In 2016, we published an article covering foreign rental properties.
5 years, 312 consultations and 97 voluntary disclosures later, we decided to re-address the subject of foreign properties from a different perspective.
When to declare foreign property? Which assets?
The list of declarable assets is very long and sometimes, (CRA being the CRA) it is not clear either.
When to declare your foreign property to the tax authorities?
- Each year, no later than April 30 (excluding the year of immigration).
- As soon as the cumulative (not individual) cost of these assets exceeds CAD $100,000.
- When you’re not sure whether to make a declaration or not. You have nothing to lose. Declare it to the tax authorities.
Assets to declare for $100.000 – This list is not complete but contains more than 95% of the practical cases:
- Real estate, bought or inherited, which are not primarily for personal use. Ex:
- Property leased for long or short term (Airbnb type)
- Empty/abandoned/unused property
- Property that does not provide shelter for you or a related person (family member)
- Cash in foreign accounts:
- Funds in a foreign account (bank account)
- Short-term investments, e.g., savings account
- Cryptocurrencies (Bitcoin, Ethereum…)
- Life insurance policy with a non-Canadian broker.
- Investments held in an institution outside Canada, even if the property is Canadian, e.g. holding Bombardier stocks with Bank of America.
- Investments in a foreign company account, even if held at a Canadian institution, e.g. Apple shares at Desjardins.
- Receivable Assets:
- Loan to a non-resident person (other than a family member)
- Other properties:
- Shares in a family business
- Plots of land
- Other types of investments, e.g., works of art, collectibles, etc.
- Intellectual property
- Excluded goods that do not have to be declared:
- Some retirement accounts such as the IRA and US 401K
- Pooled funds belonging to a Canadian institution.
Impact on your return
Making a declaration of your foreign property has no impact on your declaration as such. It is just a matter of informing Revenue Canada that you hold foreign assets worth more than $100,000.
However, if these assets generate income (e.g., rental income, interest income…), this income must be disclosed. After tax treaty and foreign tax credit, you may have little or no tax to pay on this income.
In both cases, you must be very careful because failing to declare either one or the other can result in significant penalties:
- $2,500/year in which foreign property was not declared.
- 10 to 20% of income that has not been disclosed (even if it results in no tax)
If you have failed to declare your foreign assets in the past, there is (thankfully) a voluntary disclosure program that allows you to cancel penalties and interest.
Voluntary disclosure program
Based on your situation and the type of omission you have made, it is necessary to prepare a federal, provincial or both disclosures. It must meet several criteria in order to be approved. Among these, the two most important are:
- Make a voluntary disclosure and not under the request of the authorities. It is indicated within the name.
- Your omission must be deliberate and in good faith.
*To read our last article on the subject clic here (in french only)
Do you have to make a voluntary disclosure or not? Do not hesitate to book a consultation with one of our accountants to get a better picture of your situation.Tax declaration Services for Companies