When you move to Canada while keeping financial assets abroad, such as a French life insurance policy, it is crucial to understand the Canadian tax implications. The rules in Canada may differ from those in France, and being informed helps avoid costly mistakes. Here’s a clear overview of what you should know.
1. Reporting foreign assets in Canada
If the total cost of your foreign assets exceeds Can$100,000, you must report them annually to the Canada Revenue Agency (Form T1135). A French life insurance policy is included in this category, whether or not you make withdrawals.
👉 Failure to file this form can lead to significant penalties, even if no tax is owed.
2. Annual taxation of accrued interest
In Canada, taxation is based on residency regardless of the source of income. This means that, as a Canadian tax resident, you must declare your worldwide income.
In practice, the interest accrued within your French life insurance policy must be included in your annual taxable income, even if you don’t withdraw any funds.
⚠️ Under French tax law, these interests are generally taxed only when withdrawn. However, Canadian rules apply once you are a Canadian resident.
3. The 60 months rule and the departure (exit) tax
The so-called 60 months rule applies only when you leave Canada, in the context of the departure tax (exit tax).
- If you leave Canada after having been a resident for less than 60 months within a 10 year period, the assets you owned before arriving in Canada are excluded from this provision.
- If you remain a Canadian resident for more than 60 months within a 10-year period, your worldwide assets (including life insurance) may be subject to the exit tax, unless otherwise exempt.
In other words, annual income taxation and the departure tax are two separate mechanisms.
4. Foreign tax credits to prevent double taxation
If, at the time of withdrawal, you pay tax in France, you may be eligible for a foreign tax credit in Canada. This mechanism is designed to prevent double taxation on the same income. However, the calculation is complex and depends on the Canada–France tax treaty.
Key takeaways
- Accrued interest must be reported every year in Canada.
- The departure tax applies only when leaving Canada and the asset subject to it depends, among others, on the length of residency.
- Foreign tax credits may be available if you pay French tax at the time of withdrawal.
Need expert guidance?
International taxation is complex, and each case has its own specificities. At Effisca, we support clients in meeting their reporting obligations and optimizing their tax situation, whether for French life insurance or other foreign assets.