If you’re bringing money into Canada, especially large sums, it’s important to know what the rules are when it comes to declaring the funds to officials or paying taxes on them.
Perhaps you’ve recently travelled and are making your way back into Canada. Or, maybe you’re expecting to receive a money transfer from abroad. In either case, there are a few important things to understand to avoid any penalties.
Key Points You Should Know
- When bringing $10,000 or more into Canada, you must report funds to the Financial Transactions and Reports Analysis Center of Canada (FINTRAC).
- Gift money is generally not taxed, but funds received from business transactions or the sale of an asset may be subject to capital gains tax.
- You can send money to or from Canada via cash, bank transfer, PayPal and international money transfer services such as Simplii Financial, WorldRemit, Remitly, and Wise.
Do You Need To Report Money You Receive From Abroad To The CRA?
Whether or not you have to pay taxes on funds brought into Canada depends on whether the money is considered a gift, or whether it’s money received from the proceeds of a sale.
Generally speaking, most gift money is not taxed when it’s brought into Canada. However, if you’re receiving international funds from the sale of an asset, you’ll have to pay capital gains taxes on that money, which means you’ll pay income taxes on 50% of your capital gains.
| Common Question: If I Receive Money From My Parents Abroad, Do I Have To Pay Taxes On It? In Canada, money received as a gift from parents abroad is generally not considered taxable income. However, it’s important for recipients to keep documentation showing the amount and source of the transfer, such as a letter. Note: If the money you receive from a resident of another country are court-ordered support payments, it must be reported as income. |
When Are You Required To Declare Money Received Internationally?
There are a few situations when you must declare the money you receive from another country.
Transfer Amounts Over $10,000
If you’re receiving at least $10,000 CAD, these funds must be reported to the Financial Transactions and Reports Analysis Center of Canada (FINTRAC) due to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.
However, it’s usually your bank or money transfer service provider facilitating the transaction that will report these received funds, not you.
| Note: If you’re personally carrying $10,000 or more into Canada, you must declare these funds at the border. You can do this by filling out Form E311 or a Canada Border Services Agency (CBSA) declaration card. Failure to do so may result in a fine or seizure of your funds. |
When You Receive Foreign Income
You’ll also need to report the money you receive from abroad to the Canada Revenue Agency (CRA) when you file your taxes if it’s considered income. This may include foreign income from employment, a business, rent, investments, or pensions.
For example, when you make a profit after selling an asset of value, such as real estate or stocks, you’ll need to pay capital gains tax on half the amount you earned. You may also need to file form T1135 if you inherit foreign property, and its cost exceeds $100,000 CAD.
| Note: You won’t need to pay any income tax to the CRA for internationally received funds that are considered a gift. However, be sure to keep clear records of all transactions in case the CRA requests proof of source. |
| Canadian Tax Rules for Recipient | |
| Money Transfer From India To Canada | – Gifts and inheritances are not taxable. – Foreign income must be reported on your Canadian tax return. – Canada–India Income Tax Convention allows recipients to claim a foreign tax credit. |
| Money Transfer From China To Canada | – Gifts and inheritances are not taxed in Canada. – Foreign income is taxable and must be reported. – Canada and China do not have a tax treaty, so you may not be able to claim a foreign tax credit. |
| Money Transfer From Nigeria To Canada | – Gifts and inheritances are not taxed. – Foreign income must be reported. – Canada and Nigeria Agreement may allow recipients to claim a foreign tax credit. |
| Money Transfer From The Philippines to Canada | – Gifts and inheritances are not taxable. – Foreign income is taxable and must be declared. – Canada–Philippines tax treaty may allow recipients to claim a foreign tax credit. |
What Is The Foreign Tax Credit?
The purpose of the FTC is to prevent double taxation. It allows Canadian residents to reduce their Canadian income tax when they have already paid foreign taxes on the same income.
What Happens If You Don’t Report The Money You Receive?
If you’re physically bringing $10,000 or more into Canada and do not declare it, you could be faced with penalties. More specifically, you could have your money seized and be charged 5% to 50% of the amount taken.
FINTRAC and CRA reporting are meant to fight back against criminal activity, including money laundering and tax evasion.
If the CRA catches wind of your funds that were not reported, they may send you a tax bill and charge you a penalty. In more serious cases, you could face legal trouble.
For the most part, receiving large sums of money from outside of Canada shouldn’t be an issue. You should be fine as long as you report your payments and properly file your taxes.
How Much Money Can You Transfer To Canada?
There’s no limit on how much money you can transfer into Canada. That said, your bank or money transfer service provider might have limits. But again, if you’re bringing in over $10,000 into Canada, it must be declared.
Are There Different Tax Rules Among Provinces?
No, the rules are the same across the country, as they’re governed by federal law, not provincial regulations. Whether you’re transferring or bringing money into Canada, the key requirement is that any amount of $10,000 or more into or out of Canada must be declared to the CBSA.
The main difference across provinces is how provincial taxes and regulations affect the money after it arrives, but not the actual entry process itself.
Ways To Transfer Large Sums Of Money To Canada
There are a few ways to transfer money into Canada, no matter how large or small the sum may be:
Bank Transfer
A simple and convenient way to move money in and out of Canada is through a bank transfer. Since your bank is facilitating the transfer, the funds will be secure. However, the cost associated with this option is generally high. The funds will also be subject to a foreign exchange rate, which may include a high spread.
Cash
If you’re travelling outside of Canada, you can physically bring the cash in with you. While no fees are associated with this method, it may not be as secure as a bank transfer.
There are inherent risks associated with carrying large sums of cash. Plus, there are some regulations to adhere to when it comes to bringing in a lot of money into Canada. This includes the need to declare amounts of $10,000 or more to the border agent.
PayPal
To use PayPal to send and receive money to and from Canada, you’ll need two bank accounts: one with a Canadian bank and the other in the country of origin. There are also fees associated with using PayPal.
Third-Party Services
There are several international money transfer providers available that can help you transfer money into Canada without the high fees that banks often charge.
Do You Need Any Documents To Receive Money Transfers?
Your bank or money transfer provider will take care of all the necessary paperwork associated with transferring money into Canada. They’ll also ensure that they adhere to Anti-Money Laundering (AML) laws. But it’s still a good idea to keep a paper trail of records and emails regarding the transfer just in case.
If you’re coming into Canada with at least $10,000, you’ll need to fill out Form E311 (CBSA declaration card), as mentioned earlier.
Costs To Consider Beyond Taxes
Aside from potential taxation, other costs to consider when bringing money into Canada are as follows:
- Currency Exchange Costs: Consider the exchange between CAD and foreign currency, if applicable.
- Bank Or Transfer Fees: Factors in fees for things like wire transfers, intermediary bank charges, and international draft processing fees, which can add a few more dollars to the total cost.
- Transfer Speed Costs: If you want money sent quickly, you’ll likely pay a premium service charge compared to standard transfers.
- Financial Institution Minimums: Smaller transfers may incur higher costs compared to larger transfers. Some banks waive fees if you bring in a minimum amount.
Final Thoughts
Whether you’re just getting back from travelling abroad or are expecting a money transfer from someone in another country, there may be rules attached to the receipt of these funds. Be sure to understand what these rules are to avoid any financial repercussions or even legal action.
