Harry_C

Hi - I was hoping someone can help me. I got my PR status last Autumn (became a 'landed immigrant' in Aug 2007 in Toronto) and I have been travelling back and forth for job interviews since. I now have a job starting on Aug 18th - so this time when I travel I am going to begin work and 'settle'. The complicating factor is that my house in the UK is yet to sell - so my questions are

1. Can I move £5,000 to my Canadian bank account tax free now - with the intention to move a much larger sum tax free when my house finally sells (I am worried that they may tax the proceeds of my house sale in the UK)?

2. Do I need to do anything different this time at Canada customs - as I will be arriving with 2 suitcases - but the rest of my stuff will follow once the house sells?

3. I am renting in Toronto - and even if my house in the UK sells this Xmas (yup it's that bad) - I do not intend to buy in Toronto until next year as I feel that the house market there is 'stagnating' and any dramatic move in price is unlikely to be upwards - would you agree?

Thanks - Harry (London, UK)

Judy in Calgary

Yes.

Yes, if there is a capital appreciation in the value of your UK house between the time that you land in Toronto to take up your job and the time that your UK house sells, you will be liable for capital gains tax in Canada. Keep in mind that capital gains tax is a tax on 50% of the capital appreciation.

Although you landed in Canada and activated your PR status in August 2007, you did not become a resident of Canada for tax purposes at that time. You will become a tax resident of Canada when you land here to settle properly, start work, etc.

Once you become a tax resident of Canada, Canadian authorities tax you on your worldwide income. But there are taxation treaties between Canada and the UK that prevent you from being taxed twice on the same income. If by some chance you pay tax in the UK after you've become a tax resident of Canada, declare it on your Canadian income tax return, and you'll be given credit for it.

You should have an evaluation of your UK property done at the time that you move from the UK to Canada, and that evaluation should be documented. You will need that documentation to demonstrate the difference between the value of the property at the time that you become a tax resident of Canada and the price for which it eventually sells.

I suggest you read the Wiki article called Taxes during immigration-Canada.

You should have provided the customs officer at your port of entry with two lists when you "landed" in Canada and activated your PR status in August 2007. These lists should have been a list of goods accompanying and a list of goods to follow. From the nature of your question, it seems to me that you didn't do that. Technically, you now will be liable for import duty on the goods that you ship to Canada. I don't know if there's any way round that.

Sorry, I don't know.

It would help you to avoid letting anything slip through the cracks if you were to read the Wiki article called To Do Lists-Canada. There is one list for departing from the UK and another list for arriving in Canada.
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Harry_C

Thanks Judy.

1. Will do that - but the law seems a bit biased in that I assume in Canada you do not pay capital gains tax on your principal residence (we do not in the UK). My house is the only one I have and until I sell it I will need to rent in Toronto.

2. Sorry did have a list when I landed - so that's OK. Just wondering if I needed to do anything else as this time I will be staying to work.

3. No worries on the housing market question - need to sell the house here first.

Thanks

Harry

Judy in Calgary

If you sold your UK house before you became a tax resident of Canada, you would be allowed to bring the proceeds from the sale of that house to Canada tax-free (well at least tax-free at the Canadian end of the transaction and, in many instances, tax-free at the UK end of the transaction too). And, as you say, the capital appreciation on your principal residence is tax-free in Canada.

I understand what a difficult position you're in, and many people who are in the process of moving from the UK to Canada are in the same position.

However, if you stop and think about it, is it the Canadian government's fault that you probably won't have sold your house before you become a tax resident of Canada?

Also, it would be interesting to know the rules that applied to a person moving in the other direction. That is, although the British government gives residents of the UK a tax break on the capital appreciation of their principal residence, would the British government give that tax break to a Canadian resident who retained his/her former principal residence in Canada while he/she moved to the UK? I don't know but, if I was about to undertake a move like that, I wouldn't hold my breath.

Relocating from one country to another is a very expensive exercise, and that will be the least of your expenses. As a matter of fact, it's possible that you'll incur no expense at all in this particular arena. It's possible that there will be no capital appreciation in your UK residence from the time that you become a tax resident of Canada until the the time you sell your UK residence.
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Surrey Expat

It is only your principal residence when you are living in it. It ceases to be so when you move to Canada, as you are living somewhere else. Although it may be the only one you own is irrelevant (in the UK and Canada), the determining factor is where you a residing.

CGT will become due at the point of disposition on any gain in value after you stop living in it. If it was worth £200,000 when you moved to Canada permanently and £225,000 when you sold it, the £25,000 is all that is subject to CGT. In addition if you still own it at the end of the tax year here, or have the money in an account overseas, you have to declare this on your Canadian tax return (any overseas holdings over $100,000).

Harry_C

Thanks - yup probably will pay no appreciation as prices are only going one way here and certainly won't get my asking price/valuation price.

I have also had a chat with the Canadian Revenue Agency - and there are certain stipulations on the 'Ordinarily Inhabited Rule' - so for example you don't necessarily have to be permanently based in your principal residence. There is also allowance for principle residences outside Canada.

But the big *but* here is that it only applies on a case by case basis. So in the majority of cases you are absolutely right in terms of your statements.

So my biggest aid in all of this if the falling house market in the UK.....see a silver lining in every cloud

Thanks again.

Harry

Surrey Expat

Talk to an accountant as you may be able to claim a capital of it goes down and you are a tax payer.