Questions about Tax on Savings & Properties outside Canada

[Kurt09]

Hi.

I will doing soft lading next month and I have a few questions regarding tax on savings. Here are the details:

• I am an expat working in Saudi Arabia. My home country is Pakistan.
• I will land in February 2019 for two weeks then return to Saudi Arabia for remainder of the year
• I will permanently move to Canada sometime in first three months of 2020
• Following is what I have now (i.e. at the time of landing)
  • ~CAD 35k in cash (which is reflected on bank accounts)
  • ~CAD 18k in properties (CAD 11K land in Pakistan and CAD 7K car in Saudi)
• In addition to the above, I will be saving about CAD 40K in 2019 from my salary in Saudi Arabia before I move to Canada permanently in 2020

I am confused on what is and what is not taxable. I will not be filing tax until I permanently move to Canada in 2020. I have several questions:

• Will I be required to pay taxes on income earned after soft landing, outside Canada in 2019? I will transfer this money to Canada at the time of my permanent move in 2020.
• Will I be required to pay taxes on proceeds from disposal of properties mentioned above? This money will also be moved to Canada at the time of my permanent move in 2020.
• Does the timing of transfer of funds matter? For example, could it be that if I transfer in year 2019 when I am definitely a non-resident for tax purpose, it wouldn't be taxed whereas it would be taxed if i transfer in 2020.

Thanks in anticipation!!

 

[BC4life]

1) You are taxed on your worldwide income from the time you become tax resident. If you just soft land without establishing time, you could claim to have become tax resident on the date you actually move here in 2020. So you should not be taxed on your income until then.
2) Capital gain tax will apply on the difference between the sales of your property and their value at the time you became tax resident. Theoretically, if you could sell all properties prior to moving, you should not be liable for any CGT.
3) The timing of the transfer should not matter, although large transfers made after becoming tax residents, which are not justified by your declared income, could attract the scrutiny of the CRA. If you have all your documents in place to justify the existence of these balances before you move you should be fine.

 

[canuck78]

2. If it is his primary residence shouldn't there be no CG?
3. Don't transfer any money until you are ready to settle in Canada.

 

[Kurt09]

@BC4life
Thank you so much for the clarification. I have read through some information on tax residency provided on official Canadian government website. During the soft landing, I will ensure not to do anything to establish ties like opening a bank accounts, claim any benefits or medical insurance, applying for drivers licence etc. just to be sure that I wouldn't be considered a resident for tax purposes.

As for any repercussions of transferring significant amount when I eventually move, I will have complete bank statements showing daily balances and salary credits. In addition, I have salary slips for everything I have earned thus far in my career and will have sale deed of property that I currently own. My understanding is that this should be sufficient evidence to justify that the amount being transferred is not beyond my means. As there are no taxes in Saudi Arabia, I wouldn't be able to provide any governmental evidence of the earnings such as tax return certificates.

@canuck78
I don't own primary residence in Saudi Arabia or Pakistan. The property I own in Pakistan is a small land with no construction on it. It is an investment property. Thank you for your suggestion to avoid transfer of funds.

 

[BC4life]

2. If it is his primary residence shouldn't there be no CG?
3. Don't transfer any money until you are ready to settle in Canada.

Good point on no CG for primary residence, but I was replying to the OP situation in which case his property was land, not a house. Also, for houses, not sure about the CRA rules on designating an overseas property as primary residence when one is residing in Canada.

 

[canuck78]

Good point on no CG for primary residence, but I was replying to the OP situation in which case his property was land, not a house. Also, for houses, not sure about the CRA rules on designating an overseas property as primary residence when one is residing in Canada.

Didn't realize it was land.