Have you been accused of failing to report offshore assets or income? You could be facing significant problems or even penalties depending on the situation. Reporting this information and establishing a system for ongoing compliance is important.
You need to understand the requirements of Canada's Income Tax Act. Canada's Income Tax Act makes it mandatory for Canadian residents to report all income from around the world on their income tax returns. This includes sovereign pension income from offshore.
Some of the most common questions surrounding this process include whether or not the person was a Canadian resident at the time they had offshore income and what to do if they did not report offshore income. Our Canadian tax lawyers have extensive experience in managing these types of cases and understand how to assist when you are being assessed with liabilities or residence determinations.
It can be very difficult to figure out the accurate answer as published by the CRA. The details published by this agency can be confusing for people who are trying to determine whether or not they should participate in the voluntary disclosure program.
It is critical to understand that practically all foreign offshore pension income needs to be reported by a Canadian resident even if that offshore income was not taxable in the origin country or if taxes were paid in that foreign jurisdiction.
You could be eligible to obtain a foreign tax credit if foreign taxes were already paid, however, this does not always happen to reduce the amount owed in terms of your Canadian taxes. You need support from dedicated Canadian income tax lawyers about how to understand the voluntary disclosures program and how to participate in it.
This is extremely important if you have failed to report pension income. Canada Revenue Agency's VDP allows those taxpayers in Canada who may have reported incomplete or inaccurate information to come forward without facing the dangers of criminal tax prosecution or civil income tax penalties.
The conditions for a valid disclosure include that your disclosure is voluntary, that a penalty is being applied, that the information is at least one-year overdue, and that the information is complete. You need to understand whether or not this is a beneficial program for you and whether or not you should have been classified as a Canadian resident for income tax purposes.
Our attorneys can help you with this determination and can assist you when problems have already come on board regarding unreported offshore income.
FAQ's
Do I have to declare foreign income in Canada?
Canadian residents are required to disclose worldwide income. You could be eligible to obtain a foreign tax credit if your foreign taxes were already paid. However, this does not always bring down the amount owed in terms of your Canadian taxes. You also need to disclose your income voluntarily so as to ensure a transparency and to avoid a forced crackdown by the Canadian Revenue Authority. Hiring a Canadian tax lawyer is also a good method to prevent it
Do I have to pay taxes on income earned outside Canada?
Canadian residents are required to disclose worldwide income. You could be eligible to obtain a foreign tax credit if your foreign taxes were already paid. However, this does not always bring down the amount owed in terms of your Canadian taxes. You also need to disclose your income voluntarily so as to ensure a transparency and to avoid a forced crackdown by the Canadian Revenue Authority. Hiring a Canadian tax lawyer is also a good method to prevent it.
How much foreign income is tax free in Canada?
Residents. Individuals resident in Canada are subject to Canadian income tax on their worldwide income, regardless of where it is earned or where it is received, and they are eligible for a potential credit or deduction for foreign taxes paid on income derived from foreign sources. No foreign income is tax-free in Canada.
Will I go to jail if I don't declare my offshore account?
Yes. Any income earned in offshore accounts has to be declared by Canadian residents. Failure to do so is tax evasion and can lead to jail time.
Is a gift from a foreign person taxable?
There is no gift tax in Canada. Any resident of Canada who receives a gift or inheritance of any amount from almost any source (except from an employer) will not have to include this in their income.
How are offshore investments taxed?
If you received foreign interest or dividend income from offshore investments, you have to report it in Canadian dollars and declare it in your tax records. Use the Bank of Canada exchange rate in effect on the day you received the income. When an offshore property investment is sold, generally the gain for Canadian tax purposes must be calculated by converting the net proceeds into Canadian Dollars on the closing date.
Disclaimer:
"These articles provide information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
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Certified by the Law Society of Ontario as a specialist in Taxation Law