Selling Property in Russia and bringing Proceeds to Canada

[UTRO]

Hey Guys and Gals, I am looking for a little advice. Please Post here or through PMs.

Svetlana and I are pretty much going through the final last months of awaiting CIC, Citizenship and Immigration Canada, approval for her to arrive in Canada as a Permanent Resident and as my Wife

A small synopsis.... we were married this past April in Jamaica. Since Canada does not have a K type Visa, as the USA does, Svetlana had to go straight back to Russia after the Honeymoon (although luckily she received a visitor visa in July) Immediately after that, we began the painful task of gathering all evidence of our relationship and filling out the numerous government forms required for me to Sponsor her as my Wife and as a Permanent Resident in Canada. I was 'accepted' as an Eligible Sponsor in early July. In late July our File was sent to the Canadian Embassy in Moscow. In early September our File was opened. This is when all background checks are done on both Svetlana and I, the legitimacy of our relationship is determined and the final decision is made whether Svetlana is worthy of entering Canada as a Permanent Resident.... and of course as my Wife  

Here are my questions.....

1. Upon Canadian PR approval, Svetlana will be putting her Russian Real Estate up for Sale. We are trying to determine which is the easiest, cheapest, common and most legal(!) way for her to bring these proceeds $$$ to Canada.
Experience from International Members regarding this question will most certainly be insightful as well!  

2. We are being told that when Svetlana arrives on Canadian soil as a PR, she will have to Declare all her Assets to the Immigration Officer at Point of Landing? That anything Not Declared, is subject to a Capital Gain Tax?

3. For her Property. She apparently has to bring an Assessment paper to Canada showing the value of this Property? The Government Agency in Russia responsible for the Assessment, always lowballs Property values by half? Which is is great for Russian Residents paying Property Tax, but because Svetlana's property will likely sell for double, will this mean that any proceeds netted above the Assessment value becomes Taxable when she arrives in Canada?

Any ideas, opinions, thoughts or answers will be most appreciated! Thanks, Dave and Svetlana

[Misha]

1. Upon Canadian PR approval, Svetlana will be putting her Russian Real Estate up for Sale. We are trying to determine which is the easiest, cheapest, common and most legal(!) way for her to bring these proceeds $$$ to Canada.

I sold my wife apartment (long story) and sent the money to her via Sberbank to her account in Canada. I wired the money to her and she received it the next day. It cost $35-or-so to send.

2. We are being told that when Svetlana arrives on Canadian soil as a PR, she will have to Declare all her Assets to the Immigration Officer at Point of Landing? That anything Not Declared, is subject to a Capital Gain Tax?

We weren't asked to declare anything when my wife landed in Canada (we did the inland application for PR) and didn't pay any capital gain tax. Revenue Canada hasn't called us yet  

[Phil dAmore]

After the sale closes and you have the cash in hand (and it likely WILL be cash) just do a SWIFT bank transfer to your account in Canada. 

If she has owned the apartment for more than 5 years (used to be 3) then she won't be subject to any Russian tax.  IME I found that the whole Russian real-estate market is a very murky area when it comes to things like declared values and taxes.  Cash is basically untraceable which is why it is used for pretty much everything.

I'm no expert on Canadian tax law but if the money is wired into your account prior to her arrival, well then she really isn't arriving with any assets, yes?

Personal property will likely be viewed as just that... personal effects and if it were to be subject to any duty at all, it would be minimal.

Remember, I'm no expert on Canadian tax law... I'm not even Canadian so bear that in mind when considering this advice. :noidea:

[Boethius]

There will be no tax if your wife sells the property before arriving in Canada.

Canada taxes based on residency, not citizenship.  On entry into Canada, your wife will be deemed to have disposed of all her foreign assets and to have reacquired them at fair market value.  So, if she has cash, no Canadian tax will be paid.  If that cash is invested, the investment income earned after your wife becomes a Canadian resident will be taxed.

[Svetlana]

Hi, everybody!  Allow me to introduce myself! I am Utrobina's wife - Svetlana! I have been a `secret` Russian agent on this forum for quite a long while my hubby has been posting here and sharing all the news and posts with me.  We both enjoy it a lot. And from both of us, I would like to thank you all, guys, for giving your advice to us, we appreciate it a lot. This is an important question for us (well, for whom it is not? Money is concerned!  :noidea:)
I was studying this topic on other forums, including those for Russian immigrants, and here is a summary of what I learnt.
(Please, note that due to several reasons I will be able to sell my property only after I land in Canada. And one more important note: everything written here is not Official information!!! I got it from my humble internet research only.)

- When going through the customs, before landing in Canada, I am allowed to bring as much money as I want, but I have to declare it (if it is more than 10,000$). I am allowed to do it once only, all the money brought to Canada after will be taxed.

- As far as my property will be sold After this `landing` only, I can't bring the money during the first visit. Which means, I should try to declare somehow my property when entering Canada for the first time. The way out is to declare my property with the help of the so called Property Evaluation Certificate. In this case, we assume, I won't have to pay tax when I finally bring the money?? Because I will have the proof (this Certificate) of where I got this money came from and that this money originates from Russia.

- However I also heard that according to the Canadian law, if the money is earned after selling your permanent residence property, you don't have to pay the tax anyway...?? Has anyone heard anything like that?

- Another problem is that when I bring the money to Canada (or transfer it to the bank) I was told, that a bank can ask for a proof of income. In other words, they may want to check the origin of this money and to make sure it is not connected with Russian Mafia  And they say, they check it if the sum is more than 10,000$ And naturally, after selling the property, the sum I will bring will be more (I hope, at least... damn crisis...  ) 

- As for transferring the money from Sberbank to RBC, for example, the commission will be 1% (I found out) And it is the same in other Russian banks. So, Misha, I was real surprised to read you paid so little?!? Lucky you were! What kind of transfer was it?? Maybe there is something I don't know? 

Well, I guess, I'd better close here... It was a loooooooong post for the first one, eh?  Thank you all, guys, again! We will be very thankful if you could share some more experience and ideas with us!!! 

[Boethius]

- When going through the customs, before landing in Canada, I am allowed to bring as much money as I want, but I have to declare it (if it is more than 10,000$). I am allowed to do it once only, all the money brought to Canada after will be taxed.

- As far as my property will be sold After this `landing` only, I can't bring the money during the first visit. Which means, I should try to declare somehow my property when entering Canada for the first time. The way out is to declare my property with the help of the so called Property Evaluation Certificate. In this case, we assume, I won't have to pay tax when I finally bring the money?? Because I will have the proof (this Certificate) of where I got this money came from and that this money originates from Russia.

- However I also heard that according to the Canadian law, if the money is earned after selling your permanent residence property, you don't have to pay the tax anyway...?? Has anyone heard anything like that?

- Another problem is that when I bring the money to Canada (or transfer it to the bank) I was told, that a bank can ask for a proof of income. In other words, they may want to check the origin of this money and to make sure it is not connected with Russian Mafia   And they say, they check it if the sum is more than 10,000$ And naturally, after selling the property, the sum I will bring will be more (I hope, at least... damn crisis...  )  

- As for transferring the money from Sberbank to RBC, for example, the commission will be 1% (I found out) And it is the same in other Russian banks. So, Misha, I was real surprised to read you paid so little?!? Lucky you were! What kind of transfer was it?? Maybe there is something I don't know?  

Well, I guess, I'd better close here... It was a loooooooong post for the first one, eh?   Thank you all, guys, again! We will be very thankful if you could share some more experience and ideas with us!!!  

Hi Svetlana - No, you will not be taxed on any money you bring into Canada.  Even if you don't sell your Russian property before you move, you won't pay tax on the proceeds, unless it increases in value after you enter Canada (e.g. - if the property is worth $1000 when you enter Canada, and you sell it for $1500 after you come to Canada, the $500 would be taxed.  If you sell if for $1000 after you enter Canada, the proceeds will not be taxed).

All banks are required to question any deposit over $10,000, no matter who deposits it.  It is in money laundering legislation.  

[Misha]

So, Misha, I was real surprised to read you paid so little?!? Lucky you were! What kind of transfer was it?? Maybe there is something I don't know? 

There was nothing sinister or shady. Just a simple wire transfer. I went to the bank with my sister-in-law and mother-in-law and a bagful of roubles. I had all the usual info required for wiring money: SWIFT, bank account numbers, etc... At the neighborhood SBERBANK, they counted all the money, we paid our fee for wiring the money ($35 give or take). It was sent to a joint account that my wife and I had at TD Canada Trust. She received the money within 24 hours and took it out of our account and bought a GIC.

I can't remember whether she had her PR yet. She sold it as I convinced her that prices would soon crash: I was proven correct as we sold her apartment at the peak for both the prices of real estate in her city market and when the ruble was trading at 22 or 23 to the dollar. Simply put, she got at least twice as much money from the sale then as she would have gotten had she waited.

Finally, when she received the money, neither the bank nor anybody else asked where the money came from. Revenue Canada also did not give us any calls. As it stands, in Canada, you do not have to pay any taxes on your primary residence should you sell it. So, barring any unforeseen calls, we didn't face any issues with wiring money to Canada, paying taxes or having to explain where the money came from.

[docetae]

Hi Svetlana - No, you will not be taxed on any money you bring into Canada.  Even if you don't sell your Russian property before you move, you won't pay tax on the proceeds, unless it increases in value after you enter Canada (e.g. - if the property is worth $1000 when you enter Canada, and you sell it for $1500 after you come to Canada, the $500 would be taxed.  If you sell if for $1000 after you enter Canada, the proceeds will not be taxed).

All banks are required to question any deposit over $10,000, no matter who deposits it.  It is in money laundering legislation.  

One question: How the evaluation is done ? My wife bought her apartment for around 40k, during the top of the bubble, it was 130k, now it is around 60k... Our plan was to rent the apartment the time the market is low and to sell it after. Interesting thread !

[Jazzyclassy]

Can I just ask one question . Why do you need  to sell your property in Russia? what is the urgency of that?

[Shadow]

If you are thinking about wire transfer, also check carefully if you need to pay taxes on the sale in Russia. Depending on how long you are owner and how much the profit is, you might have to pay up to 25% taxes.

[Misha]

If you are thinking about wire transfer, also check carefully if you need to pay taxes on the sale in Russia. Depending on how long you are owner and how much the profit is, you might have to pay up to 25% taxes.

In Canada, you do not pay any taxes on your principal residence. This Canadian Revenue Agency document explains this in detail: http://www.cra-arc.gc.ca/E/pub/tp/ti-001/ti-001-e.pdf.

How they define and explain the principal residence:

Principal residence exemption

The principal residence exemption is available to offset an individual's capital gain from the sale of a property that was the individual's principal residence at any time after it was acquired.

• you must own it (either alone or jointly with another person);
• you or your family members must inhabit it at some point during the year; and
• no other property may be designated as the principal residence of any other member of your family unit for last year.

Full principal residence exemption

If the house was designated as your principal residence for every year you owned the land and building, you do not have to report any gain on building, you do not have to report any gain on its sale on your income tax return or file Form T2091(IND) ...
 

[Shadow]

Misha, about Canadian taxes I am sure you know all.
However there is also the matter of Russian taxes.

When selling a property, depending on how long the ownership is registered and if you are registered as inhabiting or not, there can be taxes that you have to pay in Russia.
Would kind of sad to see the bank suddenly taking half your money, or when you return for a trip to be arrested on the airport for evading taxes. There for be sure to let your Russian spouse check the regulations about the taxation in Russian when selling the property there.

For those who wish to know about the Dutch system, any profit on private property is free from taxes. However if the property is not the main inhabited property, a taxation of 1.2% per annum over the debt-free value has to be paid.

[Misha]

Misha, about Canadian taxes I am sure you know all.
However there is also the matter of Russian taxes.

When selling a property, depending on how long the ownership is registered and if you are registered as inhabiting or not, there can be taxes that you have to pay in Russia.
Would kind of sad to see the bank suddenly taking half your money, or when you return for a trip to be arrested on the airport for evading taxes. There for be sure to let your Russian spouse check the regulations about the taxation in Russian when selling the property there.

Well, unless the laws have changed recently, I can certify that the bank did not take any of my wife's money (except for the $35 fee) and she was not arrested when she returned to Russia a year after selling her property. But, of course, it is always best to check the regulations.

[Shadow]

Well, unless the laws have changed recently, I can certify that the bank did not take any of my wife's money (except for the $35 fee) and she was not arrested when she returned to Russia a year after selling her property. But, of course, it is always best to check the regulations.

I am pretty sure she was not, my wife checked the regulations this year and she would also be free of paying taxes. However under circumstances there could be up to 25%.
Better safe than sorry.

[Misha]

Better safe than sorry.

It always is of course, but our experience simply shows that it is not that complicated. If I managed to do it without my wife, I am pretty sure Svetlana can figure it out as well 

[Boethius]

One question: How the evaluation is done ? My wife bought her apartment for around 40k, during the top of the bubble, it was 130k, now it is around 60k... Our plan was to rent the apartment the time the market is low and to sell it after. Interesting thread !

In Canada, the Canada Revenue Agency has a real estate evaluation group.  The "tax free" zone will be its fair market value at the time your wife enters Canada.

[Boethius]

In Canada, you do not pay any taxes on your principal residence. This Canadian Revenue Agency document explains this in detail: http://www.cra-arc.gc.ca/E/pub/tp/ti-001/ti-001-e.pdf.

How they define and explain the principal residence:

Principal residence exemption

The principal residence exemption is available to offset an individual's capital gain from the sale of a property that was the individual's principal residence at any time after it was acquired.

• you must own it (either alone or jointly with another person);
• you or your family members must inhabit it at some point during the year; and
• no other property may be designated as the principal residence of any other member of your family unit for last year.

Full principal residence exemption

If the house was designated as your principal residence for every year you owned the land and building, you do not have to report any gain on building, you do not have to report any gain on its sale on your income tax return or file Form T2091(IND) ...

You, your spouse, or child have to be "ordinarily and habitually resident" in the home for it to be claimed as a principal residence.  If it is sold the same calendar year one leaves the foreign jurisdiction, that's not an issue.  If it is sold in a subsequent year, one would need to demonstrate ordinary and habitual residence.

[Misha]

You, your spouse, or child have to be "ordinarily and habitually resident" in the home for it to be claimed as a principal residence.  If it is sold the same calendar year one leaves the foreign jurisdiction, that's not an issue.  If it is sold in a subsequent year, one would need to demonstrate ordinary and habitual residence.

Presumably, ordinary and habitual residence could be proven by the "propiska." If you were registered by the Russian State as living in the apartment that you are selling, this should qualify you as "ordinarily and habitually resident" in that apartment, but the CRA could always think otherwise. I have no idea what would happen if a woman moved to Canada and then sold the apartment a few years later as my wife either sold her apartment before getting her PR status or a few months after getting her status.

[Boethius]

Once an immigrant moves to Canada, he/she is no longer "ordinarily and habitually resident" in the apartment he/she inhabited in his/her original country, unless he/she weekends there, or spends half a year in his/her country of origin thereafter.    If one moves to Canada late in the year, and sells a home within the calendar year, this could be a principal residence but, since there would be no gain from the date of the deemed disposition on entering Canada, there would be no tax anyway.

[Misha]

If one moves to Canada late in the year, and sells a home within the calendar year, this could be a principal residence but, since there would be no gain from the date of the deemed disposition on entering Canada, there would be no tax anyway.

So, in other words, one way or another Svetlana does not have to pay about paying taxes in Canada on the sale of her property in Russia.

[Boethius]

Not if she sells it soon.  But if it is worth $1000 today and she sells it for $5000 four years from now, she will pay tax in Canada (on 50% of $5000 less $1000, less all expenses incurred with respect to the sale).  If there is Russian tax on the sale, she will get a Canadian foreign tax credit for the Russian tax paid.  If the Russian tax is higher than the Canadian tax, she will pay no tax in Canada.

[Misha]

Well, she might be in luck, I would wager that the Russian housing market won't recover in the next couple or even few years. The odds of the value of her apartment increasing in value substantially any time soon are likely remote.

[Lily]

Utrobina, here are some good sources for you: www.rusforum.ca, www.vikitravel.ca (very recommended). Sorry Russian language only.

Good info on taxation for newcomers, including sale of real estate

http://vikitravel.ca/2009/08/08/neskolko-poleznyx-faktov-o-nalogax-dlya-novyx-immigrantov/#more-8385

The questions that you ask are usual, and I am sure you could find an answer.
It looks like Svetlana and I are going at the same time! I applied as foreign skilled worker, Cat., 1 in early April, and had my medical exam just yesterday.

[Svetlana]

Thanks a lot, guys and girls for participating in this discussion!  Hi, Benoit, so nice to hear you agian!  We actually thought of consulting you personally again, but looks like our families are in the same boat now, eh? Naturally, the price of my apartment is much lower now than it was before the crisis. That's why we are not going to sell it right away either, but wait till "the better times" and try to rent it so far too (when I finally leave).
So, here is the reply to you, JazzyClassy, I am not gonna sell it right away and there is no rush about it. But the thing is I think it is better learn all the rules and regulations of this important issue now, before I am granted the visa and before going through the customs and landing. Otherwise it will be too late to declare anything after. I agree with Shadow 100% "better safe than sorry."
So, as you see, guys, there is no way I sell my apartment now, when real estate market is "hardly dragging its feet". I hope to do it next year, maybe? To be able to invest the money into our future house with my hubby. But who knows, maybe it will happen even later? That's why I am trying to study all these laws, rules and tricks in both Russia and Canada.

Lily, thanks a lot for the useful links!!  I have studied a Dozen of the like forums already (hundreds of pages each  ) but haven't really found the exact reply to our questions yet. But any piece of advice and information is very helpful and appreciated! Sooner or later, and thanks to your help too, we'll figure it out. 

Misha, thank you very much for posting the document link! Besides your personal experience, it is even more reassuring to read something legal!  Though again, will I be able to sell the property within one year for it to be considered my principle residence? And what if not?
Good idea about checking Russian tax policy too!

So, guys, thanks again for keeping this thread alive! it is really interesting to read your advice and I also hope some other men whose wives were in the same situation could post and share their experience?

[docetae]

Hello Sveta

I try to get Anna posting here but with no success ...For her apartment we explore one other possibility now, is to give the apartment to her parents and to have them selling it, giving us the money. I am looking now about rules for money transfer between parents/children. For delay, I am looking now all possibilities... I will go to my deputy office next week. Immigration rules are changed for refugees (more fast), I will ask him to push for an amendment which will include family too...He is the leader of his parliamentary group, so we will see, who try nothing has nothing (french sentence).

Sveta, when will you be back in Canada ? Anna will travel back for at least 2 months in november.