Receiving money from abroad in Canada: Watch out for these fees

International payments cost. While some providers and payment routes charge the sender, there may be other fees which the recipient has to pay, as money is deducted from the transfer as it’s processed. Even when banks and payment providers list a low transfer fee, it’s worth scrutinizing the exchange rates used, as this is often where the charges are hiding.

This guide walks through the fees you need to watch out for.

Jump straight to:

• Different ways to send money to Canada
• Is there a limit to how much money you can send to Canada?
• Is money transferred from overseas taxable in Canada?
• How much does it cost to receive money from abroad in Canada?

Do you need to receive money from abroad in Canada?

If you’re looking for an easy and affordable way to receive payments from abroad in Canada, Wise could be a good option for you.

To receive an international money transfer made with Wise, the only thing you need to have is a bank account in Canada, in Canadian dollars. The sender will only have to pay a small fee, which they will always see upfront. Wise doesn’t add any markup or commission to the exchange rate used, payments are always made with the mid-market exchange rate.

If you have a Wise account you can receive money for even less fees if you open a Wise multi-currency account. With this account you can get local account details for some major currencies, like US dollars, British pounds, euros, etc, and receive payments in these currencies via local payment methods.

Sign up with Wise, and start saving!

What is the best way to send money to Canada?

If you’re expecting a payment from someone based overseas, it’s well worth talking to the sender about how they intend to make the transfer, to ensure you both get the best available deal. There are a number of different ways to send money to Canada. Each comes with its own pros and cons, and some international transfer routes are significantly more expensive than others. Taking some time to research, and discuss the options with the person sending you money could mean you’re both better off.

Here are a few pointers to consider when comparing different payment routes:

Bank transfers

Heading to your local bank to make an international payment may feel like common sense, but it can be costly. Traditional banks tend to charge fairly high fees for cross border payments, which may include sending and receiving charges. It’s also common to find a markup has been added to the mid-market exchange rate, which pushes up costs further. You can see this for yourself by comparing the exchange rate your bank gives you, against the mid-market rate using an online currency converter.

Banks are likely to process international payments using the SWIFT network, which can be quite slow, and may also lead to extra fees. That’s because the SWIFT network relies on several banks - known as intermediaries - working together to process a cross border payment. Each intermediary can take a fee for the service they provide, which is deducted as they process the payment - meaning you’ll receive less in the end.

Cash for collection

If you need money urgently, or don’t have easy access to a bank account, there are ways to have someone send money you can collect in cash. Companies like Western Union work through agent locations throughout the world, meaning your sender can arrange a payment online, or using an agent near them, and you can call into a local Western Union agent in Canada to get the payment in cash.

This can be a convenient option, but beware of the costs. You’ll often find that a markup has been added to the exchange rate being used, which is an extra fee in addition to the upfront transfer charge listed. You’ll also need to consider the safety implications of carrying around a lot of cash if this is your preferred payment method.

Third parties

If you’re expecting to receive an electronic payment, your sender can also choose from a wide range of third parties, such as PayPal, Xoom or MoneyGram. The features and fees of each service will vary, so you’ll want to look carefully at the terms and conditions, and compare the exchange rate offered to the mid-market rate to find any fee hidden there. It’s also worth noting that some of these services - such as PayPal for example - will require you to sign up and create your own user account to access your money.

Wise

If you’re looking for a simple, low fee way to get an international payment delivered directly to your bank account, check out Transferwise.

Wise offers international payments which use the mid-market exchange rate with no markup. Instead, you simply pay a low and transparent charge per transaction, which can work out to be much cheaper than using a bank or other provider. Wise doesn’t use the SWIFT network, which keeps costs down, and means that there are no intermediary fees to pay.

Other methods

Depending on where your sender is, you might find there are other options available too. For example, your sender might want to send you a cheque, or use a local provider to make the payment. Make sure you think through the practicalities of the options available, and compare the costs and exchange rates available before you decide.

Is there a limit to how much money you can send to Canada?

There’s no legal limit to how much money you can send to Canada. However, each provider could have it’s own limits, so you’ll need to check the full details for your chosen service.

It’s good to know that all transfers of CA$10,000 or more have to be reported to the Canada Revenue Agency (CRA) by the bank or provider processing the payment. This rule also applies if you make multiple payments over a short space of time, which add up to more than CA$10,000. Reporting requirements are all handled by the provider you use, and are in place to stop tax evasion¹.

Is money transferred from overseas taxable in Canada?

Tax is notoriously complex, so taking professional advice is a smart idea if you’re about to receive a large payment from overseas. Whether or not you pay tax will depend on the type and value of the payment you receive.

An international transfer which is a gift from a family member might not be taxable, as Canada doesn’t have gift tax². However, there are some exceptions to this, you might have to pay income tax instead, and there are rules in place to make sure individuals don’t make financial gifts specifically to try to avoid paying tax³.

How much does it cost to receive money from abroad in Canada?

As we highlighted above, different methods of international transfer will mean different fees - both for the sender, and for you as recipient. These charges can take the form of transfer fees, intermediary fees and recipient fees, as well as extra charges which are added to the exchange rates used.

Taking some time to research different payment providers is the best way to make sure you get a good deal.

Check out the options available from Wise as a great starting point. You can get yourself a multi-currency account, and receive payments in major currencies including US, Australian and New Zealand dollars, British pounds and euros. Transfers use the mid-market exchange rate with no markup, and avoid the SWIFT network - meaning that there are no intermediary charges to worry about.

See if you can save with Wise.

Sources used for this article:
1.CRA - Electronic Funds Transfer Reporting
2.Blog - What's CRA's Position on Family Gifts?
3.CRA - Capital Gains – 2019
*All sources checked on June 30, 2020