What You Need to Know About Foreign Assets

how to prepare financially for a divorce

Foreign assets, if done right, can be a very practical way to manage your finances. If you have or are considering, foreign investments it pays to chat with an accounting professional to make sure you know how to properly manage your new assets. Read on for a few of the many things to keep in mind if you own foreign assets.

What Counts as a Foreign Investment?

The following are considered foreign investments, and therefore need to be reported to the Canada Revenue Agency appropriately:

  • Funds and bank accounts held abroad
  • Real estate
  • Shares of Canadian corporations
  • Debt securities issued by a non-resident
  • Other tangible and intangible properties located outside of Canada

Offshore Bank Accounts Are Legal – So Long as You Follow The Rules.

There are actually some scenarios in which you might be advised by your planner to consider an offshore bank account. As long as you follow the appropriate reporting rules, you’ll have nothing to worry about! Consider the following examples:

Example of the RIGHT way to use an offshore bank account: You own a vacation property in Florida, so you set up a U.S. bank account to make purchases easier.

Example of the WRONG way to use an offshore bank account: You earn money in the U.S. from renting out your vacation home when you’re not using it and keep those earnings in a U.S. account to avoid declaring the rental income on your next Canadian tax return.

Countries Are Starting to Share More Tax Information.

Canada has signed a number of “tax information exchange agreements”, which increases the amount of tax information flowing between countries such as the U.S, Switzerland and the British Virgin Islands. So if you were looking for ways to evade the taxman (your options are dwindling).

A Failure to Properly Report Foreign Investments Comes Along With a Penalty

If you have more than $100,000 in foreign investments, there is a specific form you’ll need to complete your next tax return (form T1135 if you’re curious). Failure to properly report your investments can subject you to a penalty of $25 a day, with a maximum of $2500 a year, plus interest.

Questions about foreign assets? Contact the team at Liu & Associates to book an appointment with a member of our expert team.