What does the taxman know?
 

Anyone know if the Canadian taxman has access to private bank accounts? Can he see deposits into the account? Also can he tell via the international tax office if you've worked and earned overseas? All hypothetical of course and if not then I'm enquiring for a friend of a friend!

Re: What does the taxman know?
 

Banks report to the government the interest that they pay you.

You are not taxed on the amount that's in your account (the principle). You're taxed on the interest that your principle earns.

If they are from outside the country, yes.

A plain and simple deposit into your account, comprised of money that you obtained from inside Canada, is not reported to the government, as far as I know.

But the person or organization that gave you the money that you then turned around and deposited into your bank account often does report the payment. For example, if it's an employer who paid you for work that you did for that employer, the employer would report the wages/salary that they paid you.

It depends which country it is and how much information its tax authority shares with the Canadian tax authority.

You'd be unpleasantly surprised at how many countries do share information with Canadian tax authorities.

Escape Artist has some information on this topic.

Re: What does the taxman know?
 

Best thing is to assume that the taxman sees everything and take it from there.

Re: What does the taxman know?
 

Anything around $10,000 is reported to "Fintrac" to monitor money laundering.

The Government do not monitor your accounts (I think), BUT, if you are chosen for an Audit you have to produce all of your Bank, Credit Card etc statements, canceled cheques, (for the last 6 years) and they can and will ask you about individual transactions, especially deposits. Its no good "losing" them as you are presumed guilty and have to prove that you don't owe them any money.

Re: What does the taxman know?
 

Don't tell them about it, I doubt you will get caught and, if you do, you can whine about it non stop to your friends when you are deported :p

Re: What does the taxman know?
 

I don't really care if this is hypothetical or not. Tell your friend of a friend that if they want to come to Canada to enjoy all this country has to offer then they should pay their ******* fair share of taxes.

I'm not going to give you, sorry, the friend of your friend, any assistance to cheat.

Re: What does the taxman know?
 

If you are earning money from outside the country say, maybe from rent from a property back in the uk, or royalties from a book. That could be paid into an offshore account. That is not the business of the canadian tax man.

Am i wrong?

Re: What does the taxman know?
 

There's a question on the tax return worded sth like "Do you/did you own foreign property worth more than 100k CAD during this tax year?"

Re: What does the taxman know?
 

Yes, you are wrong. I quote from the Wiki article on Canadian Taxation:

If you are tax resident in Canada, you pay income tax on your worldwide income. If, after you move to Canada, you have residual income in the UK, such as interest or rental income, then this is taxable in Canada. Income within a registered pension fund is exempt, however.

You generally will be given credit for any UK income taxes paid. Canada has tax treaties with many countries, including the UK, which limits the possibility of double taxation on many types in income.

Re: What does the taxman know?
 

at what rate do you get taxed on those rental income or value of property?

Re: What does the taxman know?
 

You get taxed on the rental income, but not on the value of the property. Or at least Canada does not tax you on the value of foreign property. Canada taxes you on the income that you derive from the foreign property. However, if you've paid tax to a foreign government on the income from the property, tax treaties generally will see to it that you are not taxed twice.

Re: What does the taxman know?
 

AFAIK you would get taxed on the income from the rental property in the same way as if you had rental property in Canada. You would only get taxed on the capital gain if you disposed of the property.

An interesting question would be whether you would be able to claim the tax relief on any mortgage on your investment property abroad as you can for an investment property in Canada. Anyone know the answer to this?

Re: What does the taxman know?
 

Yes. You pay tax on the net profit of your property abroad. This is gross rental income less all expenses incurred to earn that income. The interest on a loan to purchase that property is a legitimate expense.

Re: What does the taxman know?
 

I assume so. It's a legitimate business expense. I'll be shafted if you can't.

Re: What does the taxman know?
 

Here's a question. I'm actually making a small net loss on my property in the UK at the moment (probably about £1,000 per year). I also earn interest on my savings of about £1,000 per year. So on my UK tax return this pretty much balances out. Would I be able to offset them for my Canadian tax return so that I have no net foreign income?

If not, I guess it would make sense to use my savings to pay off a chunk more of the mortgage.

Re: What does the taxman know?
 

The loss from your rental property is allowable as long as there is a potential to make taxable income at some time in the future. For example, would it make a profit once the mortgage is paid off? If yes, then the loss is allowable.

You have to report both but if you have interest income of UKP1,000 and a rental loss of UKP1,000 they will effectively cancel each other out for Canadian tax purposes.

Re: What does the taxman know?
 

I bloody hope so. Ta for that, pretty much what I hoped to hear.

Re: What does the taxman know?
 

so I will only pay tax on my military pension once ( ie UK side) or will I have to pay again in Canada? forgive my ignorance

Re: What does the taxman know?
 

Article 17 The Canada/UK tax treaty says

Pensions and Annuities

1. Pensions arising in a Contracting State (e.g. UK) and paid to a resident of the other Contracting State (e.g. Canada) who is the beneficial owner thereof shall be taxable only in that other State (e.g. Canada).

My italics.

You should request the UK government to pay the pension gross and you will pay tax on it to the Canadian Government. I imagine there is a form to make this request.

Also note that annuities from a UK source are taxable in the UK. However, a Canadian resident can offset UK taxes paid against any Canadian taxes owing on the same income.

Re: What does the taxman know?
 

You are taxed on your worldwide income. The reality is though if you deposited the money into the account in cash offshore and never repatriate the money back to Canada, never create a papertrail to or from a canadian account and used your UK passport to open the account giving a non canadian address it would be difficult to get caught.

The practicality becomes what can you do with the money? You can't buy a property with cash in any country worth living in, you can't buy anything but a used banger car in cash but then how would you register it without creating a trail? You couldn't pay for your kids university fees in cash wthout creating a suspicious papertrail.

It reminds me of a builder friend in england, always wanted cash. Then at 40yrs old he had no pension, couldn't make overpayments on his morgtage and pretty much pissed away the money on sporting gear, pubs, meals out and electronic goods. 20yrs in business and no assets, not clever. I tried to talk him into becoming a ltd company dozens of times. Pay no tax on the first £20,000 (£10,000 plus just under £5,000 allowence each for him and his wife) and only 19-20ish% tax on the company and draw it out in dividends then you can invest it and grow some assets.


You can spend so much time dodging the tax man you are better off getting a good accountant, maximising your writeoffs and investing it well. As the old saying goes real wealth comes from a "portfolio of investments", you need to pay the tax first to grow the investments.

Just my 2 cents:)

Re: What does the taxman know?
 

If your savings are generating more income per $ than your mortgage is costing you, then keep the savings, if not use the savings to pay down any other debt you may have, the ones carrying the highest interest first.

Re: What does the taxman know?
 

Oh, I understand that, I just like the comfort of having a certain amount of cash available - partly because I know I'm going to need it to update my flat in the UK in the future. And I don't want to assume that my mortgage company is going to let me put any expenses on the mortgage.

Re: What does the taxman know?
 

You could arrange a line of credit using the equity that you have in your home as collateral.

Re: What does the taxman know?
 

I don't think there is such a thing as a "line of credit" in the UK.

Re: What does the taxman know?
 

if you have to pay tax on any appreciation in property value abroad, can you therefore offset in drop in asking price/final sale price against your tax return.

Chris

Re: What does the taxman know?
 

If you have a UK property rented to tenants, and this has declined in value since you became resident in Canada then you would have a capital loss when you sell it.

Half the capital loss is allowable BUT it can only be offset against other capital gains - not any other type of income. You can carry back any excess allowable capital loss to use against any taxable capital gains in the last three years, if there are none you can carry it forward indefinitely.

If the property is not rented (does not produce income that is taxable in Canada) it will likely be classified as personal use property. Capital gains on personal use property are taxable. Unfortunately, capital losses on personal use property are not allowable.

Re: What does the taxman know?
 

oh bugger not rented out but cut the price...worth a try.

Thanks for that

Chris

Re: What does the taxman know?
 

Clear all this up for me please!

Going to Canada to work ( hopefully ) for six months on a permanent resident visa, only six months to start with due to other half not sure about the move.

Have house in Scotland UK that she will still stay in while I'm over in Canada.

Will I be required to pay tax on my property in Scotland?????

Working for a company in Scotland I dont fill out any tax returns, so is this different in Canada if you still work for a company?

Thanks

Gary

Re: What does the taxman know?
 

In Canada you have to submit an income tax return even if you work for a company.

I don't know whether or not you'll be considered a Canadian resident for the purposes of taxation. Being a permanent resident from an immigration point of view and being a tax resident are two different things. If you OH doesn't join you in Canada, if you own a house in Scotland, and if you only rent accommodation in Canada, you may not be considered a tax resident of Canada.

I'm not an accountant, and I'm not qualified to give you professional advice on this. I'm only going by what has happened when we've moved from country to country and how various countries (including Canada) have defined residency for tax purposes.

Even if your wife was to join you in Canada and you became residents of Canada for tax purposes, the only taxes you would pay on your Scottish house would be:

• income that you generated from that house, e.g., if you rented the house and derived income in that way - JonboyE and others in this thread have addressed taxation of rental income
  
  
• tax on the capital gain if you sold your Scottish house after you'd moved to Canada - You need to get your house evaluated at the time of the move that establishes you as a tax resident of Canada. You have to be able to show documented evidence of this. You then would be taxed on the capital gain (if any) from the time that you became a tax resident of Canada to the time that you sold your Scottish house. The complication, in your case, is that I don't know at which point you will be deemed to have become a resident of Canada for tax purposes.

Re: What does the taxman know?
 

Assuming you will be renting for the six months you are in Canada then no. Technically, you designate your home in Scotland as your principle residence. In practice there would be no need to do anything.

However, a family unit can only have one principle residence so if you buy a home in Canada you will have to chose which one to designate.

You must file a tax return in Canada if you owe tax (and it is your responsibility to work out if you do). You do not have to file a return if you don't owe tax but it is a good idea otherwise you won't qualify for a refund or many other benefits.

There are some online tax preparation programs that make it very easy. Quicktaxweb is the one I use. I believe Ufile also have one. You cannot file your first tax return online but you can print it from these programs and mail it in.

Re: What does the taxman know?
 

dont know about double tax in canada. thats already answered but if you choose nz you will get double taxed. got that one from the nz site

Re: What does the taxman know?
 

According to CRA's Interpretation Bulletin IT-221R3 paragraph 16:

In addition, the CRA considers that where an individual entering Canada applies for and obtains landed immigrant status and provincial health coverage, these ties will usually constitute significant residential ties with Canada. Thus, except in exceptional circumstances, where landed immigrant status and provincial health coverage have been acquired, the individual will be determined to be resident in Canada.

For garync landed immigrant status is the same as permanent residence.

Conceptually, I have trouble with someone having sufficient residential ties in one country to be deemed a tax resident and at the same time have a principle residence in another country, but that seems to be the way the law works.

Re: What does the taxman know?
 

Hi Judy

Thanks for the feedback, that's clearer now. You have mentioned to me in the past about that complication and I now see what your getting at.

Thanks

Gary

Re: What does the taxman know?
 

Thanks also JonboyE

The picture is gettin clearer.:thumbsup:

Gary

Re: What does the taxman know?
 

I sold my house in Scotland to put a deposit on a new house here. Will i be taxed on the amount I made?

Re: What does the taxman know?
 

No.

There is no tax on any profit made from the sale of you principal residence in Canada.

The sale of you house in Scotland really should be of no concern to the Canadian tax officials.

Re: What does the taxman know?
 

Canada Revenue Agency's general rule is that, when a person sells his/her principal residence, he/she does not pay capital gains tax if he/she sells the house for an amount that is greater than the amount for which he/she bought it.

That is, if the value of the principal residence grew during the time that owner owned it, the owner does not pay capital gains tax on the profit that he/she makes when he/she sells it.

The above rule applies if a person buys a house in Canada, while he/she is a tax resident of Canada, and then later sells that house, while he/she still is a tax resident of Canada.

However, it's impossible to answer your question without knowing when you moved to Canada and became a resident of Canada for tax purposes and also knowing when you sold the house in Scotland.

If you sold the house in Scotland before you moved to Canada, Canada Revenue Agency (CRA) has no interest in it.

If you sold the house in Scotland after you'd become a resident of Canada for tax purposes, then CRA does have an interest in the topic.

The Wiki on Tax and House Sales explains the concept.

Postscript. I assume that Steve_P responded as he did because he surmised that you'd sold your house in Scotland before you'd become a resident of Canada for tax purposes (or perhaps he knew this to be the case from another post or discussion thread in which you may have mentioned the timing).

Re: What does the taxman know?
 

It amazes me that Canada taxes people on their abroad income and that officers will try hard to find any income one may have outside the country....:blink::cool::zzz::curse::huh::frown:

Re: What does the taxman know?
 

Why? Every other country does the same, to an extent. If you are claiming to be resident in Canada, then pay the country any taxes due.

Re: What does the taxman know?
 

I agree, you have to pay tax and the trick is where you pay it, the international tax treaty is there so you pay the tax and reaps the benefit of the services that tax pays for.

You just have to make sure that you have a good paper trail for any £££$$$ you make.

As in the UK, Canada has accountants that can creatively channel monies you earn, where ever you earn it, but still, you have to pay your tax.