Taxation of delayed bonus & taxation of gifts

[Skyfox]

Dear colleagues,

I would appreciate your advice / thoughts on the following issues:

1) I am planning to move to Canada in Sep of this year, but will receive a bonus from my current employer for the previous financial year in October. The question is whether this bonus should be taxable in Canada. On the one hand, when I receive the bonus I'll physically be in Canada; on the other hand, this bonus is related to my previous employment which is terminated because of my moving to Canada (the bonus is just dealyed due to internal procedures of my employer and can't be paid before my landing in Canada). Do I have to pay taxes in Canada on this bonus?

2) At what rate are gifts received taxed in Canada? If, for example, in several years after my settlement in Canada my parents would like to make me a gift, will it be included in total taxable income and taxed accordingly, or it will be taxed separately? If the latter is correct, what is the tax rate for gifts received?

I would appreciate your advice. Thanks!

 

[Skyfox]

At what rate are gifts received taxed in Canada? If, for example, in several years after my settlement in Canada my parents would like to make me a gift, will it be included in total taxable income and taxed accordingly, or it will be taxed separately? If the latter is correct, what is the tax rate for gifts received?

Just read on CRA web site that 'most gifts and inheritances' do not have to be included in income and therefore should not be taxed.

Does it mean that if, before moving to Canada, I transfer ownership for some assets in my home country to, let's say, my parents who are staying in my home country, and in the future they will send me the earnings on these assets as annual gifts, this income should not be taxed? Is it a correct understanding of the Canadian law, or I miss the point somewhere? Thanks!

 

[toby]

Dear colleagues,

I would appreciate your advice / thoughts on the following issues:

1) I am planning to move to Canada in Sep of this year, but will receive a bonus from my current employer for the previous financial year in October. The question is whether this bonus should be taxable in Canada. On the one hand, when I receive the bonus I'll physically be in Canada; on the other hand, this bonus is related to my previous employment which is terminated because of my moving to Canada (the bonus is just dealyed due to internal procedures of my employer and can't be paid before my landing in Canada). Do I have to pay taxes in Canada on this bonus?

Theoretically -- maybe. Need to know more about you. If you are establishing permanent residency in September, then any income (worldwide) you receive after that time is taxable in your personal Canadian tax return. However, if tax will be (or was) deducted at source, you will be able to deduct this tax from any tax you might be liable for in Canada.

If you are not establishing permanent residency in Sept., and are not working when you receive the bonus, then you are not yet a taxpayer in Canada ( you have spent less than 183 days in Canada, and don't have access to a year-round residence). But you'd still be taxable in your home country.


2) At what rate are gifts received taxed in Canada? If, for example, in several years after my settlement in Canada my parents would like to make me a gift, will it be included in total taxable income and taxed accordingly, or it will be taxed separately? If the latter is correct, what is the tax rate for gifts received?

No tax on gifts or inheritances in Canada. I am getting rusty on Canadian tax issues, but I think that you do have to mention these incomes in your tax return, and if you have a lot of other income with very little tax, the Alternative Minimum Tax (AMT) might kick in and require you to pay at least a minimum amount of tax. Then next year, without this one-time bonus and/or gift being in your return, if you pay more tax than the AMT calculation requires, you get a refund of the AT tax paid the year before.

This is where buying a tax preparation program (I like Quicktax) is very useful; it sorts all this out for you. If you do pay AMT one year, make note of the amount to make sure you claim the refund next year.






I would appreciate your advice. Thanks!

 

[Skyfox]

Toby, thanks for your input.