Bringing in property sale proceeds from abroad

[seekr]

I have this question on bringing in money to Canada after property sale abroad. I read a few related topics on the forum and already have cleared many questions. But still have some questions to my specific scenario. If some of the experts here can answer that, it is highly appreciated.

Scenario:
- I have a house abroad (in India) since 2007
- I arrived in Canada in 2010 on Work Permit and have been living and working here since then.
- I got my PR and landed in mid 2013
- I am selling the house abroad now and bringing money to Canada via some money transfer service. the value has appreciated from 2005 to now. (about 200K)
- I will be paying capital gain taxes in my home country, when I file my taxes next year
- I have other money(savings) that I will be bringing in too
- I had on my PR landing stated I have a house abroad, but there was no place to declare at customs (I declared only household stuff and jewelry). I was told I can bring in money later as a PR holder and there was no limit to amount or duration. However there was nothing mentioned about tax obligations and I didn't ask at the time.
-There is no rental income from the property abroad during this period, since I used it for holding my personal stuff.

Questions:
1. What are my tax obligations in Canada? I read conflicting opinions that I need to pay for capital gain tax in Canada and also that if I am paying capital gain tax in India, I am not required to pay capital gain tax here (i.e no dual taxation)? And another opinion that I need to pay taxes in Canada but can claim Foreign tax credits. What applies to my scenario.
2. If I need to pay taxes in Canada, what is the basis for the value of the house? I have read that the base value of the house is the value when I became a "resident". Is that the date I originally came to Canada(2010) or the date of landing(2013)?
3. When I calculate base value and the current value on sale, can I factor in currency conversion rate in 2010 and 2013?
4. On my tax filings in the past years, I have said no to the question that asked "if I have property abroad value at more than $100000". I did that on the basis that the house was not used to generate income but used for personal purposes. I hope that is the right thing in my scenario. Would I have problems now that I am selling and bringing in money?
5. Does anyone has good pointers to a good money transfer service and any pointers to what procedure is involved in transfer?

 

[hobbes]

1. Yes, you should report the capital gains in Canada and pay tax on it. However, you will get credit for the taxes you paid in India.
2. This is a really good question. The cost basis is the cost of the property on the day you become a resident. But I don't know if it is the date when you arrived or when you became a PR - you could call CRA and check with them. They are helpful.
3. Yes, the currency conversion on the dates of transaction should be taken into account. Bank of Canada website can help you determine the exchange rate on the date of transaction.
4. You have made a big mistake in answering "no". It doesn't matter whether the property is for generating income or not, the answer to this question is "yes" and you should have filed T1135 during all those years. Talk to an accountant on what you should do now. Even if you chose to rectify this now by filing T1135 for the previous years, CRA might still decide to slap you a fine - of upto $2500 per year! Read this: http://britishexpats.com/forum/canada-56/t1135-late-filing-penalty-795072/
5. Once you sell your house, deposit the money in a NRO account. Submit the necessary documentation (mainly a CA certificate stating that the taxes have been paid) to the bank and they will wire the money to your Canadian bank account (or transfer it to your NRE account, if that's what you want).

 

[seekr]

Thanks for the reply Hobbes. Useful information.

On question 4:
I answered No on the basis of the following definition I saw on TurboTax.

Foreign Property - definition
Foreign Property is property you owned outside of Canada, and your share of foreign property in which you had an interest. It does not include:
-property in your registered retirement savings plan (RRSP), registered retirement income fund (RRIF), or registered pension plan (RPP);
-mutual funds registered in Canada that contain foreign investments;
-property you used or held exclusively in the course of carrying on your active business; or
-your personal use property.

In my case I was using it to store my personal stuff and furniture and it was locked up for the whole duration. So doesn't that fall under the above "your personal use property" and that means I can answer "No" to the question?

 

[hobbes]

seekr, you might be right on this one. CRA's T1135 guide also says the same thing:

http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/frgn/1135_whtsnw-eng.html

Specified foreign property that must be reported to the CRA includes:

Funds held outside Canada;
Shares of non-resident corporations (other than foreign affiliates);
Indebtedness owed by non-residents (other than from foreign affiliates);
Interests in certain non-resident trusts;
Real property situated outside Canada (other than personal use property and real property used in an active business); and
Other types of foreign property such as intangible property not used in a business and certain rights under contract.

May be it was ok to not report it. You can either forget about this or to be sure, call CRA. Personal use in this case might be for people living abroad (but with resident tax status) and using that property for residential use.

 

[seekr]

Thanks hobbes. Will call CRA to clarify.

Does anyone have an answer to the following question:
2. If I need to pay taxes in Canada, what is the basis for the value of the house? I have read that the base value of the house is the value when I became a "resident". Is that the date I originally came to Canada(2010) or the date of landing(2013)?

Also another question (India tax related)
6. When I sell property in India, what is it that I am paying tax for as an NRI? My understanding was I would calculate my capital gain (selling price - indexed price of property= capital gain) and pay 20% on the capital gain. However I heard of someone who had to pay 20.6% TDS on the whole sale amount (at the time of the sale, which was a few weeks back), which I think is a mistake. What is right?

 

[hobbes]

Also another question (India tax related)
6. When I sell property in India, what is it that I am paying tax for as an NRI? My understanding was I would calculate my capital gain (selling price - indexed price of property= capital gain) and pay 20% on the capital gain. However I heard of someone who had to pay 20.6% TDS on the whole sale amount (at the time of the sale, which was a few weeks back), which I think is a mistake. What is right?

Your understanding is correct.... perhaps it is 20.6% and not 20% on the capital gain (there used to be a 3% surcharge of the tax paid for income over a certain amount - so 20% becomes 20.6%, not sure about that now). But 20.6% on the whole sale amount is not true, unless that person got the property for free - can happen if the government gifted it to him/her.

 

[seekr]

Thanks Hobbes.
Makes sense about it being a gift. Or it could have been that they could not provide evidence of the purchase price. Not sure of the scenario.
I was told it was a rush sale. I am sure they will be able to get a refund when they file their returns at the end of the year for the overpayment. (if they are overpaid)

 

[yahoo19]

Hi. I am in a similar dilemma. I landed 2 months back. As the post is from last year I am hoping you would have gone through the procedure and would be in a position to give first hand account on how one should go about getting the money from a Property sale. I had shown my property papers at the airport but the immigration woman just waived it aside. What she had to say was, I can bring in money as much as I want but over $10k I need to declare. Currently I have no plans to sell my property but I may in the near future. Thanks.

 

[steaky]

Hi. I am in a similar dilemma. I landed 2 months back. As the post is from last year I am hoping you would have gone through the procedure and would be in a position to give first hand account on how one should go about getting the money from a Property sale. I had shown my property papers at the airport but the immigration woman just waived it aside. What she had to say was, I can bring in money as much as I want but over $10k I need to declare. Currently I have no plans to sell my property but I may in the near future. Thanks.

Once you became a tax resident, you would need to report your foreign holdings outside Canada and disposition. You can bring the proceeds (either bank draft or cash) as much as you want but would need to declare if over $10K. You can also TT into your Canadian account.

 

[Erixson]

I thought it isn't so complicated. Wouldn't be simpler? You sell the property in some country and you get payment on bank account. If the bank does not exist in Canada, then you make the transaction to the account you opened in some Canadian bank and that's it. I found a work in Canada and planning to sell property in my country. It seems I need investigate the rules little bit better.

 

[crosstheevil]

This post is very helpful. Just a quick question, if I sell my property (say, a condo) before I become PR of Canada, I shall not have to pay any Canadian taxes at all, right?

Really appreciate it if someone could answer this question, thank you.

 

[torontosm]

This post is very helpful. Just a quick question, if I sell my property (say, a condo) before I become PR of Canada, I shall not have to pay any Canadian taxes at all, right?

Really appreciate it if someone could answer this question, thank you.

That is correct. Any income generated outside of Canada prior to becoming a resident of Canada for tax purposes is not taxable by the CRA.

 

[larrissa2016]

That is correct. Any income generated outside of Canada prior to becoming a resident of Canada for tax purposes is not taxable by the CRA.

Hi,

I have a similar question, i am in the process of applying for permanent residence in Canada, I used my savings account in USA as proof of funds and it has about $150k, would I be asked to pay tax on this account when i move permanently to canada?

 

[torontosm]

Hi,

I have a similar question, i am in the process of applying for permanent residence in Canada, I used my savings account in USA as proof of funds and it has about $150k, would I be asked to pay tax on this account when i move permanently to canada?

No, there is no tax on funds brought to Canada.

 

[Hot2Cold]

Hi,
A question on declaring the value of the property. Is there a specific format from a particular authority? Or any certified valuer will do?