The last thing you are probably thinking about after you arrive in Canada, your new home, is taxes but this is actually the best time! I often get asked questions after someone has lived here for several months and sometimes even years which usually ends up in regrets that the person did not get in touch with me sooner.
So what are the issues that a new immigrant should be aware of? Let's start with the basics. Every Canadian resident has to file a tax return in which they report not only their income earned from Canada but also any income earned from anywhere else in the world. You will not be taxed twice on this income as most countries have a tax treaty with Canada so taxes paid to the other country will be credited to you here. The income tax rules allow for the taxation of income earned on investments as well as from any business or employment. However, the increased value of your investments achieved prior to your arrival will not be taxed here, but any appreciation after arrival will.
Let's use an example of a person arriving from England on June 15, 2007. On that date, the person owned a house in England worth $500,000 Canadian, stocks in British Airways worth $2,500 and they had cash in the bank in the UK of $100,000. When the cash is moved to a Canadian bank account, no taxes result but should the bank account earn say $231 in interest income after June 15, 2007, then that amount will be taxed as interest income here in Canada. If the British Airways stocks were originally purchased for $7,300, then the cost for Canadian tax purposes is not the original cost, but in fact the cost on the date of arrival of $2,500. If those stocks are subsequently sold for $2,600, then the profit of $100 is taxed in the year of the sale. With regards to the house, again, the value on the date of arrival is key, in that this amount is your cost for Canadian tax purposes. As such, if you sell the house after your arrival for $492,000, then you have a tax loss of $8,000. The sale of the stocks and the house will result in what are referred to as Capital Gains and Capital Losses. Their tax treatment is different from the taxation of interest income in that only 50% of the NET gain is taxed. So following the above example, there was a gain on the stock sale of $100 and a loss on the house sale of $8,000 so your net loss is $7,900 which can be used to offset future gains.
The valuation of your assets on arrival is thus extremely important to ensure that all gains and losses in the future are properly calculated. Please be sure to contact a Canadian accountant sooner rather than later so that your specific individual circumstances can be evaluated and your tax issues identified.
This article was written by Gabrielle Loren -- a partner with Loren & Company, CGA's located in North Vancouver, BC and can be reached at firstname.lastname@example.org, at 604-904-3807 or check out their website at www.loren.bc.ca