Bring money into Canada

[bubs1121]

Well explained, Toby and that's my point. If you will declare it in your tax return, how you will justify if your account offshore didn't really earn at all? I'm just giving an example of "What if that happens" scenario. Maybe I was just exaggerated of the 2 yrs, but it happened during the 1997 financial crisis in southeast asia and just recently 2008 global crisis. A lot of companies were not able to give dividends to their investors. Mostly losses. My purpose of asking question is to educate the readers and that includes myself who wants to have an idea of Canada Taxation. And you're of great help, Toby.

 

[jes_ON]

Yes, great explanation Toby. Losses or zero income during bad years is not a problem - again, you can deduct losses - there's no law guaranteeing that investments always increase in value - but as Toby says, the issue is being able to document it. If you don't get quarterly or annual statements on these accounts (I can't imagine that), request one (or a letter) summarizing activity for the tax year.

 

[toby]

To tie up a few loose ends:

1) There is a box in your tax return which you must tick to declare whether or not you have $100,000 plus offshore. There is a schedule where you declare what type(s) of offshore investments you have. Quicktax brings this up automatically for you. The schedule does not ask you where the investments are (not yet anyway! )

On the appropriate line in your General return, you simply declare zero foreign-investment income.

No problem.

Of course, if you are audited, you will be required to show proof of zero income. So, this leads to jes_on's point that surely these offshore investment companies must provide statements. Yes and no. Yes, they will provode statements of the worth of your investment, but in tax havens there is no reason to show whether investment income is in the form of interest, dividends, or capital gains. Taxpayers are keen to declare income to be capital gains, to keep taxes low. CRA has a vested interest in declaring the income interest (highest tax rate). So you see the potential for conflict.

What I do is deal with an investment company (banks actually) that allows me to call up my investment online(I could never wait for a quarterly statement), and call up a transaction report that shows dividends received, capital gains generated, expenses paid, etc.

I save the transaction report with my copy of the tax return in case CRA came calling. I would drop transaction data into an Excel spreadsheet, and input the net income (of all three types) into my QUICKTAX program. I'd consider filing this Excel spreadsheet with my tax return (on the principle that more information is better for CRA).

Note I am saying "would do this", "would do that". It is because I am not yet a Canadian taxpayer; I will become one again only if my wufe is granted a visa. While living abroad has its joys and problems, becoming freed from the need to work as an unpaid file clerk for CRA was a definite joy!!!

 

[bubs1121]

I'm not a Canadian taxpayer either too. But would be in the nearest future. Here's another question regarding this worldwide tax. I became a PR in March 2007 but I just landed and stay in Canada for 1 week and gone back to work in Middle East. I didn't even applied for SIN. But I already had my PR Card. I will be coming back to Canada this April to live for good. My question is: Do I have to pay taxes on my worldwide income during those 3 years I'm out of Canada? Assuming I have to pay, did I commit a tax related crime already and might not be allowed to enter Canada?

 

[toby]

I'm not a Canadian taxpayer either too. But would be in the nearest future. Here's another question regarding this worldwide tax. I became a PR in March 2007 but I just landed and stay in Canada for 1 week and gone back to work in Middle East. I didn't even applied for SIN. But I already had my PR Card. I will be coming back to Canada this April to live for good. My question is:

(1) Do I have to pay taxes on my worldwide income during those 3 years I'm out of Canada?
(2) Assuming I have to pay, did I commit a tax related crime already and might not be allowed to enter Canada?


Bubbs1121:

(1) We’re getting perilously close to legal advice here. But let me give you a few generalities, and end with 55 pages of legal caveats!! No, just kidding.

You can be a permanent Canadian resident and NOT be taxable on income earned outside Canada during the time you are outside Canada. This is a compaex issue, but here is what I have learned.

If your “centre of vital interest” (I think that’s the term used) is outside Canada, you did not have a residence available to you in Canada throughout the year, ad you spent less than 183 days in Canada each year, then
(1) you pay tax on any income earned in Canada, but
(2) pay no tax on income earned outside Canada.

(2) So, no tax to pay, presumably, although it’s always wise to file a tax return each year so as not to appear on CRA’s radar screen. If you did not lie on a tax return, you are certainly not a tax criminal. If you did owe taxes, you would have to pay them plus accumulated interest at 7% per annum.



But I think you have a different problem. Your permanent residency period runs from March 2007 – March 2012. You have spent no time in Canada during that time, so you’d need to get back to Canada and stay for two years (March 2010 – March 2012) to meet your 730-day quota.

If you leave returning to Canada until later, the border officer might figure out that you will not be able to meet your quota by March 2011, and declare you in breach of the residency conditions. I think it was Karlshammer who said that the border guard keeps your PR card in these cases, and turns you back to your home country.


There is some ongoing discussion under Permanent Residency Obligations about where and when the examination (when you try to prove you WILL be able to meet your residency quota by March 2012) takes place. I suggest you read this discussion carefully. I don’t have the answers yet.

 

[bubs1121]

Just for confirmation, Toby. So if I have a residence in Canada, I still have to pay tax on my income earned outside of Canada?
With regards to my residency obligation, I just didn't mentioned the exact dates but I believe I'm safe. I landed on Mar 31 2007 and left Apr 6. And planning to come back on Apr 7 2010. So by Mar 30 2012, i will meet the magic 730 days.
Thanks Toby.

 

[toby]

Just for confirmation, Toby. So if I have a residence in Canada

I am afraid so. You are a permanent resident with a residence available to you throughout the year. I believe this deems you a full-time taxpayer, liable for worldwide income all year. If you had rented this residence to an arms-length third party (not a family member), and you spent less than 183 days per year in Canada, you could make the case that you are a "non-resident" for tax purposes (which means -- again -- that you pay tax only on in-Canada income while outside the country). Immigration and CRA define "resident" differently.


My source of information is IT-221R2 (Consolidated), which you can look up non the CRA website.

Cheers,

 

[wizardhigh]

Out of curiosity someone ask me this question,hope some expert can give opnion.
A friend of mine is landing soon,someone told him to declare more money during landing,the immigration officer will ask how much money
are you carry? Tell him/her you have > 1 million canadian dollar.This is to avoid tax if you bring or TT your money into Canada later on.You will
be exempted from tax once only during landing or items under to follow list..

Thanks

 

[toby]

A friend of mine is landing soon,someone told him to declare more money during landing,the immigration officer will ask how much money
are you carry? Tell him/her you have > 1 million canadian dollar.This is to avoid tax if you bring or TT your money into Canada later on.You will
be exempted from tax once only during landing or items under to follow list..

Thanks

There are two separate issues: (1) the value of assets you have offshore (stocks, bonds, real estate), and (2) the value of cash you are carrying with you.

(1) You are supposed to declare the value of your assets when you land in Canada (e.g. stocks, bonds, land and houses. When you eventually sell the asset, any gain (difference between value when you sell, and value when you landed in Canada) is taxable.

So yes, inflating the value as you enter Canada will reduce any taxable gain when you sell later. However, if you are audited, and asked to show how you calculated the value as you entered Canada, and you cannot, you are open to be charged with lying on a tax return.

I have no direct experience with this, but in general CRA feels it is their prerogative to be suspicious, and your job to prove your innocence. I don’t know what CRA would do if you could not prove the value of your assets. Maybe give them/you a value of zero, thus increasing the taxable gain.

(2) The issue of how much cash you are bringing into with you relates more to anti-money-laundering measures. If you are bringing a lot of money with you, you may be asked about its source. So bring some sort of proof (bank withdrawal slip, etc). If you have a lot of money and don’t report it, it might be confiscated.

But the cash is not taxable. Only interest that it earns for you after entering Canada would be taxable; or if you bought stocks then sold at a profit the capital gain would be taxable.

The goods you bring into Canada are generally not taxable ifs they are used personal property.

 

[wizardhigh]

Thank you Toby.

As for property,like houses & land,if you have valuation report done by property valuer,or bank aggrement loan which will show the value of house and loan taken.These canbe shown to CRA to prove the amount?

 

[toby]

Such appraisals would be perfectly acceptable, I'd imagine. Usually bank appraisals underestimate the real value of an asset. If you can get details of a few sales of comparable properties, those might give a higher value.

 

[steaky]

I have a question about capital gain tax. I bought a Canadian real property as an investment many years ago while I am a Canadian citizen exclusively living abroad. I might need to sell this investment property if I bring my pr wife to Canada and buy a larger one as principal residence in the near future. I wondered whether or not it would be better off to sell the investment property while I am still a non-resident for tax purpose than to sell it later on as a resident. Any ideas?

 

[toby]

If you would realize a large gain selling the Canadian property, better to sell it while you are a non-taxpayer, living abroad. You are not taxable in Canada on that gain.

However, be aware that if you are a non-resident when you sell, you are required to withhold 50% (yes, 50%!!!) and send it to the government until you can satisfy the tax authorities that you owe no other taxes to Canada. I don't know how long it takes to get the 50% back, but I expect it would take a long time.

This might be a good time to consult a really experienced real estate agent or tax attorney. Maybe your plan to re-establish residency in Canada soon after the sale somehow exempts you from the withholding tax. Or maybe the attorney you use to close the sale can keep the money from the sale in his escrow account pending your return to Canada, and once you are a resident again, there is no need to withhold 50%?

Please let us know what you find out. This might be more common a situation than we think.

 

[steaky]

Not quite, Toby. Thanks anyways. The non-resident need to file tax return to report the capital gain when he sell his house and form T2062 to reduce the tax withholding to 25% of the net sales profit (although he can claim back his non-residential tax according to the tax treaty between his country and Canada).

 

[haver]

If you have a substantional amount of money or other assets that create income for you abroad, you should consider offshore immigration trust which is good for 5 years minus 2 weeks.

On the other hand, it will cost over $15,000+ as well.