This form is typically used for foreign bank accounts, foreign investment accounts or foreign rental properties, but it can include other foreign assets. Foreign investments, including U.S. stocks, must be reported even if they are held in Canadian investment accounts. Foreign personal-use properties, like a snowbird’s condo that is not earning rental income, may be exempt.
U.S. citizens or green card holders must generally file U.S. tax returns despite living in Canada. The United States is one of the few countries in the world that has this requirement for non-residents. As a result, you may have to report both Canadian and U.S. income, deductions, credits and foreign tax payable.
Adding to the complexity is that certain types of income are taxable in one country but not the other, and some deductions or credits may only apply on one tax return.
Voluntary disclosure for previous years
If you have not reported foreign income or declared foreign assets in the past and you should have done so, you may be able to file a voluntary disclosure with the CRA. This program may allow relief on a case-by-case basis for taxpayers who contact the CRA to fix errors or omissions for past tax returns.
There are five conditions to apply:
You must submit your application voluntarily and before the CRA takes any enforcement action against you or a third party related to you.
You must include all relevant information and documentation (including all returns, forms and schedules needed to correct the error or omission).
Your information involves an application or potential application of a penalty.
Your information is at least one year or one reporting period past due.
You must include payment of the estimated tax owing, or request a payment arrangement (subject to CRA approval).
Before pursuing a voluntary disclosure, you should seek professional advice. The CRA also offers a pre-disclosure discussion service that is informal and non-binding, and it does not require the disclosure of your identity.
Bottom line
When you are a Canadian tax resident, whether you are a citizen or not, you have worldwide income and asset disclosure requirements on your tax return. Some Canadian residents, despite living abroad, may still be considered factual residents or deemed residents of Canada with ongoing tax-filing requirements.
If a foreign country taxes worldwide income, that would generally include TFSA interest, dividends or capital gains. So, a non-resident may have no tax advantage to keeping a TFSA. These accounts are more likely to be withdrawn and the funds taken abroad.
That said, if the person expects to return to Canada, leaving their TFSA to grow tax-free could be advantageous. If a $50,000 account grows to $150,000 and they re-immigrate to Canada, they would have a $150,000 tax-free account to leverage. If they instead withdrew their TFSA savings, their TFSA room would increase by that amount but their contribution room would not otherwise grow while they were abroad.
What to do with non-registered accounts
Taxable non-registered accounts are generally subject to a deemed disposition when a person leaves Canada. It’s treated as though all the investments were sold on the date of the account holder’s departure, triggering any accrued capital gains and resulting income tax.
Since there’s generally no tax advantage to leaving non-registered investments in Canada, it’s common to see non-residents liquidate and reopen accounts abroad. Some investors prefer to leave them in Canada because they have other accounts, like RRSPs, that they cannot liquidate. Others keep their investments in place because they trust the regulatory environment in Canada more than the one in their new country.
Withholding tax on non-registered accounts
If you leave non-registered accounts in Canada, they will be subject to withholding tax at the financial institution. Interest, dividends, and mutual fund or exchange-traded fund (ETF) distributions are generally subject to 15% to 25% tax at source. The rate varies based on the tax treaty between the country of residence and Canada.
This withholding tax represents your final tax obligation to Canada, so you do not need to file a Canadian tax return for this income.
Capital gains on securities are not subject to withholding tax for non-residents. Capital gains on real estate and some other assets are subject to Canadian withholding tax and even require the non-resident to file a tax return.
BEIJING (AP) — The U.S. recommended Americans reconsider traveling to China because of arbitrary law enforcement and exit bans and the risk of wrongful detentions.
No specific cases were cited, but the advisory came after a 78-year-old U.S. citizen was sentenced to life in prison on spying charges in May.
It also followed the passage last week of a sweeping Foreign Relations Law that threatens countermeasures against those seen as harming China’s interests.
China also recently passed a broadly written counterespionage law that has sent a chill through the foreign business community, with offices being raided, as well as a law to sanction foreign critics.
“The People’s Republic of China (PRC) government arbitrarily enforces local laws, including issuing exit bans on U.S. citizens and citizens of other countries, without fair and transparent process under the law,” the U.S. advisory said.
“U.S. citizens traveling or residing in the PRC may be detained without access to U.S. consular services or information about their alleged crime,” it warned.
“ Similar U.S. advisories issued for the semiautonomous Chinese regions of Hong Kong and Macao.”
The advisory also said that Chinese authorities “appear to have broad discretion to deem a wide range of documents, data, statistics, or materials as state secrets and to detain and prosecute foreign nationals for alleged espionage.”
It listed a wide range of potential offenses from taking part in demonstrations to sending electronic messages critical of Chinese policies or even simply conducting research into areas deemed sensitive.
Exit bans could be used to compel individuals to participate in Chinese government investigations, pressure family members to return from abroad, resolve civil disputes in favor of Chinese citizens and “gain bargaining leverage over foreign governments,” the advisory said.
Similar advisories were issued for the semiautonomous Chinese regions of Hong Kong and Macao. They were dated Friday and emailed to journalists on Monday.
The U.S. had issued similar advisories to its citizens in the past, but those in recent years had mainly warned of the dangers of being caught in strict and lengthy lockdowns while China closed its borders for three years under its draconian “zero-COVID” policy.
China generally responds angrily to what it considers U.S. efforts to impugn its authoritarian Communist Party–led system. It has issued its own travel advisories concerning the U.S., warning of the dangers of crime, anti-Asian discrimination and the high cost of emergency medical assistance.
China had no immediate response to the travel advisory on Monday.
Details of the accusations against the accused spy John Shing-Wan Leung are not available, given China’s authoritarian political system and the ruling Communist Party’s absolute control over legal matters. Leung, who also holds permanent residency in Hong Kong, was detained in the southeastern city of Suzhou on April 15, 2021 — a time when China had closed its borders and tightly restricted movement of people domestically to control the spread of COVID-19.
The warnings come as U.S.-China relations are at their lowest in years, over trade, technology, Taiwan and human rights, although the sides are taking some steps to improve the situation. U.S. Secretary of State Antony Blinken made a long-delayed visit to Beijing last week and Treasury Secretary Janet Yellen is making a much-anticipated trip to Beijing this week. China also recently appointed a new ambassador to Washington, who presented his credentials in a meeting with President Joe Biden at the White House.
Other incidents, however, have also pointed to the testiness in the relationship. China formally protested last month after Biden called Chinese leader Xi Jinping a “dictator,” days after Blinken’s visit.
Biden brushed off the protest, saying his words would have no negative impact on U.S.-China relations and that he still expects to meet with Xi sometime soon. Biden has also drawn rebukes from Beijing by explicitly saying the U.S. would defend self-governing Taiwan if China, which claims the island as its own territory, were to attack it.
The White House’s John Kirby discusses President Joe Biden’s priorities when it comes to Ukraine, China and other national-security matters. Kirby, who will be interviewed by MarketWatch’s Victor Reklaitis, is the strategic-communications coordinator for Biden’s National Security Council.
Biden said his blunt statements regarding China are “just not something I’m going to change very much.”
The administration is also under pressure from both parties to take a tough line on China, making it one of the few issues on which most Democrats and Republicans agree.
Along with several detained Americans, two Chinese-Australians, Cheng Lei, who formerly worked for China’s state broadcaster, and writer Yang Jun, have been held since 2020 and 2019, respectively, without word on their sentencing.
Perhaps the most notorious case of arbitrary detention involved two Canadians, Michael Kovrig and Michael Spavor, who were detained in China in 2018, shortly after Canada arrested Meng Wanzhou, Huawei Technologies’ chief financial officer and the daughter of the tech powerhouse’s founder, on a U.S. extradition request.
They were charged with national-security crimes that were never explained and released three years later after the U.S. settled fraud charges against Meng. Many countries labeled China’s action “hostage politics.”
