# Foreign Interest Income / Dividends and Capital Gains



## liquidfinance (Jan 28, 2011)

When declaring foreign interest income and capital gains do I need to supply anything to back up the figures entered on the tax return. 

For example 

£500 paid in UK interest and dividends. 
Bank Of Canada average exchange rate $1.57 = £1

$785 Entered onto tax schedule as other income. 

Do I need to provide any statements of the income received? Or do I enter the exchange rate I used? Is it simply enough that I would just enter the $785 and then put the source of income as UK interest and dividends. 


As for the capital gains do I need to provide any paperwork as to when the stock was sold and the exchange rate used?

Or is this pretty much a trust basis but you need to have the documentation available in case of an audit. 

This will be my first tax return as a permanent resident of Canada. 

Thanks all.


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## Eclectic12 (Oct 20, 2010)

For the interest and dividends, I would have thought that sum would have been enough that a T5 would be produced, though if it's a foreign bank - maybe not. If there's no form, then there's nothing to provide with the tax return. Just keep copies so that if audited, you can should where the numbers came from and how the calculations were done.

Note that this is similar to my Canadian bank accounts that are paying too little interest to send me a T5 form. For these, I keep PDF copies of the account statements or the summary page that specifically says "last year $x was paid in interest" which can be produced if audited.

The schedule for entering these is schedule 4, where the foreign amounts should be ending up on the T1 form, line 121. If you paid foreign taxes on them (ex. a dividend withholding tax), don't forget to report it so that overall, you'll pay less tax.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/121/frgn-eng.html


I believe the same is true for the capital gains, though Schedule 3, section 3 for publicly traded shares sold wants the year the shares were acquired. Were the shares held by a foreign broker? 

Again, having PDF copies of the record of sale, exchange rate and a spreadsheet showing the calculations will make any questions by CRA or an audit a lot less stressful.


Cheers


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## liquidfinance (Jan 28, 2011)

Eclectic12 said:


> For the interest and dividends, I would have thought that sum would have been enough that a T5 would be produced, though if it's a foreign bank - maybe not. If there's no form, then there's nothing to provide with the tax return. Just keep copies so that if audited, you can should where the numbers came from and how the calculations were done.


Thanks. 

There will be no T slips as these are all from accounts registered in the UK.

As for the shares I believe the date acquired will be June 15th which is the date I became a permanent resident. I recorded the prices of the stocks held on June 15th. I've read up on the CRA site and Canada treats it as if I disposed of everything in the UK and re purchased the date I moved here. 

These are all held with a UK broker.


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## AltaRed (Jun 8, 2009)

As Eclectic12 said, just keep copies of the information in case CRA asks. Income (whether interest or dividends) goes on Schedule 4 as Other Income. You can either use the exact exchange rate on the day of the transaction, or the average annual exchange rate for the year. You should be able to get both from the Bank of Canada website. 

Similarly for capital gains, it goes on Schedule 3 where you can use the exchange rates on the specific days of the transactions, or the average annual exchange rate. Either way, use the same method on both Schedule 3 and 4, and if you are going to have more of these UK transactions in the future, you are obligated to stick with the same 'method' of exchange rates. IOW, once you select a method, you are obligated to continue to use it in the future.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> As Eclectic12 said, just keep copies of the information in case CRA asks.


This is where I'm finding the electronic copies handy. Then too, with "print to PDF" utilities, it's much easier to store, save and if needed reprint. 

It was more of a pain when a charity I'd donated to via a credit card dropped a zero when sending the official tax receipt. It was more complicated to dig out the paper copy, isolate the transaction and produce just what I wanted to include with my tax return to explain why the receipt said one thing & I was claiming something different. 

It does demonstrate the advantage of a good bookkeeping/documentation system as worst case, I would have totally missed the error and middle case, it would have been more complicated to file an adjustment after the fact. The clear documentation meant the claim went through smoothly with the only additional action being to mail in the updated receipt.




AltaRed said:


> IOW, once you select a method, you are obligated to continue to use it in the future.


Good to know.


Cheers


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## AltaRed (Jun 8, 2009)

Eclectic12 said:


> This is where I'm finding the electronic copies handy. Then too, with "print to PDF" utilities, it's much easier to store, save and if needed reprint.


Probably one of the best utilities of all time. I use 'print to PDF' utilities a lot for a wide range of uses.


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## liquidfinance (Jan 28, 2011)

Now shortly after moving I also sent some cash over and would like to clarify the situation as I am aware that this should also be calculated as a gain / loss based on the BOC exchange rates.

Now I know I also need to decide if to use rate based on the day of the transactions or stick with the annual average rates. 
The annual rate is posted at $1.583994 for 2012 and is what I have used in the workings below. 

The following is a real transaction

03-07-2012 Sell £3515.72 Buy $5500 (deposited into Canadian Account) Ex Rate = $1.5644

BOC Rate £3515.72*$1.583992=$5568.87

$5500-$5568.87 = -$68.87

In this instance I assume I would use the capital loss of $68.87 against the gains made on the investments. 

Would this be correct?


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## AltaRed (Jun 8, 2009)

There may be a newer version of this Tax Bulletin http://www.cra-arc.gc.ca/E/pub/tp/it95r/it95r-e.txt but forex capital losses or gains of less than $200 are not declared.

See http://www.cga-canada.org/en-ca/Abo...r-Apr/Pages/ca_2003_03-04_dp_taxstrategy.aspx for some examples


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## liquidfinance (Jan 28, 2011)

AltaRed said:


> There may be a newer version of this Tax Bulletin http://www.cra-arc.gc.ca/E/pub/tp/it95r/it95r-e.txt but forex capital losses or gains of less than $200 are not declared.
> 
> See http://www.cga-canada.org/en-ca/Abo...r-Apr/Pages/ca_2003_03-04_dp_taxstrategy.aspx for some examples


Hmmmm.

That's a very interesting article. I didn't even give thought to the fact I am paying my UK mortgage. This is starting to get more complicated than I first thought. I was just looking at the Forex gain / loss from the point of view of monies physically sent from the UK to my Canadian accounts. Which I have three transactions for and because of the strengthening Canadian dollar I would be looking at a cumulative capital loss of around $468 which would more than offset y Capital gains from UK stocks.


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## Eclectic12 (Oct 20, 2010)

AltaRed said:


> Probably one of the best utilities of all time. I use 'print to PDF' utilities a lot for a wide range of uses.


"Print to PDF" has made keeing electonic copies so much easier. I've used it for charitable donations, my broker provides all the T forms plus the trading summaries as PDF.

Far better than paper ... as long as one remembers to keep backup copies as hard drives do fail from time to time. :biggrin:


Cheers


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## abroad (Feb 26, 2013)

*tax on exchange rates.*

I understand that if you make or lose money on selling shares, you pay tax or get tax returned. 
One also has to pay tax over the interest one receives on an foreign account rated against an annual rate (determent by Goverment).

But what happens with the money on your foreign acount.
for example exchange rates on the moment that you got your pr : euro/dollar 1/1.40
A year later its still on the foreign acount : euro/dollar 1/1.30 
And what happens with the money you sent to the bank in Canada for a exchange rate euro/dollar 1/1.25
Can one use the lose that you made on your tax return.


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## liquidfinance (Jan 28, 2011)

abroad said:


> I understand that if you make or lose money on selling shares, you pay tax or get tax returned.
> One also has to pay tax over the interest one receives on an foreign account rated against an annual rate (determent by Goverment).
> 
> But what happens with the money on your foreign acount.
> ...



This is what I was trying to figure out. 

Balance on day of pr = 10,000 Eur = $14000 CAD
Exchange 5000 1 year later should be 5000 * 1.4 = $7000 base rate the date you moved to Canada. 
5000* 1.3 = $6500 Cad received in account. $500 Capital loss. 

But then from the info provided you don't incorporate the first $200 loss/ gain which would mean in this case a loss of $300 to claim.

The thing is I think things get further complicated by any interest received on the account since residency in Canada as this change in balance will affect the ACB from the balance when you moved to Canada. 

Again my take would be 

10,000 * 1.4 = $14000
1000 Eur paid in interest * 1.3 = $1300

New Balance 11,000 Eur or $15300 CAD ACB is Now 1.3909

This is an old forum topic I found but highlights the confusion.
http://www.financialwebring.org/forum/viewtopic.php?t=104927


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## abroad (Feb 26, 2013)

*Confused*

Thanks for confusing me even more:encouragement:

What would be the best way?
So you're allowed to calculate profit or loss on money you have transfered.
Are you also allowed to calculate the profit or loss on a foreign account and put it on you're tax return.
If so is it wise to do this? 
We sold our house before we came here and the money is still in our account there. It was a small house but for us it is a lot of money.


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