My_question_is: Applicable to both US and Canada
Subject: Taxation on bringing US savings into Canada
Expert: taxman at centa.com
Date: Thursday December 21, 2006
Time: 12:47 PM -0500
QUESTION:
Hello,
I am an Indian citizen working in the US on an H1b for the past 3 years. I
validated my PR status in Canada by landing in Jan 2006. Thereafter, I
returned to the US to continued my job here. Now, I am ready to move to
Canada early March/April 2007.
I wish to take my US savings into Canada. These savings are in savings,
checkings, mutual funds, 401k and stocks and total close to 50k US.
I will liquidate all my stocks, funds and 401k holdings in the US.
I have not opened any bank/credit accounts or worked in Canada yet.
1. What are the tax implications of bringing these funds into Canada? Am I
allowed to bring it in tax free?
- Does it matter that a portion of these funds (since January) have been
earned since I validated my PR status. ?
2. Do I need to file taxes for 2006? I did not earn any income in Canada
this year.
Thanks,
============================================
david ingram replies:
Until you take up residence in Canada, NONE of your US earnings are taxable
in Canada. However, you have to be careful when you cash in your 401(K).
If you roll it into an IRA and cash it in after coming to Canada it can
become taxable so make sure it is taken out while you are still resident in
the US.
There will be a 10% penalty for early withdrawal of the 401(K. You can
exempt the penalty on up to $10,000 by putting up to $10,000 into a new
house so if you come in Jan or Feb 2007 and buy a condo or something in
Canada in 2007, you can save $1,000 US in penalty.
You do NOT need to file a Canadian Tax return for 2006 UNLESS you are
specifically asked fro one by the CRA which is not very likely. If it does
happen, you would report all your US earnings since you received your PR
card and then exempt or deduct them all on line 256 under Article IV of the
US / Canada Income Tax Convention.
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