HIGH NET WORTH PLANNER, TD WEALTH
A: Canadians are generally a giving bunch, especially when it comes to sending remittances back home. In 2016, an estimated 1.6 million Canadian households sent at least $500 to relatives or friends living outside Canada, according to Statistics Canada. The average transfer was much higher: $1,823 per household.
Depending on the amount of money you want to send, you have some options. A wire transfer from your bank account to the recipient’s bank account, conducted through your financial institution, is often simple, secure and quick. Fees for sending wire transfers will typically fall in the $30 to $80 range — though the receiving bank may also impose a fee — making this a suitable option for larger transfers. There are other options, such as online payment services, that may do the job for less, but it’s a good idea to verify the cost and, most importantly, the security of any transaction before committing to any service.
Beyond the logistics of any international transfer, gifting money abroad does come with its own unique considerations. First, you may want to determine whether a gift tax will apply, or whether the recipients will need to declare the gift on their taxes. Canada does not have a gift tax, but the jurisdiction where the money is being sent very well may. In India, for instance, the recipient of the gift is expected to pay tax if the value of the gift exceeds 50,000 rupees (about $900), and the recipient is not a designated relative by blood or marriage — a rule that also applies to non-cash gifts. The United States, on the other hand, does not tax recipients on foreign gifts, but it does ask that recipients report any gifts that exceed certain thresholds in the year. Missed reporting can lead to penalties of US$10,000 or more!
While Canada does not have a gift tax, keep in mind that you may trigger capital gains taxes if you sell property or investments to generate the cash for the gift. In addition, if the money is coming from a corporation, you may have to deal with corporate tax issues on that transaction.
There is one other thing to consider: Sending money to certain sanctioned countries can trigger enhanced screening and security. Anti-Money Laundering and Anti-Terrorist Financing regulations can make it difficult to send money to these countries, based on the country and the person sending the money. The news is littered with stories of people sending money to sanctioned countries using money transfer apps, or even through a non-sanctioned third-party country. If you feel you may encounter roadblocks, I encourage you to consider working with your financial professional to find a safe and legal way to send the money.
Sending money out of the country can sometimes be complicated. If you are unsure of the process or have more questions, your financial professional can help.
Chris Gandhu provides advanced financial, tax, estate and business succession planning for business owners and high-net-worth families at TD Wealth. Chris has particular expertise in cross-border estate planning, helping Canadians with U.S. connections deal with estate, trust and tax planning issues.