Many Canadians hear about “tax havens” and wonder if they can move money offshore to avoid tax. The reality is very different. As a Canadian resident, you are taxed on your worldwide income. This means it does not matter where the money is earned or where it is held, the CRA expects it to be reported.

How the CRA Tracks Offshore Income:

• Automatic Information Sharing: Canada participates in the OECD Common Reporting Standard (CRS). Over 100 countries now share account information with the CRA.
• Foreign Affiliate Reporting: If you control more than 10 percent of a foreign corporation, you may need to file a T1134 form.
• Foreign Property Reporting: If you hold more than $100,000 in foreign property, you must file Form T1135. This includes bank accounts, real estate, shares, and crypto on foreign exchanges.

What Is Considered Offshore Income:

• Interest earned in foreign bank accounts.
• Dividends from non Canadian corporations.
• Rental income from foreign properties.
• Business profits from a company registered outside Canada.
• Capital gains from selling offshore assets.

All of these must be reported to the CRA in your Canadian tax return.

Common Misconceptions:

• Myth: “If I open a company in the US, I pay zero tax.”
• Fact: If you live in Canada, the CRA taxes your worldwide income. Foreign structures do
  not erase Canadian tax obligations.
• Myth: “The CRA cannot see my overseas accounts.”
• Fact: Under CRS, the CRA receives account details from banks around the world.

Example:

A Canadian resident owns rental property in Florida. The property generates $20,000 USD in net rent. The owner must:

1. Report that income on their Canadian tax return in Canadian dollars.
2. Pay Canadian tax on it, with a credit for any US tax already paid. Failing to report could result in thousands of dollars in penalties and interest.

Steps to Stay Compliant:

1. Track all foreign accounts and investments.
2. File Form T1135 if your foreign property exceeds $100,000.
3. File Form T1134 if you control a foreign corporation.
4. Convert all foreign income to Canadian dollars for your return.
5. Seek advice for complex structures, such as trusts or multi country businesses.

Legal Disclaimer:
This guide is for informational purposes only and does not constitute tax, accounting, or legal advice. Tax laws are complex and subject to change. Always consult with a licensed Canadian tax professional before filing or making financial decisions related to offshore income.