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offshore assets

Canadians Required to report worldwide income from all sources

Canadian residents are required to report worldwide income from all sources for Canadian Income Tax purposes and offshore assets in excess of $100,000 on form T1135. If you fail to do this, or if you choose an offshore structure that violates the intention or spirit of the Canadian Income Tax Act, you could face a battle with the Canada Revenue Agency, and if you lose you will be subject to interest and penalties. We are a Toronto income tax law firm who can advise taxpayers in any Canadian province and assist non-residents immigrating to Canada.

Have foreign source income?

Canada has entered into an extensive series of Income Tax Treaties designed to prevent double taxation. If you have foreign source income be sure to review the relevant treaty.

Canadian residents are taxable in Canada on their world income

Canadian residents are taxable in Canada on their world income. This includes income or capital gains earned offshore, such as through the rental or sale of a foreign property such as a vacation condominium in the Caribbean or elsewhere. Failure to report such income is tax evasion and is punishable by a fine or even a jail term. A voluntary disclosure will avoid prosecution and penalties.

Property in the U.S

If you own property in the U.S., your estate may have to pay U.S. estate tax on the property after your death. The U.S. imposes its estate tax on all assets owned by Canadians that it considers to be U.S. property, which includes real property such as vacation homes and may include other items such as furniture. In addition, shares in U.S. corporations and U.S. Government Savings Bonds are considered U.S. property even if the certificates are kept in Canada.

Offshore (non-Canadian) corporation may be taxable in Canada

An offshore (non-Canadian) corporation may still be taxable in Canada if the guiding mind and management of the corporation are in Canada. In order to avoid Canadian income tax an offshore corporation must be managed offshore.

Frequently Asked Questions

Canadian taxpayers are subject to tax on worldwide income. This means that any income earned in offshore bank accounts has to be declared and tax has to be paid on it. Furthermore, there is a reporting requirement for all offshore assets in excess of $100,000. A form T1135 has to be prepared and filed annually. If you are in any doubts about how to do this you should contact a tax lawyer.

Some companies set up offshore operations in a low tax or no tax jurisdiction to reduce their overall worldwide tax burden. This is typically only available to companies that do business in more than one country. Before considering this sort of arrangement it is important to fully understand the law and the consequences of operating in this way. Something that an experienced tax lawyer will help you with.

Offshore accounts do not avoid Canadian taxation. 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. The CRA is currently cracking down on those that use offshore accounts to avoid paying their taxes. They are also running a voluntary disclosures program for those who have failed to declare offshore assets in the past.

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Pro Tip

CRA Tax Audits

There are over 350,000 tax audit and review actions conducted by the Canada Revenue Agency on a yearly basis. Around 15,000 of these tax audits deal with “cash only” businesses (i.e. the underground economy). Additionally, an estimated 35,000 are tax shelter audits.

Get your CRA tax issue solved


Address: Rotfleisch & Samulovitch P.C.
2822 Danforth Avenue Toronto, Ontario M4C 1M1