How much tax to pay on overseas real-estate rental income ?

[azazaz]

Dear Mates, thanks a lot for sharing your thoughts.

I well understand that some of you have tried to describe what usually people do under such a situation, while others drew attention to concerning Principles/rules. Obviously, your intention was to bring to my notice both ways that people exercise; without advising which way to follow. It is entirely one's own choice which route he/she would take.

I am targeting a foreign income of CAD 12,000 per year after tax and would want to know how much I should invest in real-estate which would produce this much rental income for me in Canada. For example if gross rental income in foreign country is CAD 15,000 and it is subject to Canadian tax of say; 20%, then ultimately I would be getting CAD 12,000 (i.e. CAD 15,000 - 20%). In this case, I would need to invest in real-estate a sum of CAD 187,500 to earn a gross rental income of CAD 15,000 @ 8%. If the tax percentage is increased to say; 30%, then I would require to invest CAD 215,000 to keep my net earning unchanged at CAD 12,000.

Is this workable?

I shall be grateful for your kind comments.

i would appreciate if some one can answer can10? i am unable to do any calculations otherwise i wud have done that. sorry dear can10 i cant answer your query..

 

[qorax]

Dear Mates, thanks a lot for sharing your thoughts.

I well understand that some of you have tried to describe what usually people do under such a situation, while others drew attention to concerning Principles/rules. Obviously, your intention was to bring to my notice both ways that people exercise; without advising which way to follow. It is entirely one's own choice which route he/she would take.

I am targeting a foreign income of CAD 12,000 per year after tax and would want to know how much I should invest in real-estate which would produce this much rental income for me in Canada. For example if gross rental income in foreign country is CAD 15,000 and it is subject to Canadian tax of say; 20%, then ultimately I would be getting CAD 12,000 (i.e. CAD 15,000 - 20%). In this case, I would need to invest in real-estate a sum of CAD 187,500 to earn a gross rental income of CAD 15,000 @ 8%. If the tax percentage is increased to say; 30%, then I would require to invest CAD 215,000 to keep my net earning unchanged at CAD 12,000.

Is this workable?

I shall be grateful for your kind comments.

U obviously aren't understanding the calculating concepts. Ur annual tax isn't payable on piece-rate basis... it'd be calculated on the total i/c that u make in the previous yr. Said that this is what is for 2012 (the Fed+Provincial is payable):

a) Federal tax rates for 2012:
15% on the first $42,707 of taxable income, +
22% on the next $42,707 of taxable income (on the portion of taxable income over $42,707 up to $85,414), +
26% on the next $46,992 of taxable income (on the portion of taxable income over $85,414 up to $132,406), +
29% of taxable income over $132,406.

b) Provincial/territorial tax rates (combined chart):
There's a different rate per province, I'm posting just the Ontario one for reference...
5.05% on the first $39,020 of taxable income, +
9.15% on the next $39,023, +
11.16% on the amount over $78,043

Now, as with the payables there's an entire gamut of deductions as well. Which all depends on various factors and the earnings of any & every family members... these r complex, with one simple understanding that if u make less than $18,000PA u'd usually receive rather give. Thus, u pay nothing.

Qorax
_________________________________________________________________________________________
As with ppl casting aspersions here - it'd be interesting to observe what they file yr-on-yr after landing if they also make parallel overseas i/cs!

 

[mitali]

U obviously aren't understanding the calculating concepts. Ur annual tax isn't payable on piece-rate basis... it'd be calculated on the total i/c that u make in the previous yr. Said that this is what is for 2012 (the Fed+Provincial is payable):

a) Federal tax rates for 2012:
15% on the first $42,707 of taxable income, +
22% on the next $42,707 of taxable income (on the portion of taxable income over $42,707 up to $85,414), +
26% on the next $46,992 of taxable income (on the portion of taxable income over $85,414 up to $132,406), +
29% of taxable income over $132,406.

b) Provincial/territorial tax rates (combined chart):
There's a different rate per province, I'm posting just the Ontario one for reference...
5.05% on the first $39,020 of taxable income, +
9.15% on the next $39,023, +
11.16% on the amount over $78,043

Now, as with the payables there's an entire gamut of deductions as well. Which all depends on various factors and the earnings of any & every family members... these r complex, with one simple understanding that if u make less than $18,000PA u'd usually receive rather give. Thus, u pay nothing.

Qorax
_________________________________________________________________________________________
As with ppl casting aspersions here - it'd be interesting to observe what they file yr-on-yr after landing if they also make parallel overseas i/cs!

Dear Qorax da,

Appreciate your response to Can10.

I still stand by my opinion that we all should declare our World Wide income to CRA whatever it is ...."Less or more" and yes, if I have any, I will declare as I have always declared.

Mitali

 

[Can10]

Once again I am very grateful for all the inputs my dear mates have shared here.

Dear Captain Qorax kindly advise if my understanding is correct. From the table you provided, I understand that the minimum amount of tax is deducted when your annual income is equal or less than $39,020. Assuming it is exactly $39,020, then you will be paying 15% Federal Tax and another 5.05% Provincial Tax (Ontario). For sake of simplicity lets assume there is no deductions against tax relief. Hence the amount of total tax would be $7,824. So you are left with a balance of $31,196 for yourself. Please advise if my understanding is correct. If yes, then I will go to the other part of what I am thinking.

Appreciate your further inputs.

Kind regards,

 

[qorax]

Dear Qorax da,

Appreciate your response to Can10.

I still stand by my opinion that we all should declare our World Wide income to CRA whatever it is ...."Less or more" and yes, if I have any, I will declare as I have always declared.

Mitali

Congrats on getting ur PRVs, ma'am !

 

[Cappuccino]

Yes, there are many ways of not paying tax for the country that I reside in.......the country that is giving me tons of other opportunities........BUT WOULD I DO THAT....NO I WILL NOT.....nor would I suggest anyone to do it.

I would rather have a high percentage deduction than live in the fear that CRA might catch me one day and I lose my peaceful nights of sleep till that day.....is it worth it? No...its not. I would rather buy "my peace of mind" in lieu of paying taxes. People have also to declare their world wide income to get benefits for Child Taxes...I would declare it too even if I got less amount or no amount in my benefit.....Just for the peace of my mind.

This is purely my opinion....and I am sure Qorax da and Explorer have good intentions too.

Mitali

Someone just PM'd me and asked me to comment on this thread.

My understanding is that, once you have become a taxable Canadian resident, all income - whether earnt in or outside Canada - should be declared on the tax returns where specified.

But I am a little troubled that some seniors, unless I have completely misunderstood in which case I'll apologise in advance, are advising people not to declare income from overseas that they are legally supposed to declare. Of course if you earn less than the minimum threshold you will pay not tax, however you still to the best of my understanding you still have to DECLARE the earnings on your tax return.

Generally you pay tax in the country of your permanent residence (i.e. where you spend more than 6 months of each year) and tax evasion is a crime. If you did not pay tax on the income in the country from which it was generated then you should be paying it in Canada if you're a taxable Canadian resident.

All these questions are on the tax return, so my advice is to answer all the questions truthfully and declare everything it asks to be declared, and let the government work out how much tax, if any, you need to pay on it.

Wayne.

 

[azazaz]

Someone just PM'd me and asked me to comment on this thread.

My understanding is that, once you have become a taxable Canadian resident, all income - whether earnt in or outside Canada - should be declared on the tax returns where specified.

But I am a little troubled that some seniors, unless I have completely misunderstood in which case I'll apologise in advance, are advising people not to declare income from overseas that they are legally supposed to declare. Of course if you earn less than the minimum threshold you will pay not tax, however you still to the best of my understanding you still have to DECLARE the earnings on your tax return.

Generally you pay tax in the country of your permanent residence (i.e. where you spend more than 6 months of each year) and tax evasion is a crime. If you did not pay tax on the income in the country from which it was generated then you should be paying it in Canada if you're a taxable Canadian resident.

All these questions are on the tax return, so my advice is to answer all the questions truthfully and declare everything it asks to be declared, and let the government work out how much tax, if any, you need to pay on it.

Wayne.

I second...completely agree....

 

[Can10]

Thank you dear Cappuccino for further stressing on the need for declaring all income, including global, for tax return purposes.

Please could you advise what is the minimum earned amount that attracts tax returns in Ontario. I haven't yet gotten precise answer to my original query which I would request you and other seniors to kindly address.

Kind regards.

 

[devilhimselff]

Interesting thread.

Are we supposed to pay Federal AND Provincial Tax BOTH

 

[Pippin]

Interesting thread.

Are we supposed to pay Federal AND Provincial Tax BOTH

Yes, but it is all calculated on the ONE annual tax return.

 

[devilhimselff]

Hmmm any idiot's guide to Tax paying in Canada ;D

 

[mitali]

Hmmm any idiot's guide to Tax paying in Canada ;D

Homework for you Devil: ;D

http://en.wikipedia.org/wiki/Income_taxes_in_Canada

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/menu-eng.html

http://www.canadafaq.ca/how+to+pay+income+tax+in+canada/

Good luck digesting all the information..... ;D and there are many more on the internet....

Mitali

 

[mitali]

Congrats on getting ur PRVs, ma'am !

Thanks Qorax da....truly appreciate your Good wishes....and Wish you and your family a very Happy and Prosperous Bengali New Year.....Shubho Nobobarsho!

Mitali

 

[Cappuccino]

Thank you dear Cappuccino for further stressing on the need for declaring all income, including global, for tax return purposes.

Please could you advise what is the minimum earned amount that attracts tax returns in Ontario. I haven't yet gotten precise answer to my original query which I would request you and other seniors to kindly address.

Kind regards.

Hi - sorry m8 I've only just done my BC tax return, and only barely understand that, so really don't know about Ontario taxation.

I know there are 2 separate thresholds - Federal and Provincial - in BC one is around $10,000 the other around $11,000 (can't remember which off the top of my head) so that once you start earning over $10,000 you pay one of them, once you start earning over $11,000 you pay both (those are not the exact figures but are just approximate).

I think provincial taxation varies across the provinces.

As Pippin says, it is all declared on a single tax return. You can get software which basically asks all the questions and then will generate the forms for you. Many of these software companies have a "free" threshold so if you earnt less than X during the tax year you can use the software for free. We used TurboTax for free because we'd arrive late in the year and so had not earnt enough to need to pay for the software.

You can technically download the forms and do it all yourself but it's a real ballache and there seem to be a lot of messy calculations. With the software it's pretty easy to just get the T4 the company provides for you, answer the questions, hit the print button, attach the required portion of the T4 and then send it off.

But I would strongly advised to fully and truthfully declare all income - overseas or otherwise. Technically you could "get away with it" and doubtless some people do, but if you are audited (I believe they audit people at random) and are caught, you could face criminal prosecution for tax evasion and if you're not a citizen you could even lose your residency because of it. Admittedly that's a very worse case scenario, but it is certainly likely you'll at least get a big fine if caught out.

Always stick to the truth, it's the easiest thing to remember and a loss less likely to bite you in the *ss at a later date than lying

Wayne.

 

[devilhimselff]

Homework for you Devil: ;D

http://en.wikipedia.org/wiki/Income_taxes_in_Canada

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/pymnts/menu-eng.html

http://www.canadafaq.ca/how+to+pay+income+tax+in+canada/

Good luck digesting all the information..... ;D and there are many more on the internet....

Mitali

Dammit Mitali.. I said "Idiot's" Guide ;D ;D ;D