Show Transcript
If you or a family member is planning to immigrate to Canada, you may wonder how and which assets may be subject to Canadian taxes. Nicole Ewing, Director, Tax and Estate Planning, TD Wealth, joins Kim Parlee to discuss the importance of planning ahead when bringing significant wealth to Canada.
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[AUDIO LOGO]
* A growing number of high net worth individuals and families from around the world are looking to call Canada home. And if you're making the big move and want to bring your wealth and your assets with you, what are some of the things you need to know, especially from a tax perspective?
* Nicole Ewing is Director of Tax and Estate Planning at TD Wealth. Joins me now to dig into some key considerations. Nicole, it is always lovely to see you. Let's just dig right in. You are moving to Canada and you have a significant amount of assets. What things should you be thinking of right off the bat?
* Right off the bat, we need to be planning as far in advance as we possibly can, because many of the tax strategies or opportunities we might have, might take some time. So I'm talking well in advance of a year. Some of these strategies take multiple years. So that's step one. Let's make sure that we're thinking about this as early in the process as possible.
* Then we want to engage advisors, lawyers, accountants, in both our country of origin where we currently are, and in Canada, and have those two individuals speak to each other, perhaps there's more than two, and just make sure that everybody's on the same page.
* Because the tax laws are very, very different across the world. What we tax, who is taxed, what sorts of assets are taxed, and what sorts of credits and deductions might be available, vastly different throughout the world. So we need to have that coordination between our advisors.
* You know, I think of it, just here, I had-- I had someone reach out to me last week, and I was delighted, because he was calling from Thailand, actually. And his interest was in what's going to happen when I move. What about joint accounts? What about minor accounts for my children? Are there income attribution rules?
* And those are the types of calls we like. I was able to connect them with a wealth advisor who was able to start that process for him, so when he comes to Canada next year with his family, much better prepared.
* That's great, and yeah, there's a lot to go through, as we're about to talk about. So tax rules obviously, as you said, different in every country, based, and for different reasons, and all the history that goes with that. When somebody gets their Canadian residency status, what then? Are you only subject to Canadian tax laws at that point? Or are you still going to be subject to other tax laws?
* Well, and I want to clarify what's really important here is that tax residency is distinct from immigration status. And so, you may be a tax resident before you're-- before you have immigration status. So these rules may apply to you, as well.
* And yes, you may still be subject to the tax laws of your country of origin. You may be subject to tax laws for assets that are held in other parts of the world where you don't live. You might be subject to tax in Canada, as well.
* And what's critical, is that if there is a treaty, we want to know what it says, so that we can act accordingly and make sure that we're not paying tax on the same assets or same income in multiple countries. Because, for example, if you're a US citizen resident in Canada, you are subject to tax both in Canada and in the US. And we want that to be coordinated.
* Other parts of the world, there might be assets that aren't actually taxed there. So for example, capital gains or dividend in some countries and some jurisdictions, those aren't taxable. So you want to know that before you're bringing those assets to Canada, potentially then disposing of them here and becoming subject to tax on assets that you could have brought over had you disposed of them for example in advance of coming, and simply brought cash with you.
* Yeah, got it. That's a really good point. Well, talk about that then. If you're bringing, moving foreign assets and I'm assuming not cash, or could be foreign currency or securities in kind to Canada, what do you need to be thinking about?
* Well, we need to be thinking about, is there-- are we a tax resident? What is the source of these funds? Do we have deemed dispositions that we need to be thinking about? And we want to be reporting in advance of coming what our assets are, what are we bringing with us.
* So I think of an example here where we might have somebody who doesn't want to necessarily tell what they have, their entirety of their assets and then comes to Canada and needs to dispose of it. But because you've not planned ahead and told Canada that you're bringing this asset and that this is its value on the day that you brought it, you might not get credit for that, the cost base.
* And so now you might be subject to tax on the entire value, because the cost base might be assumed to be $0, because it wasn't reported when you brought the asset with you. So making sure that you are upfront and disclosing all of your assets, and that your advisors know what you actually hold, is going to be critical.
* Got it. What about buying real estate in Canada? If, I assume once you become a resident, either tax resident or the Canadian residence status you're talking about, what do you need to think about once you actually buy real estate?
* Well, we want to firstly understand the rules, because in each jurisdiction, the way that real estate is treated might be different. So we have the principal residence exemption in Canada, which is fantastic. We would want to have familiarity with that.
* But we also want to think about that source of funds. So as I mentioned, when you are purchasing a property in Canada, you may be asked-- we have money laundering rules. You might be asked to declare what the source of those funds were. So make sure that you're in a position to do that.
* And really making sure that you understand what those rules are in terms of ownership, in terms of disposition. You know, which family members should be on title, all sorts of those questions should be considered an advance.
* Yeah. And you also mentioned earlier that if you're moving to Canada, but still have real estate in where you were, you have to be thoughtful about where you're going to be taxed the most, I guess, in terms of capital gains and those types of things, too. But is there anything else you have to think about in terms of not disposing of foreign real estate?
* It can really catch people off guard. The way, you may think, well, I've left that country, I only own property there, why would I still be subject to tax on that if I'm subject to tax in Canada? You may very well be. And what we want to think about here is, how is that asset going to be treated in your estate.
* And so having wills dealing with the real property in that other country is probably going to help. And from a tax perspective, you might want to be giving your trustees or your executors of the will the authority and the power that they're going to need in order to perhaps do some post-mortem tax planning around that area.
* So making sure that your documents reflect what you want them to say and that are coordinated with each other, that are Canadian will documents, contemplate the existence of the other, of property that you might own in other parts of the world and that we're availing ourselves of some of those rules that will avoid that double taxation or that big tax hit that you weren't expecting.
* What about pensions, retirement plans, those things? Again, if they exist in another country, how does that work?
* Well, this is a very complex area of law I would say. That really depends on the nature of the pension, on which country it's being brought from. The Canadian Income Tax Act does not have a provision that allows for the direct transfer of a foreign pension into a Canadian registered plan, for example.
* But we do have legislation that allows for that to happen indirectly. So we would want to familiarize ourselves with those rules, as well as the rules from the country that you are bringing that pension from. So there might be limitations on that. There may be an inability to withdraw from those funds.
* Or we might, for example, if we're bringing our 401(k) fund up to Canada, there might be a couple of different ways to do that, really depending on what your objectives are. And in some circumstances, it makes sense to keep things as they are and to have your foreign-- pension foreign, but incorporated into your financial planning and your cash flow planning from a Canadian perspective.
* If ever there was a time you need to speak to somebody, [LAUGHS] I'm going to say, this is it.
* This is it. Yeah, somebodies, multiple people, I would hope. This is where we want your tax, legal, financial advisors all to be supporting you as a team both in Canada and in your country of origin, to make sure that we're putting together that best plan for you, so that you're coming here and you're able to participate fully without tax being the major concern.
* Nicole, always a pleasure. Thanks so much.
* Oh, my pleasure.
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* A growing number of high net worth individuals and families from around the world are looking to call Canada home. And if you're making the big move and want to bring your wealth and your assets with you, what are some of the things you need to know, especially from a tax perspective?
* Nicole Ewing is Director of Tax and Estate Planning at TD Wealth. Joins me now to dig into some key considerations. Nicole, it is always lovely to see you. Let's just dig right in. You are moving to Canada and you have a significant amount of assets. What things should you be thinking of right off the bat?
* Right off the bat, we need to be planning as far in advance as we possibly can, because many of the tax strategies or opportunities we might have, might take some time. So I'm talking well in advance of a year. Some of these strategies take multiple years. So that's step one. Let's make sure that we're thinking about this as early in the process as possible.
* Then we want to engage advisors, lawyers, accountants, in both our country of origin where we currently are, and in Canada, and have those two individuals speak to each other, perhaps there's more than two, and just make sure that everybody's on the same page.
* Because the tax laws are very, very different across the world. What we tax, who is taxed, what sorts of assets are taxed, and what sorts of credits and deductions might be available, vastly different throughout the world. So we need to have that coordination between our advisors.
* You know, I think of it, just here, I had-- I had someone reach out to me last week, and I was delighted, because he was calling from Thailand, actually. And his interest was in what's going to happen when I move. What about joint accounts? What about minor accounts for my children? Are there income attribution rules?
* And those are the types of calls we like. I was able to connect them with a wealth advisor who was able to start that process for him, so when he comes to Canada next year with his family, much better prepared.
* That's great, and yeah, there's a lot to go through, as we're about to talk about. So tax rules obviously, as you said, different in every country, based, and for different reasons, and all the history that goes with that. When somebody gets their Canadian residency status, what then? Are you only subject to Canadian tax laws at that point? Or are you still going to be subject to other tax laws?
* Well, and I want to clarify what's really important here is that tax residency is distinct from immigration status. And so, you may be a tax resident before you're-- before you have immigration status. So these rules may apply to you, as well.
* And yes, you may still be subject to the tax laws of your country of origin. You may be subject to tax laws for assets that are held in other parts of the world where you don't live. You might be subject to tax in Canada, as well.
* And what's critical, is that if there is a treaty, we want to know what it says, so that we can act accordingly and make sure that we're not paying tax on the same assets or same income in multiple countries. Because, for example, if you're a US citizen resident in Canada, you are subject to tax both in Canada and in the US. And we want that to be coordinated.
* Other parts of the world, there might be assets that aren't actually taxed there. So for example, capital gains or dividend in some countries and some jurisdictions, those aren't taxable. So you want to know that before you're bringing those assets to Canada, potentially then disposing of them here and becoming subject to tax on assets that you could have brought over had you disposed of them for example in advance of coming, and simply brought cash with you.
* Yeah, got it. That's a really good point. Well, talk about that then. If you're bringing, moving foreign assets and I'm assuming not cash, or could be foreign currency or securities in kind to Canada, what do you need to be thinking about?
* Well, we need to be thinking about, is there-- are we a tax resident? What is the source of these funds? Do we have deemed dispositions that we need to be thinking about? And we want to be reporting in advance of coming what our assets are, what are we bringing with us.
* So I think of an example here where we might have somebody who doesn't want to necessarily tell what they have, their entirety of their assets and then comes to Canada and needs to dispose of it. But because you've not planned ahead and told Canada that you're bringing this asset and that this is its value on the day that you brought it, you might not get credit for that, the cost base.
* And so now you might be subject to tax on the entire value, because the cost base might be assumed to be $0, because it wasn't reported when you brought the asset with you. So making sure that you are upfront and disclosing all of your assets, and that your advisors know what you actually hold, is going to be critical.
* Got it. What about buying real estate in Canada? If, I assume once you become a resident, either tax resident or the Canadian residence status you're talking about, what do you need to think about once you actually buy real estate?
* Well, we want to firstly understand the rules, because in each jurisdiction, the way that real estate is treated might be different. So we have the principal residence exemption in Canada, which is fantastic. We would want to have familiarity with that.
* But we also want to think about that source of funds. So as I mentioned, when you are purchasing a property in Canada, you may be asked-- we have money laundering rules. You might be asked to declare what the source of those funds were. So make sure that you're in a position to do that.
* And really making sure that you understand what those rules are in terms of ownership, in terms of disposition. You know, which family members should be on title, all sorts of those questions should be considered an advance.
* Yeah. And you also mentioned earlier that if you're moving to Canada, but still have real estate in where you were, you have to be thoughtful about where you're going to be taxed the most, I guess, in terms of capital gains and those types of things, too. But is there anything else you have to think about in terms of not disposing of foreign real estate?
* It can really catch people off guard. The way, you may think, well, I've left that country, I only own property there, why would I still be subject to tax on that if I'm subject to tax in Canada? You may very well be. And what we want to think about here is, how is that asset going to be treated in your estate.
* And so having wills dealing with the real property in that other country is probably going to help. And from a tax perspective, you might want to be giving your trustees or your executors of the will the authority and the power that they're going to need in order to perhaps do some post-mortem tax planning around that area.
* So making sure that your documents reflect what you want them to say and that are coordinated with each other, that are Canadian will documents, contemplate the existence of the other, of property that you might own in other parts of the world and that we're availing ourselves of some of those rules that will avoid that double taxation or that big tax hit that you weren't expecting.
* What about pensions, retirement plans, those things? Again, if they exist in another country, how does that work?
* Well, this is a very complex area of law I would say. That really depends on the nature of the pension, on which country it's being brought from. The Canadian Income Tax Act does not have a provision that allows for the direct transfer of a foreign pension into a Canadian registered plan, for example.
* But we do have legislation that allows for that to happen indirectly. So we would want to familiarize ourselves with those rules, as well as the rules from the country that you are bringing that pension from. So there might be limitations on that. There may be an inability to withdraw from those funds.
* Or we might, for example, if we're bringing our 401(k) fund up to Canada, there might be a couple of different ways to do that, really depending on what your objectives are. And in some circumstances, it makes sense to keep things as they are and to have your foreign-- pension foreign, but incorporated into your financial planning and your cash flow planning from a Canadian perspective.
* If ever there was a time you need to speak to somebody, [LAUGHS] I'm going to say, this is it.
* This is it. Yeah, somebodies, multiple people, I would hope. This is where we want your tax, legal, financial advisors all to be supporting you as a team both in Canada and in your country of origin, to make sure that we're putting together that best plan for you, so that you're coming here and you're able to participate fully without tax being the major concern.
* Nicole, always a pleasure. Thanks so much.
* Oh, my pleasure.
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