At a glance
- No gift tax
- Canada does not impose a gift tax on money sent abroad. Source: Canada Revenue Agency
- Withholding may apply
- Payments to non-residents for services in Canada may require withholding. Source: Canada Revenue Agency
- Reporting foreign property
- You may need to report foreign property over a threshold on T1135. Source: Canada Revenue Agency
- Exchange rates
- Use official Bank of Canada rates for accurate reporting. Source: Bank of Canada
- Anti-money laundering
- Money services businesses must report certain transactions to FINTRAC. Source: FINTRAC
- Consumer protection
- The FCAC explains your rights when sending money abroad. Source: FCAC
What Sending Money Abroad Means for Canadian Tax
Sending money abroad means transferring funds from Canada to a recipient in another country. In tax terms, the transfer itself is not a taxable event. The Canada Revenue Agency focuses on why the money is sent and who receives it.
For individuals, sending a gift or supporting family abroad does not create a Canadian tax liability. Canada has no gift tax, no wealth tax, and no tax on the transfer itself. You do not report the transfer on your personal tax return unless it relates to income or foreign property.
For businesses, payments to non-residents can trigger withholding, reporting, and GST/HST self-assessment obligations. The rules depend on the nature of the payment and where the service is performed. This is why the purpose of the remittance matters more than the act of sending.
The Meaning of Remittance in Accounting and Finance
The word 'remittance' comes from the Latin 'remittere', meaning to send back. In modern use, a remittance is the sending of money, often to settle a debt or obligation. It can be domestic or international, and it appears in payroll, accounting, and personal finance.
In payroll, a remittance is the employer sending employee deductions to the CRA. These deductions include income tax, Canada Pension Plan contributions, and Employment Insurance premiums. In accounting, an invoice remittance is a payment sent to a supplier.
A payment is the act of paying for something. A transfer is moving funds between accounts. A remittance often implies sending money to a distant party, especially across borders or to an authority. The terms overlap, but remittance is common in tax and payroll contexts.
Tax Rules for Individuals Sending Money Abroad
If you send money as a gift, there is no Canadian tax. You cannot deduct the gift. The recipient does not pay Canadian tax on the gift unless they are a Canadian resident and the gift is income, which gifts are not.
If you send money to your own account abroad, it is not a taxable event. However, if the total cost of your foreign property exceeds the reporting threshold, you must file Form T1135, the Foreign Income Verification Statement, with your tax return.
If you send money to a non-resident as payment for services, the non-resident may owe Canadian tax if the services were performed in Canada. In some cases, you may have withholding obligations. Check the CRA's rules for non-residents.
Tax Rules for Businesses Sending Money Abroad
Businesses that pay non-residents for services performed in Canada may need to withhold tax under Regulation 105. This is a prepayment of the non-resident's Canadian tax. The business must remit the withheld amount to the CRA and file an NR4 slip.
Payments for goods, or for services performed entirely outside Canada, generally do not require withholding. However, other rules may apply, such as Part XIII withholding on passive income like dividends, interest, and royalties paid to non-residents.
Businesses may also need to self-assess GST/HST on imported services. This is separate from income tax withholding. The CRA provides detailed guidance on these obligations, and failing to comply can result in penalties.
Reporting, Exchange Rates, and Anti-Money Laundering
When you send money abroad, you may need to convert currency. The Bank of Canada publishes daily exchange rates that you can use for tax and accounting purposes. Using official rates helps ensure accuracy and consistency in your records.
Licensed money services businesses must comply with FINTRAC's anti-money laundering rules. They may ask for identification and report certain transactions. This is a legal requirement, not a tax. The Financial Consumer Agency of Canada explains your rights when sending money.
Common Confusions and Examples
Many people think sending money abroad is taxable. It is not, by itself. The confusion arises because some payments trigger withholding or reporting. For example, paying a non-resident for services is different from sending a gift.
Another confusion is the difference between a remittance and a transfer. In tax, remittance often means sending tax withheld to the CRA. In everyday use, it means sending money to someone. Context matters, and the rules depend on the situation.
| Remittance type | Who sends | Typical tax treatment |
|---|---|---|
| Payroll remittance | Employer to CRA | Withheld from employees; remitted; no tax on employer. |
| Invoice remittance | Business to non-resident supplier | Withholding may apply if services in Canada. |
| International remittance | Individual to family abroad | Not taxable; no gift tax. |
| Charitable remittance | Donor to foreign charity | Not deductible unless registered Canadian charity. |
Frequently asked questions
Is sending money abroad taxable in Canada?
No. Sending money abroad is not a taxable event in Canada. There is no gift tax, and the transfer itself is not reported as income. However, the purpose of the payment can trigger other tax rules.
Do I need to report money I send to family overseas?
Generally, no. You do not report personal gifts or family support on your tax return. You may need to report foreign property over a threshold on Form T1135.
What is a remittance in Canada?
A remittance is the sending of money to settle an obligation. In payroll, it means sending deductions to the CRA. In personal finance, it means sending money to someone, often abroad.
What is the difference between a remittance and a transfer?
A transfer moves funds between accounts. A remittance is a payment sent to a recipient, often across borders or to an authority. The terms are sometimes used interchangeably.
Are there withholding taxes when I pay a non-resident?
Yes, in some cases. If you pay a non-resident for services performed in Canada, you may need to withhold tax under Regulation 105. Other payments, like dividends or royalties, may also require withholding.
Sources
Every figure or rule on this page should be verified at the official source before you rely on it.
- Tax rules for non-residents and foreign incomeCanada Revenue Agency
- Consumer guidance on sending moneyFinancial Consumer Agency of Canada
- Anti-money laundering rules for money services businessesFINTRAC
- Official daily exchange ratesBank of Canada
- Fraud prevention for remittancesCanadian Anti-Fraud Centre