Capstone Copper Corp. will start trading on the Australian Securities Exchange (ASX) tomorrow, so prospective Australian investors need to be aware of the Canadian federal income tax considerations associated with acquiring Capstone’s common shares (Shares) through CHESS depository interests (CDIs). This brief overview aims to shed light on key tax-related information, but investors are strongly advised to consult their own tax advisors due to the nuanced nature of tax implications.
1. General Considerations
- Non-Canadian Holders: The provided information is primarily for those who are not, and are not deemed to be, resident in Canada and meet specific criteria outlined in the Tax Act.
- Caution on MLI: The Multilateral Convention to Implement Tax Treaty Related Measures (MLI) is not addressed, and its impact on reduced withholding rates under tax treaties needs careful consideration.
2. Currency Conversion (1.2)
- Exchange Rate Impact: Amounts in currencies other than the Canadian dollar must be converted based on Tax Act guidelines. Fluctuations in the Canadian/Australian dollar exchange rate may affect dividends and capital gains.
3. Dividends (1.3)
- Withholding Tax: Dividends to Non-Canadian Holders are subject to a 25% withholding tax, unless reduced by applicable tax conventions. Capstone will withhold the tax and remit it to the Receiver General for Canada.
- Capital Gains Tax: Non-Canadian Holders are generally not taxed on capital gains unless Shares constitute “taxable Canadian property.” Exemptions under tax treaties may apply.
- Listed Stock Exchanges: As long as Shares are listed on designated stock exchanges (including ASX), they generally won’t be considered taxable Canadian property.
- Tax-Neutral Conversion: Converting Shares to CDIs or vice versa does not trigger Canadian tax consequences.
- Legal Advice Recommended: This summary is not exhaustive and doesn’t replace legal, business, or tax advice. Investors should consult their tax advisors considering their unique circumstances.
- Regulatory Changes: The summary assumes current Tax Act provisions, CRA policies, and Canadian Tax Proposals. Regulatory changes might impact tax considerations.
Australian investors eyeing Capstone’s ASX listing should diligently consider the outlined tax implications. While the summary provides a useful guide, the complexity of tax laws requires personalized advice. Seeking professional counsel ensures investors navigate potential tax challenges successfully and make informed decisions in light of their specific situations.