International Inheritance and Income Tax Act Section 116
Immigrants come to Canada from many countries around the world and when they die their estates in Canada can involve foreign beneficiaries and asset transfers. According to an article in the Ottawa Citizen, most Canadians don’t seem to have the foggiest notion of how many immigrants and refugees this country admits every year. When asked the question, during one of Citizenship and Immigration Canada’s annual tracking surveys, 43 per cent of the Canadian adults polled wouldn’t even hazard a guess. Fully one-third thought the number was less than 100,000 a year. In fact, from 2001- 2014 Canada opened its doors to about 250,000 immigrants and refugees a year. (Only nine per cent of those surveyed suggested a number remotely close to that.) Although this newspaper article is from August 27, 2014 the statistics are likely much the same today.
The total number of foreign-born Canadians is interesting. According to the 2016 Census, there were 7,540,830 foreign-born individuals who came to Canada through the immigration process, representing 21.9% or over one-fifth of Canada’s total population. This proportion is close to the 22.3% recorded during the 1921 Census, the highest level since Confederation in 1867. In urban areas the percentage is higher, with Toronto currently at approximately 46%. Historically, immigrants and their families have always comprised an ongoing significant contribution to Canada’s population composition.
So what are some of the challenges an estate trustee or lawyer faces when there is a deceased person with beneficiaries outside of Canada? There are many tax considerations to be dealt with on an average estate, even without any international aspects to it. One additional concern with international inheritance is Section 116 of the Income Tax Act which creates a potential additional obligation and liability for estate trustees and lawyers. Persons in Canada, who handle money that is paid to a “non-resident” will want to review Section 116 of the Income Tax Act . After reviewing the section everyone should consider whether a hold back of 25% of the monies to be paid would be appropriate, until further clearance is obtained.
Thank you for attention,