Laws and legal documents when transferring large sums of money into Canada
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Emigrating, studying or starting a business up north can involve big money. Should you worry about taxes?
The US and Canada share the longest international border in the world. But when sending money over that border to Canada, both you and your recipients could face laws and legal paperwork, depending on how much you’re gifting.
Before you move your money out of the US, learn when our northern neighbo(u)r requires taxes on cash remittances.
How Canada regulates large remittances
When sending a lot of money abroad to friends and family, you might be concerned about taxes — and how they affect your recipient.
Canada does not regulate or tax most gifts of cash sent into the country. In short, citizens can receive as much cash as they’d like without triggering a gift or capital gains tax. Because of this, your recipient shouldn’t have to deal with cumbersome legal documents after they’ve accepted your remittance.
Exceptions come into play when that cash is in the form of property, company shares, designated stock or other securities. In that case, your gift may be subject to 50% capital gains tax, depending on the circumstances of your transfer.
Do I have to report large transfers out of the US?
With so much attention on money entering and leaving the country, if you fail to report large sums out of the US, don’t know you have to report them or don’t report them correctly — it will likely be discovered.
Although Canada and US are close neighbors, you’ll need to abide by US laws if you’re sending more than $10,000. In the years after 9/11, banks are required to report cash transactions into and out of the country. And money transfer companies are sometimes held to reporting thresholds as low as $1,000. Sending a lot of money out of the country? Know what the IRS expects of you.
How will my recipient receive my remittance in Canada?
Depending on the provider, your options for delivering money to your loved ones include bank-to-bank transfers, cash pickups and even deposits to mobile wallets.
To pick up your transfer in person, your recipient may need to provide picture ID or a confirmation number to receive your funds. If they own an account with a Canadian bank or money transfer company, they may not be required to provide this information each time you send money.
Money transfer services with no maximum sending limit
Frequently asked questions
The US trades about $575 billion in goods and services with our northern neighbor. If you’re interested in getting in on that action, take a look at our guide to starting an import/export business with Canada that includes potential startup costs, registering your business and more.
If you follow the law and submit your legal documentation timely and accurately, you shouldn’t experience hassles with the IRS. If you choose not to follow the law, you may be on the hook for stiff penalties, including jail time.
Penalties can be avoided if you can show the IRS reasonable cause for a failure to file. However, the US does not consider reasonable cause to include information that might be a crime in another country.
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