Hey there. So I'm a tax resident of Canada and my father who has nothing to do with Canada (no residence or citizenship) wants to gift me a sum of money in a bank overseas and an apartment also located overseas. Would I incur any gift, income or capital gains tax? The last one I've heard is of real concern for a Canadian tax resident receiving real estate as a gift.
Tax implications on overseas gifts
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Hello,Hey there. So I'm a tax resident of Canada and my father who has nothing to do with Canada (no residence or citizenship) wants to gift me a sum of money in a bank overseas and an apartment also located overseas. Would I incur any gift, income or capital gains tax? The last one I've heard is of real concern for a Canadian tax resident receiving real estate as a gift.
There is no such regulation yet in canada to tax your gift receiving from your family member overseas. Since you are a resident of Canada, if you receive any earnings out of the gift such as rent, interest, capital gain while selling the property etc. then report your income in your canadian tax return. Canada taxes your worldwide income as a resident.
At a high level, you wouldn't incur any tax on money/cash gifted to you. But generally speaking, when a property is "transferred" to you, you wouldn't be taxed on the CGT as your father would be liable for the tax event. That being said you would have acquired the property and would need to start declaring its rental income to the CRA (if any). If the property is worth above $100,000, or its value takes your "specified" foreign property value under your name to a total of $100k or over, you need to start filling out T1135 forms.
Agreed!At a high level, you wouldn't incur any tax on money/cash gifted to you. But generally speaking, when a property is "transferred" to you, you wouldn't be taxed on the CGT as your father would be liable for the tax event. That being said you would have acquired the property and would need to start declaring its rental income to the CRA (if any). If the property is worth above $100,000, or its value takes your "specified" foreign property value under your name to a total of $100k or over, you need to start filling out T1135 forms.
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If the property is over 100K, it needs to be generating income for it to be reported. It's on CRA website. If one has a property that is over 100K that is just sitting there, then no need to report.If the property is worth above $100,000, or its value takes your "specified" foreign property value under your name to a total of $100k or over, you need to start filling out T1135 forms.
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Here is the information about when to report and when not to:
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/questions-answers-about-form-t1135.html
If an individual owns a condominium in Florida that has a cost amount of $120,000, is the property specified foreign property for the purposes of Form T1135 if the condominium is:
Specified foreign property does not include personal-use property. Personal-use property is generally defined as property owned by the taxpayer that he or she or a related party uses primarily for personal or enjoyment purposes. The CRA takes the view that "primarily" means more than 50%. Whether a particular property is primarily for personal use or enjoyment is a question of fact that is determined on a case-by-case basis.
In situation (a), the individual does not need to report the condominium since it is held primarily for personal use or enjoyment.
In situation (b), the property is not held primarily for personal use or enjoyment. As a result, it is a specified foreign property and has to be reported on Form T1135.
In situation (c), if there is no reasonable expectation of profit and the individual is merely recovering part of the condominium expenses, the CRA will consider it a personal-use property. As such, the property is not a specified foreign property and is excluded from the reporting requirements of Form T1135.
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/information-been-moved/foreign-reporting/questions-answers-about-form-t1135.html
If an individual owns a condominium in Florida that has a cost amount of $120,000, is the property specified foreign property for the purposes of Form T1135 if the condominium is:
- used exclusively by the taxpayer as a vacation property?
- rented out for eight months of the year with a reasonable expectation of profit and kept for personal use the other four months?
- rented out for part of the year without a reasonable expectation of profit for the purpose of recovering a portion of condominium expenses?
Specified foreign property does not include personal-use property. Personal-use property is generally defined as property owned by the taxpayer that he or she or a related party uses primarily for personal or enjoyment purposes. The CRA takes the view that "primarily" means more than 50%. Whether a particular property is primarily for personal use or enjoyment is a question of fact that is determined on a case-by-case basis.
In situation (a), the individual does not need to report the condominium since it is held primarily for personal use or enjoyment.
In situation (b), the property is not held primarily for personal use or enjoyment. As a result, it is a specified foreign property and has to be reported on Form T1135.
In situation (c), if there is no reasonable expectation of profit and the individual is merely recovering part of the condominium expenses, the CRA will consider it a personal-use property. As such, the property is not a specified foreign property and is excluded from the reporting requirements of Form T1135.
That's incorrect. It absolutely doesn't matter if the property is generating income or not. It's the intent of the property. As you found in your next post the intent of the taxpayer is to use that condo for personal purposes. However, if you have a property undergoing renovations but the intent is to rent it out after those are complete, or you have land you have bought for growth as an investment asset, then it needs to be reported.If the property is over 100K, it needs to be generating income for it to be reported. It's on CRA website. If one has a property that is over 100K that is just sitting there, then no need to report.
Stocks like Google, Tesla etc. don't generate any income but they would need to be reported if thresholds are met because when you buy those things the intent is to make a profit.
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Can you please provide the link that states that? I called CRA to confirm a month ago, and they confirmed that if it generates any profit, then we need to report it.That's incorrect. It absolutely doesn't matter if the property is generating income or not. It's the value of it that matters.
EDIT: They also pointed me to the website with use cases (I linked it above) that states when one should and should not report it.
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Correct. However, for many of us, if we have family living in that property (which makes it for personal use), then there is no intent to generate income. In the cases you mentioned, one must generate any sort of income (from rent, etc) for the property to be considered not for a "personal use".As you found in your next post the intent of the taxpayer is to use that condo for personal purposes. However, if you have a property undergoing renovations but the intent is to rent it out after those are complete, or you have land you have bought for growth as an investment asset, then it needs to be reported.
EDIT: I also CTRL+F "intent" and I could not find anything. Taxing based on "intent" is a little weird, no? I had an intent to live in the place after I get old and move out of Canada but my intent changed 3 years from now and I decided to rent it out. "Intents" change.
Sure, but just remember when it comes to taxes/laws it's always the intent that matters the most. A rental doesn't have to be actively rented for it to be a designated a rental for the purposes of forms like T1135. For example a landlord may still claim expenses related to a rental but opt to not rent it out due to renovations or he/she is picky with tenants or is trouble getting tenants because it's a low-pop area.Correct. However, for many of us, if we have family living in that property (which makes it for personal use), then there is no intent to generate income. In the cases you mentioned, one must generate any sort of income (from rent, etc) for the property to be considered not for a "personal use".
In your case it's totally a personal use property.
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It still has to be a rental. Even if generates any sort "rent" money that is > than condo maintenance fees (or in Russia, we pay that + land tax), then it's rental. Pretty much, needs to generate money.A rental doesn't have to be actively rented for it to be a designated a rental for the purposes of forms like T1135.
In terms of "intent". Maybe. I won't argue here. It's kind of hard for CRA to prove that I had an intention of buying a place to rent it out. I bought a place for myself -> it stayed there for 1 year because I was intending to move back -> 1 year later I got a job at Google -> decided to rent a place in my home country. As I have said, intents change.
You can't have your cake and eat it too: Thus if you're claiming expenses in relation to a rental, but not renting it out, then it's a rental. Rent is only one component of a rental's profit, with the other being the capital growth. I just sold one of my properties for a 250% gain, only 50% of that was from rent.It still has to be a rental. Even if generates any sort "rent" money that is > than condo maintenance fees (or in Russia, we pay that + land tax), then it's rental. Pretty much, needs to generate money.
In terms of "intent". Maybe. I won't argue here. It's kind of hard for CRA to prove that I had an intention of buying a place to rent it out. I bought a place for myself -> it stayed there for 1 year because I was intending to move back -> 1 year later I got a job at Google -> decided to rent a place in my home country. As I have said, intents change.
At the end of the day there is no harm in declaring it - all the CRA wants to do is know about it.
Yes absolutely intents change, if a rental later becomes a personal use property, then it doesn't need to be declared.
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Fair enough.You can't have your cake and eat it too: Thus if you're claiming expenses in relation to a rental, but not renting it out, then it's a rental. Rent is only one component of a rental's profit, with the other being the capital growth. I just sold one of my properties for a 250% gain, only 50% of that was from rent.
At the end of the day there is no harm in declaring it - all the CRA wants to do is know about it.
Yes absolutely intents change, if a rental later becomes a personal use property, then it doesn't need to be declared.