Departing Canada as a tax resident can be beneficial to many taxpayers who move to a lower tax jurisdiction in terms of future tax savings. However, before you go, we recommend you consult with us regarding your final income tax calculation and your Canadian expatriate tax returns in order to identify, plan for and avoid any unexpected (tax) surprises.
Below we have listed 5 of the most common items we address with our clients who are intending to expatriate from Canada in the year based on their personal situation.
1. Departure Tax: If you are a Canadian resident who is leaving the country permanently or for an extended period of time, you may be subject to a capital gains tax (at your bracketed rate) on your assets held outside of your registered pension accounts (e.g. RRSP, Pension, TFSA, RRIF). In some cases, this tax can be deferred until the actual sale of the asset.
2. Reporting of Properties by an Emigrant of Canada: Your final tax return must require disclosure of certain assets held at the date of departure if the total fair market value exceeds $25,000.
3. Homebuyer Plan or Lifelong Learning Plan Repayment: If you have an outstanding homebuyer or lifelong learning plan balance, you will be required to repay this amount within 60 days of your departure OR it will be included in your departure tax return as income on which you will need to pay tax.
4. Continued Canadian Expatriate Tax Reporting Requirements: Even after you have left Canada, you may still be required to file Canadian tax returns to report certain types of income, such as rental income or capital gains earned from the sale of Canadian property.
5. Non-Resident Taxation: Once you become a non-resident of Canada, you will be subject to withholding tax on certain types of income earned in Canada, including rental income, employment income for services provided in Canada, and investment income. Some of this income will be subject to a 25% tax withheld at source (i.e. withheld by the payor and remitted to CRA on your behalf). This rate of tax could be reduced by a tax treaty. And other income may require a tax return to be filed.
Departure tax requirements and calculations can be different for each taxpayer, for example, an individual who has been resident in Canada for less than 60 months ending on the date of expatriation has different reporting and tax implications than someone who has been resident in Canada for a longer period.
Please contact us to arrange for a personalized consultation with our experienced team of Canadian Expatriate tax professionals today.