Ecuador taxing Shareholders directly as per new law passed..So, firsty, I think this is why we saw the huge selloffs last week and the dip this week so hopefully I can assist in putting some of the question to rest.
Secondly, I interpret this new law thats causing a bit of panic for residents of Ecuador and NOT foreign investors but here goes.... and incase you have been under a rock and have no idea what I am talking about, I will post these links.
https://www.stockhouse.com/news/press-releases/2015/01/08/inv-metals-comments-on-recent-ecuadorian-tax-law-developments https://lundingold.mwnewsroom.com/press-releases/lundin-gold-comments-on-recent-ecuadorian-tax-law-developments-tsx-lug-201501080986735001 I have spent a majority of the day on the phone with the international tax center to clear this all up. Soo..... Here is why they CANNOT tax shareholders.
The treaty between Canada and the Repulic of Ecuador is set in place to protect against double taxation. I will post a link for your interest but will Copy/Paste the section that pertains here, "Capital Gains". I will also try to explain where I can.
https://www.collectionscanada.gc.ca/webarchives/20071126045738/https://www.fin.gc.ca/news01/data/01-058_1e.html Article 13 is the section in question.
So basically each section provides coverage of all aspects of Capital Gains Tax.
Section 1 - Basically covers a home. If I were to own a home in Ecuador and sold it, I would pay taxes ONLY in Ecuador.
Section 2 - Coversy moveable property. If I were to own a truck in Ecuador and had a Capital gain, I would have to pay ONLY in ecuador.
Section 3 - Self explanatory, sale of ships and aircraft. I own neither.
Section 4 - This one is a bit confusing so I will explain more. This is only for rental propery as steted in the foolowing paragraph. So if Flea, Golden and I owned a rental property and I wanted to sell my share, I would pay tax on my sale.
Section 5 - Now this one covers us. Very important to note this one. This is what tells us that we have to pay taxes ONLY in Canada. And if your like me and have a TFSA, you pay NOTHING. The rest of the sections do not matter.
Article 13
Capital Gains
1. Gains derived by a resident of a Contracting State from the alienation of immovable property situated in the other Contracting State may be taxed in that other State.
2. Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting State has or had in the other Contracting State or of movable property pertaining to a fixed base that is or was available to a resident of a Contracting State in the other Contracting State for the purpose of performing independent personal services, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise) or of such a fixed base, may be taxed in that other State.
3. Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or from movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that State.
4. Gains derived by a resident of the Contracting State from the alienation of:
(a) shares, the value of which is derived principally from immovable property situated in the other State, or
(b) an interest in a partnership or trust, the value of which is derived principally from immovable property situated in that other State,
may be taxed in that other State. For the purposes of this paragraph, the term "immovable property" does not include any property, other than rental property, in which the business of the company, partnership or trust is carried on.
5. Gains derived from the alienation of any property, other than that referred to in paragraphs 1, 2, 3 and 4, shall be taxable only in the Contracting State of which the alienator is a resident.
6. The provisions of paragraph 5 shall not affect the right of a Contracting State to levy, according to its law, a tax on gains from the alienation of any property derived by an individual who is a resident of the other Contracting State and has been a resident of the first-mentioned State at any time during the five years immediately preceding the alienation of the property.
7 Where an individual who ceases to be a resident of a Contracting State and immediately thereafter becomes a resident of the other Contracting State, is treated for the purposes of taxation in the first-mentioned State as having alienated a property and is taxed in that State by reason thereof, the individual may elect to be treated for the purposes of taxation in the other State as if the individual had, immediately before becoming a resident of that State, sold and repurchased the property for an amount equal to its fair market value at that time.
Hope this helps and we can get back to buying...
******* Read with Caution. Interpret how you want to, call who you want to and hang nothing on my research and DD.*******
Also, this does not stop Ecuador from taxing EGX somewhow. I do not know how as most of the Ecuadorians seems as though they have, at best, a grade 6 education but... we will see.
Good Luck all...