Tax guidelines and regulations for large money transfers into Canada

While our friendly neighbor to the north won’t require any forms from your recipient, you may have to file with the IRS if you send more than $10,000 out of the US.

How Canada regulates large remittances

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.

What are the penalties in Canada if my recipient fails to file?

If your recipient doesn’t list the transfer on their income taxes, they could be charged with tax evasion in Canada. If they can prove that the failure to list the transfer was accidental, they’ll have to pay any taxes due, along with a penalty. If the failure to file was intentional, they can be criminally charged.

Do I have to report large transfers out of the US?

Any transfer over $10,000 needs to be reported to the US government, but that responsibility generally falls on banks and money transfer companies. However, if you’re sending more than $15,000 as a gift or more than $10,000 as a business transaction, or if you have a foreign bank account that’s held more than $10,000 at any point in the past year, you’ll need to notify the IRS.

Sending a lot of money out of the country? Know what the IRS expects of you.

How much money can I send to Canada?

As much as you want — there isn’t a legal limit on the amount you can send. But some transfer providers impose their own caps, so use a no-limit provider like Xe if you’re planning a large transfer.

How will my recipient in Canada get the money?

Depending on the provider, your options for delivering money to your loved ones include bank-to-bank transfers, cash pickups and deposits to mobile wallets.

To pick up your transfer in person, your recipient may need to provide a 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.

How to send money to Canada

Compare providers for your next large transfer to Canada

Bottom line

Canada’s lack of a gift tax makes it easy to transfer money to an acquaintance or loved one there. While your recipient won’t have to worry about any forms, transfers over $10,000 may need to be reported to the IRS.

As with all international money transfers, be wary of potential fraud and only send money to people you know. Using a reputable provider can safeguard you from potential scams.

Frequently asked questions

• Can I send money to Canada with PayPal?

  Yes, though you may get a much better exchange rate if you use a different money transfer provider.

• Will I need to pay a gift tax in the US?

  Probably not. While you’ll need to file a gift tax return if you’ve given more than $15,000 in the past year, you won’t need to pay the tax until you’ve given away more than $11.18 million.