Tax on money brought into Canada

[foreverwaiting]

Someone has told me that the funds you bring in initially as a landing permanent resident are tax free but any further money you bring in subsequently is taxed. Is this true? If so, what is the tax rate?

 

[rupeshhari]

Foreverwaiting,

when you land, do you need to take a cheque to deposit in Canada or is a bank statement okay?

if bank statement is okay, is that part of the money that you land with?

 

[foreverwaiting]

No, when I land I will have some drafts, TCs and a bit of cash which will easily cover POF. If later on I want to bring in more money after selling some assets in my home country, will that be taxed in Canada?

 

[Canary]

Please can someone answer this query because I am in the same situation. My family might not sell our property for at least one to two years so will this money be taxed? In fact do you have to inform the canadian government of all your assets before moving there? as long as you are not earning money from them, I assume not.

 

[toby]

Here’s a brief primer, followed by a recommendation to purchase one of the tax programs available in Canada. I like QuickTax the best (an unpaid testimonial).

In your first Canadian tax return, covering the year you become a permanent resident, ending 31 December of that year, you must declare offshore assets worth more than $100,000. The list does not have to be detailed, unless CRA (the Tax People in Canada) ask you for more details.

All income, anywhere in the world, must be included in your Canadian tax return, but in the first year, only offshore income earned while you live in Canada is taxable. So, declare only that part in the tax return. If you hold onto those assets and sell them later at a profit, after moving to Canada, you must pay tax on them.

The amount of tax payable depends on the type of income: interest income is taxed at the highest rate, dividends less so (usually), and capital gains (stocks, houses, etc) at the lowest rate (depending on the cost of acquiring and maintaining them, which is the Adjusted Cost Base).

This needs to be checked, but I believe that you can declare your principal residence anywhere you want, and profits on the sale of a principal residence are not taxable in Canada. So, if a major offshore asset is a house, you could designate it as your principal residence, and avoid tax on its sale. This means that if you have a house in Canada during the period you hold the offshore home, when you sell the Canada house at a profit, the profit attributable to those overlapping years must be taxed at the capital gains rate.

I’m sure that is more than you want to now. Holding offshore assets can be complicated, since if you declare offshore income as capital gains, and claim a high Adjusted Cost Base, Canada might ask you to prove these things, and that might be difficult in some offshore regimes.

One final point. If you are a permanent resident, but spend part of the year outside Canada, you are taxed on offshore income realized only while you are in Canada. This opens up some potential tax-saving strategies.

Welcome to the wonderful world of Canadian international tax law.