Island Bound

Hi

I have read on here that you do not need to put your rental income from a UK property on your Canadian tax return for the first year of your tax residency..

Where can I locate this info on a tax relevant website...had a good search and cannot find it anywhere just on this forum?

Thanks everyone...

JonboyE

No true. You don't have to file a T1135 form for the year you become a tax-resident. However, you have to report your rental income from the day you move here.

jwtimmon

Isn't there also reciprocal tax agreements as well to consider?

In my case I'll be paying Irish tax on my rental income and as such although I'll declare it on my tax return in Canada it will make no difference to my tax liability as I have already paid tax on it in Ireland.

John

Aviator

http://www.fin.gc.ca/treaties-conven...land_2-eng.asp

You would need a certificate of tax paid or a copy of your Irish tax statement from their ministry of finance, such as a tax assessment. It may6 make a difference to your Can tax if it pushes your total income into a different band. If Canada tax is higher on foreign income than you have paid, you pay the difference to CRA

jwtimmon

Ohhh hmmm interesting document.

Ok so my reading of that is the Irish tax applies for income generated by the house in Ireland.

I'm not seeing where I may be liable to pay any difference in tax if the Irish tax is lower than the Canadian equivalent. Not disagreeing or being argumentative, I just can't find a reference to it anywhere.

My Irish tax will be 20% of rental income less expenses where expenses include 75% of mortgage interest, depreciation of any furnishings supplied, maintenance, repairs and management fees. If I end up with a second tax bill because the Canadian tax system is higher or doesn't allow for as many expenses then I could end up in a situation where the house makes no financial sense to keep.

Island Bound

I love putting threads on here... It kind of makes me giggle. I find the answer to my question then others enquire and it's a full debate....I guess that's what the forum is for but still makes me laugh how one question sparks a million others?!?

Minus 40 today with windchill and people ask why I want to move to the island instead of stay in artic Alberta?!?!

jwtimmon

Sorry

Island Bound

By all means carry on... I may learn something and usually do?!?!

Aviator

This will be figured out when you fill in your CDN return by CRA. You are required to include your worldwide gross income, you deduct allowable expenses on a page of the tax return, allowable expenses are listed on the form.

House rental income, minus deductions as you would have done for your Irish taxes. You can only claim for expenses RCA allow in Canada, which may be different to your Irish return.

CRA take your worldwide nett income to determine what your taxes should be in Canada, this sets your tax band. If your Irish income pushes you into a different tax band, you may also end up paying more tax on your Canadian income as well.

http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html

If you only pay 20% in Ireland, it is highly likely there will be tax to pay here, unless you are low income here. There may also be CPP added to this as well.

When CRA determine what your tax should have been, minus the foreign tax paid, they will either send you a bill or a refund.

If you want to see references, it is in the Canadian Income Tax Act.
http://laws-lois.justice.gc.ca/PDF/I-3.3.pdf

Also, if you own property overseas valued at over $100k CDN, after your first tax return in Canada you are required to file a T1135. Very expensive if you forget and get found out.

Should you sell the property while a tax resident of Canada, any increase in value betweeen when you became a tax resident and when you sell the property (in $CDN) is subject to CGT at your marginal rate.

jwtimmon

Thank you for links and pointers. Food for thought.