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You don’t have to pay income tax or gift tax on most types of money transfers to Canada from friends and family. But you may have to pay capital gains tax if you’re receiving money by selling or disposing of an asset.
Canadian authorities do not regulate or tax most gifts of cash sent into the country. In short, residents can receive as much cash as they’d like without triggering a gift or capital gains tax. Because of this, you shouldn’t have to deal with cumbersome legal documents after accepting your remittance.
There may be exceptions if you receive money from selling or disposing of assets like stocks, bonds, real estate, inventory, vehicles, furniture, artwork etc. In that case, your funds may be subject to 50% capital gains tax, depending on the circumstances of your transfer.
In Canada, you pay tax on half of realized capital gains. This means that half of the money you earn from selling an asset is taxed, and the other half is yours to keep tax-free!
To calculate your capital gain or loss, follow these steps:
This amount counts as part of your income and will be taxed based on the amount you earn, the province or territory in which you live and any tax deductions you can get your hands on.
Remember that you’re only taxed on assets you dispose of. So, when calculating capital gains, don’t factor in the buying or selling costs of any assets you’re still holding onto.
There is no legal limit to the amount that can be transferred into Canada – but your money transfer provider or bank may impose its own maximums. For large transfers, encourage your sender to use a provider with no transfer limit like OFX or TorFX.
If you go through a legitimate money transfer provider, you won’t need to provide any extra paperwork. The main legal considerations when sending large sums of money are the Anti-Money Laundering (AML) laws, but your money transfer provider will look after the necessary documents when you submit your identification for processing. As a good rule of thumb, keep all records and emails relating to the transfer in case you need them later.
If you’re travelling into Canada with CAD$10,000 or more, you’ll need to declare this using Form E311, a CBSA declaration card, an Automated Border Clearance kiosk or a Primary inspection kiosk. Alternatively, you can make a verbal declaration to a border services officer upon your arrival.
Splitting transactions into smaller amounts is referred to as “structuring,” and is considered a punishable offense when used to avoid the $10,000 reporting threshold. Structuring is something money launderers do to avoid detection, but banks and money transfer services are trained to detect this and report it to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
If you repeatedly fail to report $500 or more of your income to the CRA, you may end up being slapped with a penalty of 10% on the unreported amount. This applies to individuals, businesses, corporations and trusts. A “repeated failure” means a failure to report all your income more than once in a 4-year period.
If you haven’t reported all your income to the CRA — whether intentionally or by accident — you can avoid prosecution and maybe even some of the penalties and interest fees you owe by reporting through the CRA’s Voluntary Disclosure Program.
Any transfer over $10,000 CAD needs to be reported to FINTRAC, but that responsibility generally falls on banks and money transfer companies, not individuals. Financial institutions may also report any transactions deemed suspicious, regardless of the amount being received.
If you follow the law and submit any required legal documentation timely and accurately, you shouldn’t experience hassles with the CRA.
Although many types of transfers don’t count as taxable income, some transfers might – for example, if you’re receiving money related to income-producing activities outside of Canada. If you don’t report taxable income, you may be on the hook for stiff penalties including a percentage of the income you failed to report (possibly around 5-10% of that income) plus an additional percentage for every month you avoided paying taxes (possibly around 1-2% of that income). Speak with a Canadian tax professional to find out exactly what tax rules apply to you.
Depending on the provider, options for receiving money include bank-to-bank transfers, cash pickups and deposits to mobile wallets.
To pick up your transfer in person, you may need to provide photo ID or a confirmation number to receive your funds. If you own an account with a Canadian bank or money transfer company, you may not be required to provide this information every time you receive money.
See how lower fees, stronger exchange rates and higher transfer limits can help you get more money to Canada.
The absence of a gift tax in Canada makes it easy for Canadians to receive money transfers from acquaintances or loved ones. While you won’t have to worry about any forms, transfers over $10,000 CAD may end up being reported to FINTRAC by the company processing the transfer.
As with all international money transfers, be wary of potential fraud and only receive money from people you know for verifiable reasons. Using a reputable provider can safeguard you from potential scams.
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