Living Abroad And Becoming a Non-Resident

by Dean Paley on November 29, 2010

If you have left Canada to work in another country or are considering moving from Canada, it is important to consider the income tax consequences and your tax options.

If you are a resident of Canada, then you are required to pay income tax on your woldwide income.

closed_moving_boxLeaving Canada to take up residency in another country may not be enough to avoid Canada’s income tax. When you leave, you need to ensure you understand Canada’s residency requirements for income taxes and consider the exit tax.

What Is A Resident For Income Tax?

When determining if a person is a resident of Canada, the CRA will look at the fact surrounding each case. They will first look for residential ties. Residential ties include:

    • A Home Available for Occupation: If you have a home in Canada that is available at will for your use is seen as a significant residential tie. If the property is leased to an unrelated third party weakens the tie to Canada.
    • Spouse or Dependents: If you leave Canada but leave your spouse or dependent children here, this is seen as a significant residential tie to Canada.

Even if none of the above applies, the CRA will the look for secondary tests of residence. These items are looked at on a whole as opposed to individually and the more of these you have, the more likely you may be a resident. Secondary tests of residence include:

    • Furniture, clothing, cars and RV’s in Canada,
    • Memberships in clubs or other social organizations in Canada,
    • Canadian bank accounts,
    • Employment in Canada,
    • Credit cards,
    • RRSP’s, RRIF’s or other savings plans,
    • Brokerage accounts,
    • Actively managing a business,
    • If you have landed immigrant status or have work permits in Canada,
    • You have hospital or medical insurance in Canada,
    • A Canadian driver’s license,
    • A motor vehicle registered in a province or territory of Canada,
    • A seasonal dwelling place in Canada,
    • a Canadian passport, and
    • Memberships in Canadian unions or professional organizations.

Even if you do not meet any of the primary or secondary tests for residency, you can still be considered a resident of Canada for tax purposes if you are in the country for 183 days in any given calendar year.

The Exit Tax – Thanks For The Memories!

Let’s assume you decide to leave and you have no residential ties to Canada. The final tax hurrah may be the so-called exit tax.

At the point to cut your ties with Canada and take up residency elsewhere, Canada then considers you to have sold all of your assets at their fair market value. Any net taxable capital gains will be included in your income and accumulated income become immediately taxable.

Many people are unaware of this dispostion when they leave and many fail to file that final tax return. That is until the CRA sends a demand to file a tax return, which you only ignore at your own peril! The CRA can and will seize investent account and real estate in Cnaada if you fail to file.

Now it is possible to sever tax residency for a period of time and then re-establish residency later. This is a highly complex set of rules, but can allow for the potential to unwind the exit tax at a later date.

Help Is Available

If you have left Canada and did not file a final tax return, or perhaps you have received a request or demand to file, we can help bring your tax situation up to date. We offer affordable professional services.

Give us a call at (289) 288-1206 or contact us through email to arrange an appointment to bring your tax situation up to date.

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