# Returning Immigrant ; Foreign capital



## cheetah (Feb 10, 2014)

Landed as a new immigrant 2 yrs ago. But did not establish residency in canada and returned to my country of origin a few days after landing.
Now I returned to canada( BC) about a week ago to live here for good.

My question is about bringing in my savings to canada from abroad. 
I have heard capital abroad is not taxed but income is.

My capital is invested abroad earning good interest so I would like to bring it to canada as my need arises.
My worry is how will the CRA distinguish foreign capital from my foreign interest Income ? 
Will the burden be on me and what precautions do I need to take?
I do not want my capital to be taxed here only my foreign interest income.

Any suggestions on this issue welcome.


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## Guban (Jul 5, 2011)

As a Canadian resident, you are taxed on your world wide income. The burden of proof is on the tax filer. You should keep records distinguishing between what you owned when you became a resident, and what you currently have and be prepared to provide the mto CRA if they ask.

Don't forget to file T1135 if that applies to you.


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## cheetah (Feb 10, 2014)

*Thanks Guban*

1.I read that first yr of new residents , they do not have to file a T1135. Will this be my first year as the first 2 yrs I never 
established residency and lived abroad. ?
2.As I moved to canada just this month, I will be filing my tax returns in 2015. I will have nothing to do with CRA
during the rest of 2014. is that correct?


thanks very much


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## Guban (Jul 5, 2011)

1. This is my understanding too.
2. Sounds correct for income taxes. I assume you have no Canadian sourced income for 2013, such as a rental property.


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## cheetah (Feb 10, 2014)

A new query; I understand that I can bring any amount of new money to canada from abroad as a new resident and it won't be taxed. 
Someone in US owes me a good sum about $50k; If he writes me a cheque and I deposit it in my canadian account, will it be taxable or will it be 
new money that won't be taxed. 
thanks


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## AltaRed (Jun 8, 2009)

Short answer is no because capital coming into the country itself is not taxed. 

However, capital gains is taxed while a tax resident of Canada, i.e. if your capital appreciates (e.g. stocks, forex, real estate, etc.) subsequent to your arrival. All capital is deemed to have an Adjusted Cost Base (ACB) at Fair Market Value (in CAD) on the day you enter Canada wherever it is in the world. If it goes up in value between then and when you sell that capital, there will be capital gains tax due.


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## cheetah (Feb 10, 2014)

thanks AltaRed. 
More about my example ; someone in US paying me $50k ; will I have to prove to CSA that this is the money owed to me and 
not my income from a source in US?


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## AltaRed (Jun 8, 2009)

cheetah said:


> someone in US paying me $50k ; will I have to prove to CSA that this is the money owed to me and
> not my income from a source in US?


First of all, it is CRA (Canada Revenue Agency) and no proof required. The CRA is not into the business of monitoring movements of funds between financial institutions. They are the taxation authority.

However, the financial institution receiving the $50k (whether a cheque deposit, wire transfer, or cash) must report this transaction to FINTRAC http://www.fintrac-canafe.gc.ca/reporting-declaration/Info/rptLCTR-eng.asp and may* ask you to disclose what the large transaction is about. Per the link provided, any institution receving a transaction of $10k or more, or any 2 or more transactions totalling $10k or more in a 24 hour period must report it. These requirements are to deter money laundering. Also, please note, do not carry $10k or more across the border on your person without declaring it. If caught, it can be confiscated.

* I have had a few calls in the past from financial institutions wanting to know what some large transactions have been about, e.g. moving money between bank accounts.


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## cheetah (Feb 10, 2014)

thanks again. Yes, I know about declaration. I had more than CAD 10k when I entered canada in feb and I declared it. 

1.Sorry I wrote CSA. Ok, CRA ; mypoint is when will CRA want to know if the transaction is foreign income or just capital transfer because tax will become due on the former.
and in my specific transaction of owed money, what papers, if any , do I need to keep as record. Or do I not worry about it.
2.Thanks for mentioning FINTRAC; about this specific $50k transaction of mine, what can I say to the institution if asked and what can I expect from FINTRAC?
since this transaction will be reported.


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## AltaRed (Jun 8, 2009)

1. CRA has no reason to know, or to ask about the capital. They only want you to report income each taxation year. Regardless, it is always good to retain paperwork... presumably a copy of the receipt/document you give the person sending you the money to indicate payment received/debt retired, etc. etc. Everyone has paperwork of some kind on legitimate personal/business loans, do they not?

2. FINTRAC does not ask.... it will be the bank in which you deposit the funds that could ask you (if they do and highly unlikely in my opinion). Simply tell them it is repayment of a personal (or business) loan by X in the USA. FINTRAC receives perhaps hundreds of thousands of these 'reported' transactions every business day. Merely moving funds from one bank account to another results in a 'reported' transaction. I suspect it is primarily a digital database that does not get any human intervention unless the computer algorithm flags a peculiar transaction and/or some agency somewhere wants to tap into the database for a 'person of interest'.


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## cheetah (Feb 10, 2014)

so, as I understand, the only time I can be asked questions about all my transactions( if they were income or not) is if I am selected for an audit by the tax people.
Is that correct? And when does that happen in reality?


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## OhGreatGuru (May 24, 2009)

forgive me, but your questions sound as if you are asking if you can avoid declaring foreign income to CRA. We don't give advice on how to defraud CRA on this forum.

On page 2 of your Income Tax form you are asked if you own foreign "property" ("property" is in the broad legal sense any financial assets whether cash, investments, or real estate) worth more than $100K. If you do, you have to file a T1135 describing the details. You are also required to report all income from foreign sources on your income tax return, regardless of the amount. They don't need to conduct an "audit" to ask for more information on this.


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## cheetah (Feb 10, 2014)

And Forgive me OHGreatGuru, I have no such intent. In fact it is the opposite, I am new to canada, and I want to make sure I go by the book on everything.
Well, the accusation hurt, really . Good bye this forum.


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## OhGreatGuru (May 24, 2009)

cheetah said:


> ....
> 
> My capital is invested abroad earning good interest so I would like to bring it to canada as my need arises.
> My worry is how will the CRA distinguish foreign capital from my foreign interest Income ?
> ...


To go back to your original question, assuming you are over the $100K limit, you are required to report to CRA a statement of your foreign capital and earnings on T1135. You will not be taxed on your foreign capital, but T1135 gives CRA the information they need to distinguish between capital and income.

If your assets are not over $100k you do not need to file T1135, but you need to keep your own records of your accounts and earnings in case of an audit.


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## OhGreatGuru (May 24, 2009)

cheetah said:


> ...Well, the accusation hurt, really . Good bye this forum.


I started drafting replies to this several times and quit because I could only see it degenerating into insults.

However, for the record;
- OP's questions were answered several times by 3 different posters;
- In spite of this OP kept repeating essentially the same question;
- From the background provided I concluded OP must have a reasonable level of education, making incomprehension of the answers a less likely explanation for this repetition.
- This, together with the way OP phrased the question the last time _(... the only time I can be asked questions about all my transactions...)_ led me to wonder out loud if OP might have another agenda.


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## AltaRed (Jun 8, 2009)

Perhaps (I considered that too). However, I took it as either: 1) someone asking for certainty when, at some point, down the query chain no such certainty exists, or 2) mixing up income reporting/tax returns and CRA's jurisdiction with financial transaction/anti-money laundering issues.

CRA can ask for documentation at any time to back up a tax return and/or can trigger a review, and/or audit, at any time. In which case, of course, it is an aggravation only if the transaction is legal and above board.


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