Foreign Assets
Under Canadian tax law, any Canadian tax resident who owns foreign assets (assets located outside of Canada) with a total value exceeding CAD 100,000 at any time during the tax year must file a foreign asset report. Simply filing the foreign asset report does not incur taxes; however, any income generated from these assets is subject to taxation.
Types of Assets
​​
-
Overseas bank deposits
-
Shares of non-resident corporations (other than foreign affiliates)
-
Debt owed by non-residents
-
Interests in non-resident trusts
-
Overseas real estate (excluding personal-use or primary residences)
-
Other overseas assets (e.g., foreign life insurance, gold, etc.)
-
Property held in an account with a Canadian registered securities dealer or a Canadian trust company
Why do I have to declare foreign property?
-
For the Canadian government, foreign assets generate overseas income for tax residents. Canada applies a worldwide taxation system, meaning income derived from these assets is subject to tax. Additionally, reporting foreign assets is an effective measure to combat money laundering.
-
For the filer, accurately reporting foreign assets is a mandatory obligation as a Canadian tax resident. Furthermore, proper reporting facilitates the future transfer of funds into Canada.
What if I don't declare my foreign assets?
Failing to declare foreign assets on time can lead to complications when transferring funds into Canada and result in significant penalties:
-
For tax residents who fail to file within the required timeframe, the CRA imposes a daily penalty of $25, with a minimum penalty of $100 and a maximum of $2,500 per year.
-
For intentional misdeclaration or omission, the CRA may impose monthly penalties of $500 or $1,000, depending on the circumstances. The maximum penalty can reach $24,000 or 5% of the total cost of the undeclared foreign assets.
Voluntary Disclosures Program
If you failed to declare foreign assets on time due to a lack of understanding of the regulations, you may use the CRA’s Voluntary Disclosures Program (VDP) to proactively disclose errors or omissions in past tax filings. Eligible applicants can benefit from relief, such as penalty waivers or protection from prosecution. However, this program has specific eligibility criteria and is not available to everyone.