# Tax and moving back to Canada



## barleydrinker (Nov 18, 2017)

I am a canadian abroad and moving back home. I am non-resident for tax purposes currently, but will resume full time tax paying when I return!

I believe I become a resident for tax purposes the day I move back. Here are some questions:

1) I assume money I transfer into the country electronically, which is my own money that has already been taxed, is not taxable. Are there any thresholds that require reporting or anything?

2) I am currently in the UK and we have tax shelter accounts. These are personal accounts to which you can contribute (up to a maximum per year) whereby capital gains from investments in these accounts are not taxed. I have read there are similar things in Canada. My question is, and I assume the answer is no to this but I will ask anyway, can we transfer the money from the UK tax vehicle to the Canadian one?

That's all for now. I am sure there will be more questions. Any advice is on these questions or in general will be appreciated.


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## Eclectic12 (Oct 20, 2010)

For #1 ... I don't believe there is a threshold for the transfer, in terms of taxes. FINTRAC may mean being asked questions about it.
https://www.investopedia.com/terms/f/fintrac.asp

For #2 ... The UK - Canada tax treaty or forum for people similar to yourself or consulting a professional will help.
This forum says that someone from 2016 found out leaving the ISA in the UK meant the account was UK tax free but would be taxed by Canada. 
http://britishexpats.com/forum/canada-56/tax-question-isa-held-uk-879036/

This is similar to an American citizen moving up to Canada or a Canadian working in the US, where the TFSA is Canadian tax free but taxed by the US.

I suspect a withdrawal from the ISA then contribution to the TFSA, as long as one respects the TFSA contribution rules to avoid triggering a penalty, it will work. 

The bigger issue for you is that while you are NR, no TFSA contribution room was granted. This likely means that when you become a Canadian tax resident, assuming all the other criteria are met - there will only be $5.5K TFSA contribution room for yourself. https://www.canada.ca/en/revenue-ag...ings-account/who-open-a-tfsa.html#tsvsnnrsdnt

I suspect that when becoming a Canadian resident, the FMV of the ISA would become the cost for investments like stocks held in an ISA. Likely Canada would tax the growth and income paid going forward.

A couple of tips for the TFSA ...

A lot of otherwise bright people miss that TFSA withdrawals have to wait for the following year to become available as additional TFSA contribution room. As an example, I withdrew from my TFSA in 2017 so that the 2018 events are the 2018 TFSA allotment of $5.5K + the 2017 withdrawal $$ becoming added contribution room.

Keeping running balance (like balancing a cheque book) IMO is the best way to go. It prevents over-contribution situations that have a 1% per month penalty for an accidental over-contribution (a larger penalty is possible where one is deliberately trying to gain an advantage). CRA's numbers are for Jan 1st where the financial institutions don't have to report the previous years transactions until Mar or so - which can make their number well out of date.

TFSA is the name of the registered account ... where one sets up one that allows stocks/bonds/GICs etc., these are allowed. For some reason, some people assume the "Account" part limits one to a bank style savings account.


Cheers


*PS*

Hopefully you are consulting an expert. It is great to get info from CMF but YMMV as to whether those responding fit your situation and may miss or not know something important.

As an example, I have read for years that the US because of the Canada - US tax treaty does not tax an RRSP for someone moving to the US. Recent articles indicate that what the US does not tax is the *cost*. So where one has an RRSP with a cost of $100K but an FMV of $300K, selling then re-buying before moving to the US triples what the US won't tax.


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## barleydrinker (Nov 18, 2017)

that's what I suspected about #1. My money is mine and won't be taxed. Thresholds I imagine there are none except for reporting.

for #2. you basically nailed my problem. I don't plan on leaving the ISA here. I would bring with me. My question, basically the problem you brought up, is can I move my ISA directly to a TFSA. You are correct, i have accumulated no head room while abroad.

This no doubt is a question for the UK - Canada tax treaty.


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## Eclectic12 (Oct 20, 2010)

For #1 ... keep in mind that once the transfer occurs to a Canadian FI, for large amounts - there may be a holding period. A friend said that his inheritance was big enough that 1/2 was on hold in his chequing account and the other half could only be transferred to savings. He didn't need it for cash flow so it didn't bother him.

For #2 ... it seem that a clearer question is whether an ISA to TFSA transfer can be made without having TFSA contribution room. Or maybe if the tax treaty provides for an ISA to TFSA transfer that is exempt from contribution room.

The way I have read of this type of transfer before is where a spouse dies, with the other spouse as successor holder. The spouse can transfer everything to their TFSA, with no TFSA contribution room required. Naming for example, a sister as beneficiary means that the sister needs TFSA contribution room to put the TFSA funds into their own TFSA. https://www.taxtips.ca/tfsa/holderdeath.htm


Likely a special provision in the UK - Canada tax treaty is needed to get around the need for TFSA contribution room, IMO.

Tax treaty provisions can be tricky as I was surprised to find to that despite the UK - Canada tax treaty, this UK bulletin says lump sum RRSP/RRIF withdrawals will be double taxed. Canadian tax being on the withdrawal while UK tax is on asset selling is identified as the issue that makes the "credit for taxes paid" provision useless, in this case. https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt4617


Cheers


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## barleydrinker (Nov 18, 2017)

Thanks for the info all. Useful. If anyone has read the Canada-UK tax treaty on the ISA -> TFSA topic, please let me know.



> Tax treaty provisions can be tricky as I was surprised to find to that despite the UK - Canada tax treaty, this UK bulletin says lump sum RRSP/RRIF withdrawals will be double taxed. Canadian tax being on the withdrawal while UK tax is on asset selling is identified as the issue that makes the "credit for taxes paid" provision useless, in this case.


That's surprising. One issue I will be facing is that I won't be able to transfer my workplace pension, AFAIK. I think they just delisted Canada as a place you can take pensions. But I think that's very different issue from the one you bring up. As far as my pension goes, I think at the moment, it's best to just leave it in the UK.


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