Inheritance from parents living abroad

[mygdon]

I am a PR in Canada.
1) Are there any taxes if I inherit some money or real estate from my parents currently who currently live (thanks God) abroad? In my previous country there is an Inheritance tax.
2) They helped me buy a house on mortgage here by giving away some money to me for the down-payment. Do I need to pay tax here for this amount?
3) If so, will it help from taxation point of view to show it as a lending from them that I will pay back after some time.
4) How does inheritance work in Canada? Is there a online reference that I could read?
Thank you for helping me out.

 

[qanda]

There are inheritance taxes in Canada, but if you are inheriting from somebody who is not a Canadian resident and the assets are not located in Canada, it may not apply. If you inherited property, you have to register (I think each year). Try looking up "deemed disposition at death" and "probate fees Canada".

A couple of books that might be helpful follow:
Border Guide: A Guide to Living, Working, and Investing in the United States, Robert Keats
The American in Canada: Real-Life Tax and Financial Inisights into Moving to and Living in Canada, Brian D. Wruk and Terry F. Ritchie

Though they are both about US/Canada taxes, a lot of the basic information is very helpful in understanding the issues for any country.

Don't know about the gift question.

Accountants who specialize in Canadian taxes and the taxes would be the best resource, although they very very hard to find, very expensive and generally target people with a net worth exceeding $1 or $2 million.

There really is a need for a non-profit that would publish basic information for everybody else, especially with the rash of punitive laws (in many countries) on any international transactions since 9/11/2001.

 

[toby]

In Canada there is no tax on inheritances and gifts.

Some people confuse inheritance tax with tax on profits (deemed disposition) at the parent' death; they are different things.

What happens is this. Assume your parents die, in Canada. Their assets are assumed to be sold (a deemed disposition) on the day of death. If this value is higher than the amount they paid, the difference is taxable in their final tax return. (Actually, in Canada there is a personal return, an estate return, etc, so if your parents lived in Canada this might be a good question to review with an accountant in order to reduce taxes.)

Only the home (and any insurance policy that specifies you as the beneficiary) is not taxed at death, in Canada.

Any such tax payable is not (in Canada) called an inheritance tax. It is a tax on profits. You might think this is not an important distinction: you might think that tax is tax, call it by whatever name you like. But it does make an important difference in your case.

Your parents live abroad, and that country's tax laws would determine any taxes payable there. But once the taxes have been paid, the money can be sent to you -- as an inheritance -- and inheritances are not taxed in Canada; i.e. no additional tax payable in Canada. Ditto the money your parents gave you for the purchase of your house -- or for any purpose at all. Gifts are not taxable in Canada either.

If inheritances were taxable in Canada, and there were no tax treaty between Canada and your parents' country, the inheritance might be taxed there and again in Canada. But this is not the case, as I have tried to explain. No additional tax in Canada.

 

[Jonboy]

To add to what toby has already posted:

I am a PR in Canada.
1) Are there any taxes if I inherit some money or real estate from my parents currently who currently live (thanks God) abroad? In my previous country there is an Inheritance tax.

No. It is taxed in the country where your parents live. Once the foreign inheritance tax is paid the net proceeds are not taxed again in Canada.

2) They helped me buy a house on mortgage here by giving away some money to me for the down-payment. Do I need to pay tax here for this amount?

No.

3) If so, will it help from taxation point of view to show it as a lending from them that I will pay back after some time.

As long as your parents are not registered as part owners of the property it is a non-issue.

4) How does inheritance work in Canada? Is there a online reference that I could read?

There is no inheritance tax in Canada. When you die all your capital assets are deemed to have been sold at fair market value on that day. Any capital gain that has accrued in your lifetime is consequently taxed on your final tax return. There are some exceptions, notably your principal residence and anything you will to your spouse. As toby also mentioned, life assurance policies that designate someone other than yourself as the beneficiary are not considered as your capital property and the proceeds are not taxable.

It is a bit more complicted than this in some cases and, in my self-serving opinion, often worth getting the help of an accountant if the deceased affairs are anything other than very simple.

A very good source of reference is the CRA's website. http://www.cra-arc.gc.ca/formspubs/tpcs/dcsd-eng.html The T4011 is the detailed guide.

 

[toby]

And if I may add an unsolicited plug, get an accountant versed in international tax matters, not just Canadian tax matters. Jonboy is one of the former.

 

[trailmix]

I have a question pertaining to this topic of overseas inheritance.

My mother recently passed away in Peru and I have completed all the necessary paper work and tax payments on my inheritance. From what I understand, I am under no obligation to pay tax in Canada, as I have already paid the taxes in Peru.... But will I need to prove this to the CRA?
I have no intention on going back to Peru and plan to retire in Canada and would like to bring my money over all at once. I worry I may be asked why I have made a large deposit and am curious if I can simply state the facts of my inheritance or need to show paper work of some sort?
Please advise....

 

[steaky]

Don't worry. You just declare it (if the amount is equal or greater than $10,000) at Port of Entry if you bring them in cash.

 

[toby]

I have a question pertaining to this topic of overseas inheritance.

My mother recently passed away in Peru and I have completed all the necessary paper work and tax payments on my inheritance. From what I understand, I am under no obligation to pay tax in Canada, as I have already paid the taxes in Peru.... But will I need to prove this to the CRA?
I have no intention on going back to Peru and plan to retire in Canada and would like to bring my money over all at once. I worry I may be asked why I have made a large deposit and am curious if I can simply state the facts of my inheritance or need to show paper work of some sort?
Please advise....

There is no inheritance tax in Canada, whether or not the inheritance was taxed in a different country. It might have seemed from other answers that there is no inheritance tax in Canada only because it was taxed elsewhere, but no -- no inheritance tax in Canada period.

So, you need not provide proof that the inheritance was taxed in Peru.

But as Steaky says, be prepared to show the source of the money you bring into Canada -- to satisfy anti-money-laundering requirements.
You might show -- for example -- a copy of the death certificate, and a bank statement showing the transfer of funds to you. If you did pay tax in Peru, that tax return would be useful to show the source of the money.

 

[abhihappy]

What happenes if you inherit family jewely ,gold and silver, how does this get accounted for,