What Newcomers to Canada Need to Know About Reporting Foreign Property & Capital Gains Tax
A Complete Guide on Reporting Foreign Property and Taxes When Selling Abroad
As a newcomer to Canada, you may bring assets, including real estate, from your home country. Canada has specific tax rules for foreign property and capital gains that you need to be aware of if you decide to sell your property abroad in the future. At BooBoo Accounting Services, we specialize in helping newcomers navigate these rules, ensuring full compliance with the Canada Revenue Agency (CRA) and minimizing your tax liability.
1. Reporting Foreign Property Annually (Form T1135)
When you move to Canada and retain ownership of foreign property, the CRA requires you to report certain foreign assets annually by filing Form T1135 – Foreign Income Verification Statement.
Do You Need to File Form T1135?
You must file Form T1135 each year if the total cost of your foreign property exceeds $100,000 CAD. This includes:
Real estate properties (homes, land)
Bank accounts in your home country
Investments (stocks, bonds, etc.)
Shares in foreign corporations
Even if you don’t earn income from your foreign property or it’s used for personal purposes (such as a vacation home), you are still required to file Form T1135 if its total cost exceeds $100,000 CAD.
Important Note: The $100,000 CAD threshold applies to the total cost of all your foreign property combined, not just a single asset.
2. Selling Your Foreign Property: What You Need to Report to the CRA
If you sell foreign property, capital gains tax may apply. The CRA considers the sale of foreign property a taxable event, meaning you must report the profit (capital gain) from the sale when filing your Canadian tax return.
What is a Capital Gain?
Capital gains = Selling price – Original cost of property – Eligible expenses (e.g., legal fees, real estate commissions).
The capital gain is then taxed at 50% of its value (which is the taxable portion of the gain).
Example:
You purchased a property abroad for 500,000 (foreign currency), which was worth $40,000 CAD. A few years later, you sold it for 1,000,000 (foreign currency), which was worth $80,000 CAD.
Your capital gain is $40,000 CAD ($80,000 – $40,000). You will report 50% of this gain as taxable income on your Canadian tax return.
3. Currency Conversion & Foreign Tax Credits
Currency Conversion: When reporting foreign property and capital gains, it’s important to convert foreign currencies into Canadian dollars (CAD) using the Bank of Canada exchange rates for the date of the transaction (purchase or sale).
Foreign Tax Credits: If you paid taxes on the sale of the property in the foreign country, you may be eligible for a foreign tax credit. This can help reduce the amount of tax you owe in Canada by offsetting the tax already paid abroad.
4. Bringing Funds to Canada: Is It Taxable?
When you sell your foreign property and bring the proceeds into Canada, the funds themselves are not taxable. However, you must still report the capital gains from the sale when filing your tax return.
Key Considerations:
If you bring over more than $10,000 CAD (or its equivalent in foreign currency) into Canada, you are required to declare it at the border to Canada Border Services Agency (CBSA).
You are not taxed on the money itself when bringing it into Canada, but you must report the capital gains from the sale when filing your tax return.
5. What Happens If You Don’t Report Foreign Property or Capital Gains?
Not reporting your foreign property or the sale of foreign property can lead to significant issues with the CRA, including:
Penalties: Fines of $25 per day for up to 100 days, with a minimum penalty of $100 and a maximum penalty of $2,500.
Audits & Reassessments: The CRA may audit your tax returns, especially if you fail to report your foreign assets, leading to reassessments.
Loss of Tax Credits: You may not be able to claim foreign tax credits to avoid double taxation.
6. How BooBoo Accounting Can Help
Navigating foreign property reporting and capital gains tax can be complicated, especially for newcomers. At BooBoo Accounting Services, we provide expert advice to ensure compliance with CRA rules. Our services include:
Filing Form T1135 for foreign property reporting
Calculating and reporting capital gains from foreign property sales
Currency conversion for reporting in Canadian dollars
Claiming foreign tax credits to avoid double taxation
Helping newcomers understand Canadian tax laws and minimize tax liabilities
Get In Touch With BooBoo Accounting Services
If you own foreign property or have recently sold a property abroad, it’s crucial to understand your tax obligations in Canada. At BooBoo Accounting Services, we specialize in assisting newcomers with all aspects of foreign property reporting and capital gains tax.
Whether you’re unsure about filing Form T1135, need help calculating capital gains, or want to learn about the best tax strategies for bringing funds into Canada, we are here to help.
Start Your Journey Toward Stress-Free Tax Filing Today!
At BooBoo Accounting, we make tax compliance simple. Contact us now for personalized support and expert advice on reporting foreign property and managing your Canadian tax filings.