What happens if the notification on my Canadian life policy goes in late?
Separate the two defaults. The notification has its own due date measured from the disposition, and being late with it is charged by reference to the filing and the delay rather than to any tax on the disposition, which is why a policy interest disposed of at no gain can still cost something. Then there is the Canadian income tax return for the year, on which the disposition is reported. If that return is late and a balance is owing, the return late-filing penalty for the 2025 tax year is 5 per cent of the balance owing plus 1 per cent for each full month it is late, to twelve months. The insurer's own position is a third thread again.
The insurer is holding my money until I notify. Does a late notification unlock it?
Usually yes, and that is the practical reason to file even when the tax position looks like nothing. The insurer is processing the disposition and will not settle without evidence the notification has been made, so the delay you are feeling is commercial rather than penal. Filing late brings that evidence into existence and lets the insurer's file close. Do two things at once. Ask the insurer in writing what evidence it will accept, so the last step is not a fresh negotiation. And deal with the return for the year of disposition on the same footing as the notification, so the figures in the two places agree.
Will the penalty be higher because I filed a Canadian return late before?
Only where two conditions are both met, and being late twice is not one of them. On the return late-filing penalty, the higher rate applies where the CRA issued a demand to file and charged a late-filing penalty in any of the three preceding tax years. Where that is the case the penalty for the 2025 tax year is 10 per cent of the balance owing plus 2 per cent for each full month the return is late, to a maximum of twenty months. The rates double; the cap moves from twelve months to twenty, which is a longer run rather than a doubled one. The penalty does not compound. Interest compounds daily on the unpaid balance.
There is no gain on the policy. Is a late notification still a problem?
Yes, on two counts. The notification obligation arises from the disposition of the interest, so the consequence of a late one is measured by the default rather than by the tax, and a nil result does not undo it. And the nil result itself is worth testing before it is relied on, because an interest in a Canadian life insurance policy has its own computation, which is not the premiums-paid against proceeds-received arithmetic most people do in their heads. Sellers reach no gain by the wrong route reasonably often. Compute it properly, file the notification, and report the disposition on the return for the year.
Can I ask the CRA to waive the penalty on a late policy notification?
There is a relief route and it rewards documents rather than explanations. On this kind of property the documents often exist without anyone having gathered them: the insurer's correspondence about what it required, the dated requests for a policy contract held in another country, the ownership chain that had to be settled before anything could be filed. That chronology is the submission. Two sequencing points. Bring the notification and the return up to date first, because relief is asked for on filings that are in, not instead of them. And treat penalty and interest as separate questions, since an answer on one does not carry to the other.
I disposed of a policy interest years ago and never filed anything. Where do I start?
Start with the policy file, not the form. Establish what interest was disposed of and when, from the contract, the endorsements and the insurer's record of the transaction, because everything else depends on that and it is the part that takes longest to assemble. Then the notification, then the Canadian return for the year of disposition, in that order, so the return reports what the notification says. Time is not neutral while you decide. For the 2025 tax year the return penalty adds 1 per cent of the balance owing for each full month, on top of the initial 5 per cent, until it reaches twelve months, and interest compounds daily on what is unpaid.
How is rental income from a foreign property taxed?
Twice over, then relieved. The country where the property sits taxes the rent — often by withholding on the gross amount, with an election available to file on the net result instead. Your residence country also taxes it, generally on net income under its own rules, and credits the foreign tax. Because the two countries compute "net" differently, the numbers rarely match without work. See the section 216 election.
Do I pay tax when I inherit property abroad?
The inheritance itself is often not income to you, but three other things can create tax: the estate may owe tax where the deceased or the property was situated, some countries tax the recipient directly, and the gain from the date you inherit to the date you sell is yours. Reporting obligations can also attach to holding the asset. See inheriting property abroad.
