This is one of the more important aspects of returning to Canada for citizens who have lived abroad for many years and want to repatriate some or all of their money back to Canada and have it converted into Canadian dollars ("CAD"). There are several aspects to transferring money and foreign exchange:
The key word for understanding foreign exchange is timing.
When moving back to Canada some years ago, I personally fell into the trap of wanting to have all of my money in Canada when I arrived back. I converted our holdings to CAD and set up life in Canada with those funds before I actually returned. Due to exchange rate changes in the months preceding our return, I lost CAD 14,000 on the conversion rate difference from my earlier projections. Had I waited for a more favourable rate, I could have recouped most or all of these lost monies. As exchange rates go up and down over weeks, months, and years due to a combination of sudden shocking events and fairly clear patterns, timing becomes the key variable for your consideration.
As of the latest update to this document, the Canadian dollar (CAD) is at a low level compared to the US$ (USD). Given this situation, should you convert some or all of your foreign currency back to Canadian dollars right now?
In summary, timing is the key consideration for moving some or all of your monies back to Canada when you are returning to reside here.
Major costs in Canada when you return can be the purchase of real estate for living in or as an investment, a vehicle, or even money for post-secondary education for your child. Living expenses in major cities in Canada are continually rising so plan on having enough cash in Canada to live comfortably, too. Clearly, bringing some money to Canada is essential.
Note: I have also added some USD foreign exchange considerations to the "Moving Back to Canada from the USA" page, which can give you some more general considerations for those living there.
The opportunity facing Canadians considering moving their USD funds to CAD is embodied in this chart:
Source of the data for this graph: OFX - Foreign Exchange.
Quite simply, the mid-term projection of the USD is anyone's guess but as of Q2 2022 the USD is still strong compared to the CAD. This is certainly a good time to move money to CAD from USD from a longer term historical perspective but significant fluctuations may occur in the near future and so timing your transfers with care is advised. Note: The USD seems to be strong, but there are so many variables changing in world economics at this time that makes it very hard to predict what will happen in the coming months...
This leaves Canadians moving back to Canada with some fundamental questions to consider:
If you need the money to be in Canada now, or very soon, exchanging now from USD may save you from future losses from a poorer exchange rate. If you are exchanging GBP to CAD, ongoing post-BREXIT implications could go either way: Strengthening the GBP or weakening it, so there is no definitive timing implication for that currency. Australian Dollars? The AUD has declined in recent years, giving you fewer CAD for your AUD.
If you can wait for the very long term (5-10 years +), You can more accurately match any currency's high exchange rate to your needs.
If you are not in a rush to move your money back to Canada, and want to balance the risk of your holdings (called "hedging"), perhaps keeping 40% in USD, 40% in CDN, and the remaining 20% in EUR, YEN, or CNY (RMB) would make sense. More below, in "Part 2: Hedging".
"Hewers of wood and drawers of water"
This used to describe the early Canadian economy. Resource-based. And we did most of our trade with the U.S.
Today, the Canadian economy is more diversified, but we still retain some of the economic pillars of the past. What Canada looks like now:
The challenge for the present and future? We still do a very large portion of our trade with the U.S.!
Another old saying:
"When America sneezes, Canada gets a cold".
Given our reliance on the U.S. for trade, and the fact that the U.S. population and economy is 10 times the size of Canada's, is there cause for concern when this friendly neighbour gets economically sick?
The simplest and most clear message coming from Canadian reliance on our economically significant neighbour to the south is that you might consider holding a significant part your financial investments outside of Canada and the U.S., in foreign currencies and investments. Switzerland, Germany, Brazil, and Japan all offer an opportunity to off-set economic risk in the U.S., and by association, Canada.
This is more complex stuff. If you have significant financial holdings in a foreign currency I suggest you consult with a financial advisor who understands currencies, specifically.
"Hedging" simply means balancing your risk or "not putting all your eggs in one basket".
When one currency goes up another goes down, by default. Obviously you want to be invested more in currencies that go "up" over time and not down. However, this is devilishly hard to predict, per the timing issue noted above.
For most people, this means you need another tool: Owning more than one currency so that when one goes down, you have another that goes up. You won't make any major gains on your money from a currency value perspective...but you won't ever lose much, either, assuming you have spread your risk across a few currencies.
If you are getting paid in one currency, and putting away savings for the future, hedging is a powerful risk reduction tool for you.
Here is an example mix, assuming you are still living overseas or are returning to Canada but do not want to immediately convert all your funds:
You have Australian dollars (AUD) 100,000. Here is how you might hedge it:
AUD 40,000 (40%)
USA 21,000 (20%)
EUR 16,000 (20%)
CDN 21,000 (20%)
(The above is just an example to illustrate hedging and the actual amounts will fluctuate based on changing exchange rates).
Another example mix, if you want to be a bit more widely invested:
AUD 20,000 (20%)
EUR 16,000 (20%)
CDN 21,000 (20%)
CHF 19,500 (20%)
JPY 37,000 (20%)
Important note: This currency "hedging" will not likely be in cash that is held in bank accounts, to be clear. If you have an investment account (stocks, bonds, ETF's, etc.) you can hedge across currencies by holding bonds or bond ETF's, for example, that are denominated in different currencies. This way you can achieve not only currency valuation stability, but some income from your money, too.
Holding multiple currencies might seem complicated, but it really is quite simple. If in doubt, always hold at least 2 different major currencies, ones that are not closely tied together. For example, the USD and CDN are too closely tied together. Having these two currencies is not considered an effective risk management strategy. CDN and EUR are not as closely tied together. Holding funds in these two currencies would be the start of an effective hedge strategy.
You sell your house in California, for example, and tell your bank to transfer the USD$800,000 you got from the sale to your Canadian bank account and all is good. Easy.
You are in Hong Kong and are moving back to Vancouver, for example. You simply have your HK bank wire your HKD or USD savings to your Canadian bank account and your Canadian bank does the foreign exchange to CAD as the money arrived in Canada. Easy.
(Yeah! This was the shortest section on the whole web site!)
But wait a minute...! There are a few important things to be aware of:
Did you know that banks generally give you the worst foreign exchange rate and have the highest fees?
Most of my clients are now using private foreign exchange companies to transfer their funds to Canada. They convert their USD, EUR, GBP, and other currencies to CDN dollars at a much better exchange rate and with much lower fees than using foreign or Canadian banks.
Will you be transferring $5,000 to Canada? Then in this case use your bank for doing the exchange to CDN. It is a small amount and using a foreign exchange company won't make much difference.
However, if you are transferring $25,000, $50,000, $100,000, $500,000, or $1,000,000+ there will be a very big difference and using a foreign exchange company will mean substantial savings. Typically hundreds and usually thousands of dollars in savings!
From my clients:
Using a foreign exchange company over the bank to send the deposit for my condo saved me about $660! I didn't expect that much of a difference.
Based on comparing the bank's exchange rate with the rate I was given with Knightsbridge I probably make about 9K, WOW! Thanks for that heads up, totally worthwhile.
I figure we saved $4,000! I couldn't believe it!
So for a few hours of my time researching and testing and getting the OFX option to work I paid myself $27K [foreign exchange savings over using a bank]...for moving funds this is huge.
Below are a few private foreign exchange companies to consider, based on client reviews...
OFX - OFX is a long-established foreign exchange firm that many Canadians in the U.S. and other countries are very pleased with. Their Canadian division is based in Toronto and they have offices in the U.S., Australia, the UK, Hong Kong, and Singapore. OFX has great exchange rates that can save you hundreds or thousands of dollars and Canadians in North America can even get personal help (a real person!) from their Canadian office for setting up your account.
For those in the U.S. or Canada please contact me if you would like an introduction to this service. Feedback from clients:
Thank you for providing such clear, detailed instructions for exchanging a large amount of US dollars for CND. I used OFX and was extremely happy with their service. They were responsive and supportive and walked me through all of my questions. I was given a good exchange rate.
OFX is great to work with you as you have a real client support person who can help with your setup and planning of big transactions. I estimate we saved not just thousands but tens of thousands of dollars on very large tranfers I did.
I researched options and did a small test transaction to move and convert $USD to my bank here and have it converted to $CDN. I wanted to do that early and eliminate the possibility of currency swings affecting the total. That was a good move since the rates have really moved and I ended up with about $45K more than it currently would be. I used an internet currency exchange company called OFX. I did a lot of research and for my needs and the size I was moving this looked to be the best. My test transaction of $5K took a long time because the coding used by ________ [bank] is very difficult to determine. So it took 3 attempts but the company [OFX] was great to work with. Once that finally went I then transferred the balance of over $600K in one shot. In 2 days it was posted to my ________ [bank] account and converted to about $770k CDN. Just to check I used the ________ website that day to see what they would have paid my if I had used the bank. I have a ________ [bank] account here in the US. I bank with ________ in Canada. I could have more easily just called _______ [bank] and had them do the transfer and conversion. I would have realized $27k less if I had done that.
So for a few hours of my time researching and testing and getting the OFX option to work I paid myself $27K. ...for moving funds this is huge. Since we will split our time between the 2 countries there will be a recurring need to move and convert and I will never use ________ [bank]. OFX offers options to alert you when a rate you want is reached for example. So for people with a regular need that can wait till rates move this is ideal.
Torfx - UK -
Recommended by my clients. A very consumer-friendly UK-based firm that professionally and securely handles transfers to Canada from the UK, U.S., Hong Kong, Australia, New Zealand, the UAE, and other countries.
Whether you are sending funds to buy a property in Canada, moving funds before you move back to Canada, or doing regular transfers of funds for pensions or business income, torfx is great work with and will give you a much better rate and no-fee service than a bank.
TorFx has three differentiating factors from some other foreign exchange services: First, they assign a client support person to work with you in setting up your account, making exchange timing decisions, and getting things done. You are not just dealing with an impersonal "system" or a random employee every time you contact them but a dedicated person to work with instead. You can still do things online but there is the reassurance of having someone to be of support.
Second, TorFx can help you by locking in a rate if that rate is very good at a particular time. For example, if you plan to buy a house in Canada in a few months they can help with what is known as a "forward contract". Or in reverse they can set you up to wait for a certain exchange rate to be reached in the market, at which time the foreign exchange transaction is done automatically. This allows you either immediate certainty that you will not lose if the exchange rate changes to the negative and/or the ability to gain if the exchange rate changes in your favour between now and when you want the funds in Canada in CDN dollars.
Third, TorFx can hold your funds until you need them. In conjunction with the second benefit above, they can act as a temporary "bank" for weeks or months between the movement and exchange of your funds. This minimizes transaction costs in moving money into and out of bank accounts and allows for the opportunity to wait for a good exchange rate. A time saver, too, as there are fewer transactions to plan for and initiate.
I just started using Wise to pay rent for the short-term house we are renting here in Calgary. I LOVE the simplicity and user experience of Wise. Very nice service (and quick, too!)"
Another experience with Wise, from R. Hanks:
For moving money, I have used Xoom (part of Paypal) and Wise for several smaller transfers and then used Wise for a large transfer from proceeds of the sale of our house in the US. Wise has higher limits than Xoom, but both are easy to use. Transfers from the USA for US residents can be done by direct debit (easiest) or using a domestic wire (for large amounts with Wise). Of the two, Wise is the most transparent in the fee structure, exchange rate, and processes. They have also been very good at answering questions so far. I also had accounts with OFX and HiFX, but neither one is transparent about the exchange rate. What you see on the website public page for the rate is higher than when you log into your account-a bit of bait and switch. With Xoom and Wise, both have the accurate exchange rates available without logging in.
We used Knightsbridge and were delighted by not only the money we saved but that it was so easy to use.
We sent the wire [transfer] from the Bank of America in Bellingham at 11:00am Tuesday morning. Wednesday morning Knightsbridge confirmed that they had received it. Thursday morning it was in our [Canadian bank] account by 7:00am, perhaps earlier. Knightsbridge guaranteed the exchange rate before the transaction was undertaken. I’m not sure how it could be better and for more than $0.6 million the exchange rate saved thousands over the bank.
You do have other options. For example some clients note that they use a big stock brokerage to do foreign exchanges on holdings they have with the broker and get a better exchange rate. There is even a complex trick that some people use called "Norbert's Gambit" when they have stock holdings in USD that they want to move to CAD.
Some people also consider the use of the U.S. division of a Canadian bank. For example, RBC has a division based out of the state of Georgia. And TD has a big retail division in the U.S. The problem? While it might make initial logical sense to have an RBC or TD account in the U.S. and one in Canada for easy conversion and sending of funds back and forth you will be paying higher fees and get worse exchange rates by doing so than if you use a foreign exchange firm. But if the convenience and peace-of-mind of using the same bank is worth it to you and you are not sending large amounts back and forth? Then it is certainly a viable option.
For Canadians living in the U.S. only: Melanie shares her experience using EverBank-TIAA, an online bank based in Florida, to do her foreign exchange and transfers to Canada:
I opened an account with EverBank a couple of years ago. They are an online only bank based in Jacksonville, FL and were acquired by TIAA in 2016, so very stable. They offer foreign currency accounts with VERY low spreads so I have been converting funds to CAD periodically. They charge .75% on up to $100K, 0.5% $100K-$400K and 0.375% over $400K.
In summary, shopping around for the best foreign exchange rate (including fees!) is in your financial interest if you are moving large amounts back to Canada when you return.
I have had a few people tell me that they had to pay taxes on profits on foreign exchange not earned in Canada before or at the time they returned to live in Canada.
Hmmm....when I gently explored further with these people I learned they had not actually been non-resident in Canada. They had not cut all critical ties to Canada when they originally left. They were actually liable for gains on currency exchanges on any world-wide holdings because they were still tax residents of Canada in the eyes of the Canada Revenue Agency.
If you are living abroad, have been for many years, and have no major ties to Canada, you are normally free to transfer money back to Canada without tax implications on the exchange of currencies.
If you decide to have a USD bank account in Canada you become liable for Canadian taxes on any gains in the value of your USD holdings vis-à-vis the CAD values from the day the money arrives in Canada forward in time.
In other words, capital gains on currencies that are held in Canada are taxable in Canada at the time a transaction converting them to CAD happens. This is whether you are a tax resident in Canada or not.
Are you OK with this?
An example to illustrate not taxable and taxable gains in Canada:
Not taxable because no exchange to CAD has taken place by the end of the tax year (December 31st):
March 24, 2021: Deposit USD $10000 into a USD Canadian bank account.
December 31, 2021: The USD $10000 is still in the USD Canadian bank account.
No conversion has taken place, no "realized" gain has happened, and therefore there is no tax implication for you in Canada in 2021.
Taxable because an exchange has taken place:
March 24, 2021: Deposit USD $10000 into a USD Canadian bank account. On this day the exchange is 1.25.
December 31st, 2021: No taxable gain has taken place in 2021 as no exchange to CAD occurred.
June 14, 2022: Convert the USD $10000 USD into CAD and deposit it into a CAD Canadian bank account. On this day in 2022 the exchange is 1.35.
December 31, 2022: End of this tax year. Gain for the year?
USD $10000 x 1.35 = CAD $13500 received after the exchange.
USD $10000 x 1.25 = CAD $12500 "base" rate amount at time of original deposit on March 24, 2021.
Realized amount that is a taxable gain on your 2022 Canadian tax return: CAD $1000.
Summary: Being proactive can save you some tax work later: If you plan to have all your assets in CAD immediately after you move back then transfer CAD to Canada when you move back, not USD into a USD account in Canada (for example).
In other words: Exchange the funds to CAD while you are living in the U.S. or further abroad (through a foreign exchange company!) and transfer the CAD to a CAD bank account in Canada. No taxable exchange gain in your current country happens and none happens as the money is coming into Canada in CAD. Easy.
However, if don't need the money in CAD in Canada immediately, and you feel the currency your funds are in now will go up vis-à-vis the CAD in the future therefore earning you a significant capital gain by exchanging to CAD later, then consider either having a USD account in Canada (if you are holding USD) or holding the funds offshore in another currency so that when you do exchange it to CAD you can make a big gain. If this gain occurs it will be taxable in Canada if you are tax resident here while the gain occurs, but you are paying taxes on a gain you wouldn't have had if you had converted your funds to CAD earlier. So even net of taxes you win!
Off-shore banking might conjure up images of people hiding their funds from tax collectors of their country of residence. While off-shore banking might be used by some people for such unsavory purposes, accounts with banks that are legally structured in far-flung places in the world are really just great banking services for lots of normal expatriates who want their accounts and funds free to be easily moved around the world.
Opening an international off-shore bank relationship with a major international bank makes sense for many expatriates and Canadians returning to Canada to resume residency. You can hold multiple currencies in accounts with the bank and access your accounts and funds electronically from anywhere in the world. HSBC is an example of one such bank. On top of offering accounts with multiple currencies, HSBC will also give you an international credit card that is not linked to the country you are resident in. It comes with high fees for usage, but while traveling or when you are between country residencies, it might make sense. (Note: This is not an ad for HSBC and I do not work for them or are paid by them in any way).
Per the hedging discussion above, off-shore banking is a great way to set up a simple hedging strategy. As international banks understand multiple currencies much better than local banks, they are in a position to make your hedged savings happen quickly and easily.
An interesting new "borderless account" option is emerging for people who want to keep money "offshore" but still access it in Canada easily while managing multiple currencies to ensure they "hedge" their money. A client shared the following:
"I note you recommend getting a Canadian bank account in advance of moving. None of the Big Five [banks in Canada] make that easy. They want me to register a Canadian address ... and then show up in person at the nearest branch. I need some way of transferring the proceeds of our house sale to Canada, so we can buy a house... The fintech app Wise has just introduced a "borderless account", which purports to work like a CDN bank account for any $CDN funds."
Opening a bank account while visiting Canada, with a foreign address
You can open a bank account quite easily in Canada when you are physically present, and have a foreign address. Just bring lots of identification for proof that you are you and it is then very easy to open an account. The problem noted in the quote above is for people trying to open an account from abroad, either over the phone or electronically. It is possible to open a bank account from abroad. Check out the Taxes, Accounting, and Banking page of this site for experiences clients have had opening an account from abroad.
One final note on off-shore banking:
Integrity. I strongly suggest staying in your integrity at all times with off-shore banking, tax considerations, or any other question when moving back to Canada. A wise person I know, who lived a quietly wealthy life, explained it this way:
"I never cheat on my taxes. And I sleep well at night."
Please share your ideas, considerations, and experiences relating to foreign exchange. I will post them here as help for others. Along with a credit to you will be a big thank you on behalf of the many people you will be helping!
Latest update to this page: May 2022