OK

so now we have our LMO we can work towards arrival dates. There are various balls/factors being juggled at the moment. One ball is the lump sum relocation allowance and tax.

All my reading (the CRC site and verious forms and booklets on it) points to the fact that relocation allowances when moving from outside canada (and not a deemed or factual resident) to inside canada are fully taxable, even if receipts for actual costs can be provided.

I have searched and searched the forum for this but can't find the answers, but I am pretty sure I can remember posts about this confirming what I have said. I think I remember souvenir in particular confirming this.

If this is the case then there are reasonably compelling reasons for getting out before the end of this canadian tax year as then very little tax will be due as we can make full use of the personal allowances and the low tax rates for low income earners. So in other words we would pay very little tax on the lump sum, whereas if we go out in Jan we will pay quite alot.

Can somone confirm any of this? ie the taxable repurcussions of relocation allowances for non canadain citizens moving to canada?

Gryphea

I received a substantial relocation package to BC with my new company and the only portion of that allowance which was taxable was the lump sum they gave towards GST on a new property, the rest was tax free as to say.

It may differ from Province to Province though so I would seek advice from your HR dept.

As I understand it you are taxed in Canada on worldwide income, so you would be "double taxed" on the year you arrive but would get a rebate later.

Assuming you are earning in the UK, you relocation allowance would be part of your whole years earnings, not looked at in isolation so the time of year you move wouldn't make much difference to the amount of tax you pay, just to whether you pay more up front and get a rebate, or pay less up front and get a smaller rebate.

I am not a financial whizz-kid so I may have completely mis-understood this. If so I look forward to learning more about it.

Very odd- I thought it was entirely taxable if moving from outside canada to inside canada, I thought you could only get round it if you were canadain but moving back?

I think you are only taxed on your world wide income AFTER you land in canada, not beofer. But I maybe wrong- I'm pretty sure not though

Good point. Logically you seem correct.

Is it possible however that the relocation package money is given after you arrive (to make sure you get there)?

Ignore that, Just realized how stupid I am....my excuse....jet-lag

just bumping this back up! in the hope that someone else may be able to offer their wisdom!

The easiest thing is to not tell anyone about it if you don't have to. We had relocation packages on both our moves (UK to Canada and Canada to Canada). Both were taxable and we couldn't hide it because the tax was deducted at source from Souvette's pay check (govt). Your situation is probably rather different. Think about where the money is coming from, where it's going to and how the payment will be made. Then guess what the chances are that the taxman in Canada will find out about it if you don't tell him. Slim, would be my guess.

My understanding (though I'm not an expert!) is that:

If you relocate WITHIN Canada your relocation expenses are tax deductable. So you can claim your relocation costs on your tax return and you would get a deduction that would offset a relocation payment given to you by an employer. That doesnt mean to say that the whole amount they give you is tax free - only the amount that matches your actual expenses (i.e. if they gave you $100k and it only cost you $10k to move you would still get taxed on the $90k as though it was salary).

BUT - if you relocate to Canada from OUTSIDE (i.e. from the UK) your relocation costs are NOT tax deductable so if you got an extra allowance you wouldnt be able to use your relocation costs to offset it.

I personally wonder if there might be a way around this (others might know the answer) - if you received the payment BEFORE you moved to Canada and became resident for tax purposes then the Canadian government would presumably have no claim on it (though the UK government might if they knew about it). Just a thought.

You can only claim a deduction for moving costs to Canada if, prior to the move, you were a full-time student, a factual or deemed tax resident of Canada.
See the CRA's page here.

I know I am a bit of a spoil sport sometimes, but this won't work. Although you are only taxable on your worldwide income after you become tax resident in Canada this is Canadian source income and is taxable in Canada whether or not you are tax resident.

Thanks for this guys. It confirms what I had thought that it is taxable and therefore moving out and getting relocation in this canadian tax year is far better for us than arriving in jan

Thanks

Gryphea

I relocated with a package ( the amount of the pacakage exactly matched what my expenses were ) and have been informed by the relocation agents that the amount is not taxable unless the company lists the items paid to me as a benefit. I would then have to offset those benefits with the receipts I submitted for my expenses to basically nullify the benefit. Other members of the company who have relocated from outside Canada have confirmed this too, so not sure who to believe now.

The relocation agents are wrong. See the link to the CRA website in my earlier post.

Of course, if the company doesn't show the payment as a benefit on your T4, and you don't include it in your tax return, then they, and you, might get away with it. However, it is still against the law and they will have some explaining to do if they are audited by the CRA.