to invest in Canada as a U.S. expat. Each account comes with its own set of tax rules and implications on both sides of the border.

Registered Retirement Savings Plan (RRSP)

• Eligibility: Non-residents can generally maintain existing RRSPs but cannot make new contributions unless they have Canadian earned income.
• U.S. tax treatment: The U.S. recognizes RRSPs as tax-deferred accounts, so you don’t pay U.S. tax on growth until you withdraw funds. However, you must disclose the account on Form 8938 and FBAR.

Tax-Free Savings Account (TFSA)

• Eligibility: Only Canadian residents can open or contribute to a TFSA. If you become a non-resident, you can keep your TFSA but can’t add new funds.
• U.S. tax treatment: The IRS does not recognize the TFSA as tax-free. All income and gains are taxable in the U.S., and the account must be reported on FBAR and Form 8938.

Non-registered accounts

• Eligibility: These are standard brokerage accounts open to non-residents. There are no contribution limits or special tax advantages in Canada.
• U.S. tax treatment: All income and gains must be reported on your U.S. tax return. Canadian withholding taxes may apply, but you can claim a foreign tax credit.

Investing in Canadian stocks and ETFs: What U.S. expats need to know

Canadian stocks and exchange-traded funds (ETFs) can be attractive for U.S. expats seeking diversification, but before you buy, here’s what you need to know:

• Access: In theory, most Canadian brokerages allow non-residents to buy and sell Canadian-listed stocks and ETFs. In practice, several major brokerages will not open accounts for U.S. residents or expats, so it’s wise to check specific firms.
• Dividends: Canadian companies often pay attractive dividends. As a non-resident, you’ll face a 15% Canadian withholding tax, but you can claim this as a credit on your U.S. return.
• Currency considerations: Investments are typically denominated in Canadian dollars, so be mindful of exchange rate fluctuations.
• Reporting: All holdings must be reported to the IRS, and you may need to file FBAR and Form 8938 if your total foreign financial assets exceed certain thresholds.

The PFIC problem: Why U.S. expats should avoid Canadian mutual funds

One of the most important (and often overlooked) issues for U.S. expats investing in Canada is the Passive Foreign Investment Company (PFIC) rules. Here’s why this matters:

• What is a PFIC? Most Canadian mutual funds and some ETFs are classified as PFICs by the IRS. This includes funds held in TFSAs and non-registered accounts.
• Tax consequences: PFICs are subject to harsh U.S. tax treatment—potentially punitive tax rates and complex annual reporting (Form 8621). Even if the fund doesn’t distribute income, you may owe U.S. tax on “phantom” gains.
• Practical impact: For most U.S. expats, investing in Canadian mutual funds is simply not worth the hassle or risk. Instead, consider direct investments in Canadian stocks or U.S.-registered ETFs that hold Canadian assets.

Ready to invest in Canada with confidence? Get expert tax help

Navigating cross-border investing as a U.S. expat can feel overwhelming, but you don’t have to go it alone. The right guidance can help you avoid costly mistakes, minimize taxes, and make the most of your international opportunities. Our team of expat tax experts is here to support you every step of the way.

Frequently Asked Questions