Becoming a Non-Resident of Canada Watch Video
Allan Madan, CPA, CA
Are you considering leaving to work, live or retire abroad? Read More…
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
ABOUT THE AUTHOR
ALLAN MADAN
CPA, CA
Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.
Greetings,
what happens in the case one owes money to CRA for Child benefit, but this person has left Canada for goods, and does not intend to re-pay back? What instruments can CRA use to get back the money from an already a non-resident person?
Thank you.
Dear Petru,
I would estimate that the amount is not very significant. However, the CRA does have information sharing pact with various countries around the world and it is possible that the tax authority in the person’s new country may contact you.
Else, the person should think about the situation in which they return to Canada for visit or to re-establish residence in Canada. The debt owing could potentially bar the individual from leaving Canada in that instance.
– Allan and his team
Thanks for this informative video Allan.
What happens if I leave Canada but my husband stays behind in our house for several more years until he retires? I don’t plan on coming back. He has lots of holidays and will be coming to visit us and our children overseas. When he retires he will join us.
Could I be deemed a non-resident for tax purposes?
Thank you,
Diane
Hi Diane,
Your spouse is considered to be one of very strong ties to Canada and as such, it is highly probable that the CRA will treat you as Canadian resident for tax purposes.
Thanks!
– Allan and his team
Hi Allan
Well I am planing to move to other country for 5-10 years and if i and family become non-resident what I have to do must in Canada i.e. do I have to sell a home,can I keep my bank accounts,can i keep kids RESP, can I keep my life insurance going,Can I take money to other country with me or later and what happens children higher eduction if we come back or kids want to study in university and if we still stay out side.
In case if I am allowed to keep home and if I keep it on rental then what tax i need to pay.If I plan to come back Canada the money earned outside is allowed or do I have to pay tax on it.
I put many questions as one related to another if one plans to be become a non-resident.
Thank you and hope to hear from you.
Shabbir
Hi Shabbir,
To become a non-resident of Canada you need to sever all primary ties and as many secondary residential ties as possible. Primary ties include a home, spouse, and dependents. As your family will be moving with you, these ties will be broken. And if you rent your property out while away from Canada this will no longer be considered a primary tie. Secondary ties include bank accounts, insurance, RESPs, social ties, driver’s license, etc. Secondary ties are assessed collectively to determine strength of ties to Canada. If you continue to hold one or two ties (i.e.: bank account and RESP) you will not likely be considered a resident of Canada. But it is best sever as many ties as possible.
Renting your home in Canada while away will result in rental income that will be taxable in Canada. You will have to pay a 25% withholding tax on rental income in Canada. You can later file a Section 216 return to recover a portion of the withholding tax.
If you are considered a non-resident, the income earned outside of Canada will not be taxed in Canada. And if you come back to Canada at a later date you will not be liable for tax earned during the period you were outside Canada.
If your kids come back to Canada for higher education, this will likely not affect your residency status as they will probably be over 18 and no longer considered a dependent (primary tie).
– Allan and his team
HI. My father and mother, who have lived in Portugal for the last 10 years or so, just found out that they should have declared non-residency when they left. The CRA has stopped their pension payments. My parents are really worried about the implications of not having declared. They have bank accounts here, RRSP here, they have some furniture here still at my house, they have all of their main family here still. How do they deal with the CRA now? Should they get a tax lawyer?
Please help.
Hi Fernando,
Thank you for posting your question on our blog and contacting us for additional services. It has been great working with you.
Take care.
Allan and team
Dear Allen,
In July, I will leave Canada with my wife and young family and start a new job in Indonesia (with which Canada has a tax treaty). We do not want to sell our home and would prefer not to rent it out. It is in a great vacation spot and we would like to return to Canada for vacation each summer and stay here. We have been non-residents before, but we had no primary ties in place, so it all seemed much clearer. Do you feel there any steps I should take before we leave from a determination standpoint? Thanks a lot,
Scott
Hi Scott,
In order to become a non-resident you should sever all primary ties and as many secondary ties as possible. As your family will be relocating to Indonesia, the spouse and dependent tie will be severed. We recommend you rent your Canadian home while in Indonesia to avoid having this property treated as a dwelling place in Canada.
Secondary ties include credit cards, bank accounts, driver’s license, personal property (i.e.: car). You should sever as many of these as possible. The CRA will assess these ties collectively so holding a couple of these ties will not cause you to be a resident of Canada.
-Allan and his team.
Dear Allan,
I am moving to a country with a tax treaty with Canada in July, but would like to keep my house vacant as we want to take a vacation here each summer. I will be bringing my wife and young children with me. Are there steps I can take between now and July to improve my chances of avoiding tax issues? Thanks,
Scott
Hi Scott,
Holding your Canadian home as a vacation property will be considered a primary residential tie to Canada. This will likely cause you to be considered a resident of Canada. The best option would be to rent your home out at fair market value to an arms-length party (i.e.: not related). This will ensure that your home is no longer considered a primary tie as it will not be available for your use.
-Allan and his team.
Hello thanks for the info!
I’m planning to leave Canada on June 18th and become a non-resident.
I’m wondering what happens to my instalment payments? Am I still required to pay
to CRA?
Thank you
Derek
Hi Derek,
You must make installment payments if you have taxes owing greater than than $3,000 in the current tax year or either of the previous 2 tax years. If you continue to have Canadian sourced income that will result in taxes owing of more than $3,000 you should make installment payments. If you are leaving Canada and will not earn any Canadian sourced income, it is not necessary for you to pay installments. However, as a non-resident you will have to pay Canadian taxes on any Canadian income.
-Allan and his team.
Dear Allan,
I am not a canadian citizen but I do hold a PR card. I am planing on leaving canda and go back to Dubai as my self employed buisness is not that good. I own a small apartment and I have contributed to RRSP and RESP also. What tax implications do I have to sustain if I decided to drop my PR and leave Canada ?
Thanks for your help
regards
Jo
Hi Joseph,
If you are departing from Canada, you have to file a Departure return for your last year in Canada. Also, when individuals emigrate, there is a deemed disposition (sale) for most of their property and they have to pay tax on any capital gains.
Regarding your RRSP and RESP, they do not have to be closed when you depart. Your RRSP can remain in Canada and you do not have to pay Canadian taxes on any growth in the RRSP. Your child’s RESP can also remain in Canada and earn tax deferred income in Canada.
-Allan and his Team
Hi Allan,
I just became a permanent resident of US, and I have a rental property in Canada that I am renting out. I already found out that I now will have to set up a non resident account to withhold the taxes on the rental income. If in a few year I want to sell my properly I will have to pay 25% tax on the gains. You mentioned in your previous posts that I can submit a special tax election that you can make to reduce the amount of tax to 25 percent of the gain on sale of your home. The gain is calculated as the selling price, less the fair market value of the property when you left Canada. Do I have to do anything now to assess the value of my condo, or that is done at the time of sale. Is there a way to avoid paying this much tax, such as stop renting it out for a period of time and claim the condo as a vacation condo? Last question, I have a HBP, so I will have to repay or pay tax on the amount that I haven’t replayed yet?
Thank you in advance
Hi Liliana,
Thank you for your question. You will most likely be able to have the 25% capital gain tax refunded back to you by filing a special section 116 nonresident tax return by April 30 of the following year. It will be in your best interest to have the value assessed as of the date you departed from Canada as you will have to have this done sooner or later and it may be difficult to do so later.
Finally, your remaining HBP balance is due within 60 days after your departure date from Canada. Otherwise, the amount will be included on your final (emigration) Canadian tax return as an income.
Thanks,
– Allan and his team
Hi Alan,
Will my residency status affect the tax rate of a potential life insurance policy paid out to me? or is it the same for both residents and non-residents of Canada?
Hi Michelle,
Life insurance payout received following someone’s death is not considered as a taxable income so your Canadian residency status will be irrelevant for tax purposes in this case.
Best Regards,
Allan Madan
Hi Allan,
If I were to become a resident of Canada again within a short period of becoming a non-resident, I would like to avoid paying the departure tax, how can I defer on paying this tax or would I be given a tax credit if I became a resident again?
Hi Shane,
There are exceptions to the departure tax rules. For example, if an individual is resident in Canada for less than 60 months in the 120-month period preceding the disposition, then the rule is generally not applied to property owned by that individual . An individual may elect to defer the payment of the departure tax by providing adequate security or collateral. No security need be provided for the tax payable on the first $50,000 of taxable capital gains. In certain circumstances (specifically in cases of undue hardship) it is possible to negotiate with CRA as to the type, and amount of security.
“if an individual is resident in Canada for less than 60 months in the 120-month”
Did you mean to say 60 days….120 days in the above? 120 months is TEN YEARS.
Yes,
That correct
Hi Allan,
I have contributed to the CPP for a couple of years now, If I were to leave Canada for a substantial time and then come back when I am of age to receive it, would I still be eligible to receive it? thanks.
Hi Huy,
It is impossible for me to personally assess your eligibility as that would be dependent on the length of time and amount that you have contributed while you were working here. I do know that Canada has international social security agreements with many countries. These agreements can help you qualify for pensions or benefits from Canada as well as these other countries. For example, if you did not live or work long enough in another country to qualify under its rules, the time you spent there and/or the contributions you made in that country may be added to your contributions in Canada to allow you to meet the eligibility requirements.
If you have lived or worked in another country, or you are the survivor of someone who has lived or worked in another country, you may be eligible for benefits from Canada and abroad.
It is best to contact Service Canada to personally assess your situation.
Best Regards,
Allan Madan and Team
Is it possible to collect CPP benefits even if one is not geographically located in Canada?
Hi Chrissy,
As long as you have made contributions to the CPP, you can file and claim CPP benefits from anywhere in the world.
Best Regards,
Allan Madan and Team
What type of tax and or legal implications if I fail to disclose all my foreign based assets when becoming a non-resident?
Hi Charles,
Canada along with the United States have begun to crack down on many offshore foreign assets. Depending on the country in which you have citizenship/residency status after leaving Canada you will face a hefty departure tax in addition to a fine of $25/day up to a maximum of $2,500 for each tax year for failing to disclose the foreign asset. There are possibilities of criminal prosecution for tax evasion as well.
Best Regards,
Allan Madan and Team
Is it possible to use foreign based assets as collateral in deferring departure tax?
Hi Thompson,
At this time the CRA does not allow foreign assets to be used since those assets are outside of Canadian jurisdiction. Perhaps in the future where Canada establishes specific country to country treaties allowing them to take control of offshore foreign assets will this be a possibility.
Best Regards,
Allan Madan and Team
Hi Allan,
What type of assets can I use as collateral to defer payment on the departure tax, does it have to exceed a specific value?
Hi Cruz,
Value is irrelevant for assets exceeding $25,000 or more since you have to pay departure tax in light of accrued capital gains. You can only use collateral specific to that property on which capital gains and departure tax is expected. You cannot use another property.
Best Regards,
Allan Madan and Team
Is it possible to transfer my contributions made to the Canadian Pension Plan to another pension plan in another country?
Hi J.J.,
You can transfer your contributions made to the CPP as long as the country has some sort of social security agreement in place with Canada.
Best Regards,
Allan Madan and Team
How exactly would they go about transferring these contributions and how would the contributions be calculated in process?
Hi Timothy,
As long as your resident country has an agreement in place with Canada,
there should be a system in place for you to apply and transfer your contributions.
best regards,
Allan Madan and Team
Hi Allan,
I worked in Canada for a period of two years as non-resident and am originally from England where I am now residing. During this time I paid and contributed towards the Canada Pension Plan. My question is, as a non-resident am I eligible to apply and receive CPP benefits?
Thank you
http://www.youtube.com/watch?v=gO57Uj8qO4k
Non-residents and temporary workers that have contributed to the CPP in anyway are eligible receive at least some benefits
Hi Allan,
Regarding departure tax on life insurance policy, what if I had purchase the policy when I was a Canadian citizen and now a non-resident? would my life insurance policy be considered as a Canadian life insurance policy?
Hi Arielle,
Yes it would be considered as a Canadian life insurance policy and will not be deemed to departure tax as long as you have last emigrated after October 1, 1996 and file the election.
Best Regards,
Allan Madan and Team
Regarding the 1% penalty for TFSA accounts, does this apply to the entire contribution or just contribution I made as a non-resident?
Hi Mahmoud,
This will only apply to the ‘excess contribution’ so the contribution that you made as a non-resident. However you may also be hit an advantage tax of 100 percent for any ‘deliberate contributions’.
Best Regards,
Allan Madan and Team
Please help me understand this departure tax better. If I sell my principle residence before I move from Canada to the US, I would not have to pay tax? And what about my personal belongings? Things such as living room and bedroom furniture, my personal vehicle that I need, and my small fishing boat for recreational use? I do not have anything fancy or other property or businesses or other belongings except for what I own in my non fancy house. If my house doesn’t sell until after I have moved, I have to pay tax on any profit that I make on it?
Thanks.
Hi Sandra,
Please see my responses below:
* If you sell your primary residence prior to moving to the US, you will not have to pay tax on the profit realized on the sale to either the IRS or the CRA.
* Personal use property is not subject to capital gains tax, generally speaking
* If you sell your primary residence after you move to the US, you will need to obtain a Clearance Certificate from the CRA within 10 days of the sale. Otherwise, the buyer will withhold 25% of the selling price in the form of taxes. Note: For US tax purposes, the cost of your assets is equal to their fair market value on the date of entry into the US. Therefore, so long as your house did not increase significantly in value while you lived in the US, it’s unlikely that you will have to pay US taxes on the sale of your Canadian home.
Thanks,
Allan Madan, CPA, CA & Team
Hi Allan,
Thanks for your very informative video and article. I have a few questions as follws.
I left Canada in March 2013, sold my house in Canada in June 2013, bought a house in USA in November 2013. I have income from both Canada and USA in 2013. My previous company continously paid me and contributed to my RRSP accounts in Canada until June 2013. My current company started to pay me in March 2013. Currently I still hold bank accounts (checking, TFSA, RRSP, Visa) with one Bank in Canada, have a life insurance policy in Canada. In addition I am separated; my childern live with their mom in Canada.
My questions are:
1. Am I a non resident?
2. Do I have to pay tax for selling the house in Canada? (bought 2010, sold in 2013, gained $20,000)? If yes, should I deduct the agent fee from the gain?
3. I borrowed money from my RRSP account for buying the house in Canada, Can I return the money to the RRSP account now?
4. I still have room available for RRSP contribution, can I buy contribute some to my account before the end of Feburary?
5. How to deduct alimony and child support?
Thanks,
Timothy
Hi Timothy,
Thanks for your questions. My responses are as follows:
1. You may continue to be a resident of Canada, since you have dependent children in Canada. While your former spouse will no longer be a significant tie for you to Canada, your children under 18 living in Canada will be. You can complete form NR73 to obtain the CRA’s opinion on your residency status.
2. If you lived in the house, you can claim the principal residence exemption, in which case the gain will not be taxable.
3. You can repay the HBP balance outstanding, but repayment in full is only required if you become a non resident of Canada.
4. Yes, you can still continue to contribute to your RRSP so long as you have RRSP room available.
5. Spousal support payments are generally deductible, if they are made pursuant to a separation agreement. Child support payments are non deductible.
Thank You,
Allan Madan, CPA, CA
Tel: 905-268-0150
Thank you Allan for providing valuable information. I used to work in the US (citizen of India at that time), moved to Canada in 2007, and attained Canadian citizenship. In 2013, I immigrated to the US after getting a permanent resident visa (aka greencard).
I have IRA and Roth IRA accounts from the time period when I used to live in the US. On the T1161, do I have to include those IRA or Roth IRA holdings? Are they considered pension plans?
Hi Naresh,
Both the IRA and Roth IRA accounts are considered pension plans and do not need to be reported on form T1161.
Thanks,
Allan Madan, CPA, CA
Tel: 905-268-0150
Hi Allan,
Your site is very informative and thanks for taking the time to write an article and answer the questions.
My situation is that I got a Job in the USA and will be moving in April 2014. I bought a house in the July 2013 and I dont plan to rent it till my Family joins me in August 2014.
1.) Can you please let me know exactly what forms/exemptions do I need to fill/get to make sure if that I sell the property after 2 years, I just pay the tax on the gain and not 25% on the value of the house?
2.) If I have an incorporated in Canada, and if I make revenue on the incorporated when I am in the US how will that scenario work out.
Thanks
Hari
Hi Hari,
Thanks for your positive feedback.
My answers to your questions are as follows:
1) You will need to prepare an application for a Certificate of Compliance. This will reduce the withholding taxes from 25% of the value of the home to 25% of the gain. See http://www.cra-arc.gc.ca/E/pbg/tf/t2062/README.html to get access to Form T2062. Note: You will be able to claim the principal residence exemption for the period of time that you lived in the home. I help my clients with the preparation of form T2062 and all of the related paperwork.
2) If you have a corporation in Canada, the US revenue received by the Canadian corporation will be taxable to it. Note: Your Canadian corporation may be deemed to have a permanent establishment in the US, and be required to file a US Corporate Tax Return for income earned through the US permanent establishment.
3) You should be mindful of departure tax when you become a non resident of Canada. Departure tax will likely apply to the shares you own in your Canadian corporation.
Thanks,
Allan Madan, CPA, CA
Tel: 905-268-0150
Hi Allan,
Is there anyway to reclaim departure tax if I become a Canadian resident again and have not disposed of that property?
Hi there,
I am a Canadian citizen and am offered a Job in UAE.
I am under the impression that as long as I am severing all my ties with Canada like closing bank account, taking my family with me, selling my house etc, I would not be required to pay income tax’s on worldwide income.
Upon contacting CCRA International Tax Department I was told that under the Canada-UAE tax treaty,(which covers UAE Nationals only), I (as a person on resident permit in UAE) have to pay income tax on my UAE income. Sounds stupid.
According to CCRA I have to be a resident of somewhere in order to be taxed. As I am NOT an ARAB by birth therefore can not be UAE citizen I would be deemed to be a Canadian Resident for Income tax purposes.
I contacted the Ministry of Finance and Foreign affairs and they advised me that I would be treated a NON-Resident for TAX purposes. It seems our govt departments don’t know who’s saying what. It seems that they themselves do not know what they were talking about.
For some reason this does not make sense to me. This means that for Canadian Citizens, UAE is no more a TAX FREE country.
Can you please advise based on your extensive experience. They are making me and a number of friends confused.
I would appreciate your reply.
Regards
I await your reply. saba
Hi Saba,
Please contact me at amadan@madanca.com and provide me with all of the facts.
Thanks,
Allan Madan, CPA, CA
If I withdraw my TFSA after becoming a non-resident, is there a penalty?
thanks.
Hi Ben,
There is typically no penalty for withdrawing from a TFSA, how ever if you decide to re contribute in the same year, there can be a penalty of 1%. The amount you withdraw in the year is added back to your limit for next year, but if you exceed the TFSA contribution for next year there is a penalty of 1%. The same rules apply if you have become a non resident, however we recommend withdrawing from your TFSA before you become a non resident.
Hope we were able to guide you.
Thanks,
Madanca Team
I don’t believe this is correct advice? My understanding is that you can’t re-contribute to your TFSA as a non-resident. You have to wait until you re-establish residency. Also, why would you recommend withdrawing from your TFSA before becoming a non resident? The funds can still grow tax free and be withdrawn tax free..
Thanks!
Kevin
Just to clarify, I meant to say, ‘you can’t re-contribute the withdrawn funds that have been added back to your limit the following year while a non resident, without penalty’…
Hi Kevin,
You should stop contributing to your TFSA once you become a nonresident of Canada. Otherwise, a penalty of 1% per month will apply to the contributions made after you cease residency. You can keep your TFSA intact after leaving Canada and the existing funds inside your TFSA will continue to grow tax-free.
Hi,
I am a Canadian citizen trying to decide on a job offer in Abu Dhabi (UAE) with a very attractive income. If I have to pay tax in Canada, however, it is no longer attractive. To my understanding, as long as I become a non-resident of Canada, I wouldn’t have to pay tax on my UEA income. Is that correct? I am single, no kids, and own a small condo in Vancouver, with a corresponding mortgage. I owe $20,000 on the home buyer`s plan as well, but I should have no problem paying that off within 60 days of leaving. My concern is leaving that money sitting in an RRSR account in Canada and, in case I never return, having 25% deducted from it when it’s time to cash it. Is there any way around that? I was hoping to be able to rent my condo while I`m away, and use the rental income to continue paying my mortgage and strata fees. Would that make me a resident of Canada for income tax purposes?
Thank you
Hi Spoo,
Thanks for contacting me. You are correct that non residents of Canada are not required to pay Canadian income tax on overseas income. To answer your remaining questions, I need additional information from you. You can contact me at amadan@madanca.com or by calling me at 905-268-0150.
Thanks,
Allan Madan, CPA, CA
Tel: 905-268-0150
Hello
You have mentioned in # 10 that
Your personal tax credits will be reduced by the number of days that you were outside of Canada.
However there is more to that statement
If the Canadian-source income the taxpayer are reporting for the part of the year he was not a resident of Canada is at least 90% of the net world income for that part of the year or if he had no income from sources inside and outside Canada for that part of the year, he can claim the remaining applicable federal non-refundable tax credits in full.
Is this valid?
Yes if after the departure, the Canadian sourced income is 90% more than the worldwide income, the individual will get full credits.
Hello, my friend is selling one of her properties in Canada. It is elected as her primary principal residence. If she currently resides in the US, will she still pay the capital gains tax? She is a Canadian and British citizen with landed immigrant status in the United States. She has not rented out the property since she left, and she has not continued to file Canadian returns.
Hello.
Your friend cannot use the principal residence exemption in Canada for the years she was not a resident of Canada to reduce the capital gain. However, for the years that she was a resident in Canada, and living in the property, she can claim the exemption.
According to your question, she has stopped filing Canadian returns. This means that she will most likely be subject to capital gains tax in Canada on the increase in value of the property while she was living in the US.
There are two conditions she must fulfill in order to claim the principal residence exemption for the years she lived in the property. First, she must not have owned and occupied another home in America as her primary residence. Second, she must not have rented the property while she was gone.
If she has become a US resident for tax purposes (automatically done if she has a green card), the Canadian house can be tax-free in the US (up to $250,000 US profit since she entered the US) on one condition. She has to have occupied it as her residence for a full 24 months out of the last 60. In this case, determining residency status is very important. If your friend failed to sever ties to Canada, she will still be liable for Canadian tax on worldwide income. Please contact me to learn more.
Regards,
Allan Madan and Team
How long does it take to get the letter back determining that your are indeed a non-resident? I’m a US citizen who lived in Canada for almost 4 years and have moved back to the States and want to where my pension funds.
Hi Mike,
It takes approximately 6-8 weeks after submitting the form NR73 to the CRA.
Hello.
I am permanently moving out of Canada on November 16, 2015, and will be retiring to Panama on that date. On January 1, 2016, I will receive a one-time lump sum payment from my employer for banked overtime. The payment will be included on my 2016 T-4 slip. Will this payment affect the CRA’s ruling in deeming me a non-resident? In addition, can I rent out my old house?
Hello.
Only having a T4 in 2016 does not make you a resident of Canada. However, some other factors will determine your residency. If you go to live in a country that has a tax treaty with Canada, article IV of the treaty governs your residency for tax purposes. Since you are going to Panama, I would pay real attention to anything Canadian. Make sure you sever your ties properly.
You can have a property here for investment, but you must rent it out on lease terms of a year or more. In addition, you must have an agent sign an NR6 for you. The NR6 guarantees to the Canadian Government that if you do not pay your taxes to Canada, the agent will. This agent can be a friend, relative, or a business like ours. Ultimately, residency for tax purposes in Canada has little to do with physical presence in the country. Therefore, it is advised that you contact me so that we can sort this out.
Regards,
Allan Madan and Team
I’m contemplating moving to Maldives permanently, with no intention of returning to Canada. I am aware that I owe the CRA one final tax return, but what happens if I give up my Canadian citizenship? Would I still be subject to their tax laws even though I am overseas?
If you have any sort of income coming into Canada, then you will have to file a personal income tax return with the CRA. Even if you move to another country and renounce your citizenship, you will still have to file a return for the years you lived in Canada. There’s no getting around it; you owe the government taxes for the time you spent in Canada and earned money.
Renouncing your citizenship will only stop you from having to pay future taxes in Canada, provided you sever any and all ties with the country. If you have any sort of income or investments within Canada, expect the CRA to expect a tax return from you.
Also remember that Canada does have relations with the Maldives through their tax treaty with Sri Lanka. This means that the Canadian government and Maldivian government can exchange information if they need to find delinquent taxpayers.
Hello.
I filed a Canadian exit return in 2003 and moved to the US. Now, I realized I forgot to file a T1161 form. I own a house in Ontario that I wish to sell. Because of the change in housing prices, there will be no capital gains on the property. When I sell my house, what are the tax implications? Will I be penalized for not filing the T1161?
Hello Ronald,
You will need to file the following forms within ten days of the sale: T2091,T2062 and T2062A. If you miss the ten days, you fill face a penalty of $25 a day for each owner with a minimum of $100 and to a maximum of $2,500.
You need to get an appraisal of what the property was worth on the day you left. You can get this from the realtor who is selling the house. When they do their comparable market analysis, have them also do one for the day you left. It is very likely that you will face a taxable benefit on the property, so expect to pay at least some tax to Canada. Whatever you do, do not file a late T1161. This could very well land you a huge penalty.
Regards,
Allan Madan and Team
Hello.
I am a Canadian citizen, currently living in Washington State. I have a locked-in RRSP with TD Canada Trust in British Columbia. I would like to unlock it, to purchasing a home in the US. Is it possible to do this? If so, how would I go about doing this?
Hello.
First, you must be gone for more than two years. Then, you must write the Superintendent of Financial Institutions for written permission to withdraw the money. They will write a letter back to you, which you then take to the financial institution. TD will withhold 25% for tax purposes, and give you the rest.
Regards,
Allan Madan and Team
hello,
my husband and I are moving to the middle east for teaching positions and we have amounts owing on the home buyers plan. This section is copied from revenue Canada: I am unclear aobut this section listed online on the HBP: “If you become a non-resident of Canada after a qualifying home is bought or built, you must choose one of the following options:
? Repay the remaining balance to your RRSP by the earliest of the following dates:
– ***before the time you file your income tax and benefit return for the year that you become a non-resident; (WHAT DOES THIS MEAN EXACTLY? DO I HAVE UNTIL APRIL 2015 to pay this??)
or
– 60 days after you become a non-resident.
Hi Ekta,
You should repay the balance on the earliest of:
1. Time you file your departure tax return, which is due on April 30, 2015 if you departed in 2014, or
2. 60 days after you become a non-resident
So if your departure date is June 30, 2014, the balance must be repaid by Aug 29, 2014 (60 days after).
Regards,
I just moved to the United States with my fiancé and do not want to have tax implications for selling our house. We are only here for a year or two for my husband’s job and are planning to move back to Canada. When we return we will need a bigger house so either way we are looking to sell. Would it make sense to lease our house for the time we are gone and sell it when we get back?
If you know that you are coming back in about a year or two, you can hold off on selling your house. This way you won’t have to pay the 25% tax on the selling price of your home while out of the country. This would definitely be a better route if you are looking to save money. Just make sure that you file section 216 tax return to report rental profits. Hope this helps!
My husband and I are both Canadian citizens. We have been working in the US for more than a year on TN visas. We worked more than 183 days a year in Florida, we own a condo as a residence, and file our income tax in the US. In Quebec, we also own a condo that we are renting out through an agency.
We still have our driver’s licenses and medical insurance cards, though we did not use any of these government services while out of the country. We are also repaying our RRSP for the HBP, and hold a bank account in Canada. We use this bank account to repay our condo mortgage, and repay my student loans. Can we be considered non-residents rather than factual residents? Are our Florida wages taxable in Canada? We are planning to leave the country permanently.
Hello,
Under Article IV of the US/Canada Income tax treaty, your wages are only taxable in Florida as it appears that you are non-residents of Canada. However, you should immediately forfeit your medical insurance card and other secondary ties to ensure a clean break from Canada. When you leave the country, the HBP is taxable on your final Canadian return. Alternatively, you can repay the money within 60 days of becoming a non-resident.
On the final Canadian return, you must file form T1161. Since the condo is rented, you must file another Canadian return to report the rental income and expenses only. This is called a section 216(4) return, and is due by June 30th of the following year. For example, June 30 2015 for the 2014 year.
Regards,
Allan Madan and Team
My son has outstanding Canadian student loans of about $50,000, which he is paying off by direct debit from his Canadian bank account. His job is suddenly taking him to the US, where he will be living for at least 3 years. He is closing down all his Canadian ties so CRA knows he is not resident in Canada for tax purposes; however, there is no provision to debit a US bank account to pay down the loan (CSLP suggested using PayPal, which makes him nervous). We understand that leaving a Canadian bank account open may create tax problems. Do you have advice, other than mailing a cheque every month?
Having a bank account open in Canada by itself won’t create a problem. As long as your son severs other major/secondary ties to Canada like drivers licenses, investment accounts, home, social organizations, and personal property, he should be fine.
Hey.
Thinking of leaving Canada for a new job in Asia, and wondering what implication this will have on several issues. I have been a permanent resident for two and half years. I have money in a bank account, a TFSA, and an RRSP. I am not planning to come back to Canada, and I informed the CRA on the day I learned about my move.
Will I lose my permanent residence status immediately? Can I keep my accounts, or do I have to liquidate them immediately?
Hello,
To maintain permanent resident status, you need to reside in Canada for 2 years within a 5 year period. To not be taxed as a resident of Canada, you must sever all ties to it. You can maintain your current TFSA and RRSP accounts, but you cannot add to them.
If you are likely to leave Canada and never come back, then I would suggest withdrawing all your money this year. If you become non-resident before December 31st, your personal exemption may be prorated.
Regards,
Allan Madan and Team
Hello ,
I’m currently a graduate student in the US and a Canadian citizen. For taxation purposes, I am a non-resident in Canada (I’m a grad student-350 days a year in the US). Do I still have the ability to contribute to my TFSA? I’ve been out of the country for 3 years now and am wondering if I’ve been accumulating space ever since?
Hello,
You don’t accrue any contribution room during years you are non-resident. Also, if you have not done so already, send a letter to the CRA informing them of the date you became a non-resident. That will allow them to calculate your correct contribution room, and will also let them know why you haven’t filed a Canadian tax return. It is helpful to send the letter so their records are up-to-date.
Regards,
Allan Madan and Team
Just wondering if you have a minute to reply to my earlier question – as my son leaves the country on Monday, we are trying to clean up all our loose ends, Thanks so much.
My son has outstanding Canadian student loans of about $50,000, which he is paying off by direct debit from his Canadian bank account. His job is suddenly taking him to the US, where he will be living for at least 3 years. He is closing down all his Canadian ties so CRA knows he is not resident in Canada for tax purposes; however, there is no provision to debit a US bank account to pay down the loan (CSLP suggested using PayPal, which makes him nervous). We understand that leaving a Canadian bank account open may create tax problems. Do you have advice, other than mailing a cheque every month?
Hi Elizabeth,
Sorry for the delay in responding. If your son has severed all ties with Canada then I would advise that keeping a bank account in Canada would be okay. Having a bank account is only a secondary factor when the CRA judges if an individual is a resident for tax purposes. As long as your son has no significant ties such as:
– home in Canada
– spouse in Canada,
– dependents in Canada
and very limited secondary ties:
– personal property(cars or furniture) in Canada
– Social ties (memberships)
– economic ties(bank account, credit card)
– Canadian Driver’s licence
– Canadian passport,
– Health insurance in Canada
Then he should be fine to keep a bank account open in Canada to repay his student debt.
If you are not comfortable with keeping a bank account open I would talk to your American bank as there must be a method they can automatically debit your student loan from its account. You may just have to go through your US bank as opposed to who granted you the loan. If not then a cheque or wire transfer would be the alternative options. If you have any other questions feel free to contact me. Hope this helped.
regards
Hello.
I am originally from Luxembourg. Four years ago, I became a permanent resident of Canada. As of today, I will be working in the Middle East and will earn USD salary with tax-free status. I will not be moving back to Canada for the foreseeable future. I have around 500K to build a portfolio, but I will have no investments in Canadian securities. I do not want to use a local Middle-East broker. Is there a way I could have a portfolio based at a Canadian broker? I also want to keep a tax-free status, due to the fact that I am no longer a Canadian resident.
Hello.
This depends on your new country of residence. You would have to check to see if they have a tax-treaty with Canada. However, Canada does not usually make it easy for non-resident to hold Canadian investment accounts. This is because they can easily be used for tax evasion and money laundering. It can be done under certain circumstances, but certainly not in a “tax-free manner. This is unless you have already established a pre-existing tax-deferred account while a resident, such as an RRSP.
If you would like to speak to me more about your situation, I would be glad to go over the details with you. Then, we will determine what the best course of action is.
Regards.
Allan Madan and Team
I left Canada a few years ago, and have not filed a return since. I have a couple of bank accounts in Canada, and they are earning interest. I did not fill out an NR73 form, but am wondering now if I should. Do I have to fill in the NR73 when I haven’t been requested to do so? Any advantage to doing it?
Hello Shaan.
It is not necessary to fill out NR73 when leaving Canada. Its purpose is to request the CRA’s opinion on your residency status, which they determine on a case-by-case basis. You may want to fill one out if you are unclear on your current residency status for tax purposes. Not filing does not protect you from CRA review of your file. Also, note that NR73 opinions are not binding. This means that the CRA can change their opinion.
The advantage of completing an NR73 is that you get a CRA opinion that you can use to determine whether to file Canadian tax returns. If you cease filing returns without knowing the facts, you may be subject to interest and penalties.
Regards,
Allan Madan and Team
I am an Australian National and work in Kuwait. I have never lived nor worked in Canada nor worked for a Canadian company anywhere in the world. My children (one minor, two adults) live in Canada and I recently bought a house for them to live. My wife visits them but may live there more than 183 days, but I visit them only for 30-40 days in a year. I do not earn any interest nor have any Canadian source income. I fund my children education and their expenses.
I believe I am a non resident. Would I have to file Tax Return and pay income tax on my Global income.
Regards
SUbhra
Hi Subhra,
If your minor child in Canada is a dependant on you; if the home you purchased for them is in your name; if your wife did indeed spend more than 183 days in Canada; there could be a high chance that you will deemed as a resident of Canada.
Best Regards,
Hello,
I am a Canadian citizen, and I am filing as married for the first next year. My husband and I were married this year, outside of Canada. He is neither a resident nor has he ever been to Canada. What proof does the Canadian government need to see as proof of our marriage? I assume a translated marriage certificate? Is there a form I need to fill out and attach?
My second question is this. Am I able to get a tax credit for my husband’s out-of-country tuition payments? I’m aware I can put my spouse’s tuition fees on my taxes usually, but I don’t know if the same applies for an out-of-country tuition.
Hello,
I would keep a copy of the marriage certificate and the translation. You would do this is in case the CRA requests this. On your tax return, you put your married status and the date of marriage. You also have to put his name and net world income. This is so that the system doesn’t incorrectly give you the spousal exemption and pay credits. The CRA will probably question the lack of his SIN. In this case, you could write them a letter and send or fax this and the marriage copies to them.
As for the tuition payments, you cannot claim them as your own. Since he will not be completing a Canadian return, there is no way to transfer his tuition credits from his country to your Canadian return.
Regards,
Allan Madan and Team
Hello, I receive rental income in Canada, but I will soon be leaving the country for better opportunities. I am planning on selling the home that I rent out before I leave. What are the steps to make sure I get the most out of my tax returns?
Hello, if you haven’t done so already, you need to elect to file to potentially receive some or all the refunds from the Part XIII tax deducted. Once you elect to file, you must report the income from your rental in a separate tax return. However, you must not include any other Canadian income in this separate return. In your situation, you can file more than one Canadian tax return in a tax year: One for your Canadian rental income, and one for any other type of Canadian income that you receive.
You can our blog post for more information about this topic here: http://madanca.com/learn/articles/entry/non-resident-of-canada-receiving-rental-income/
Regards,
Allan Madan and Team
Hi, I live in Sarnia, Ontario and got a job in USA. I plan on commuting back and forth between the two countries to get from my home to my job. I was just wondering how this will affect my residential status and if I need to file my taxes differently?
Hello Ron, because you are commuting back and forth between Canada and USA, you will be considered a factual resident of Canada. As for the tax implications, your income will be taxed as if you never left Canada. You will continue to report income from inside and outside of Canada, and claim all deductions that apply to you. You will also have to pay federal taxes as well as Ontario provincial taxes. However, you can reduce both federal and provincial taxes by claiming all non-refundable tax credits that apply to you.
You also need to file a US non-resident tax return and pay US federal and state tax on your US earnings. However, you will receive a foreign tax credit on your Canadian tax return for US taxes paid.
Hello,
I am emigrating to the US in October on a family petition. I currently have TFSA, RRSP, and LIRA accounts. My plan is to leave the LIRA as is and manage a self-directed account from the US, since I understand the LIRA is 100% taxable in the US.
1. For the TFSA, I was planning to cash out and close the account. Does it make sense to do this if I have some equity positions that are at a loss? I am guessing it is because of the deemed disposition of the assets at fair market value on the day I leave Canada and enter the US. Am I correct?
2. For the RRSP, I am resetting the cost basis for all equity positions that have capital gains. However, for those that have unrealized capital losses, should I leave them as is or also sell them? How will the US tax this… will the cost basis for these RRSP investments be the original cost, or the fair market value on the day I entered the US? If it’s the original cost (which are higher than current prices), then I think I should leave these investments as they are and not reset the basis.
Thanks in advance for any insights.
Sam in Toronto
Hello, just wondering if you have a comment on my question above?
Thanks!
Hello Sam,
On departure from Canada, the LIRA, TFSAs and RRSPs are not deemed to be disposed of. This leaves you a few options when considering your Canadian accounts. RRSP and registered pension plans in Canada maintain their tax deferred status in the US so long as you complete form 8891 annually. The TFSA is considered a foreign trust in the eyes of the IRS, and as such any income earned in the TFSA becomes taxable in the US.
Your options for the TFSA include: Closing the TFSA to avoid any US tax, or you could hold onto the TFSA and pay taxes in the US on income earned inside the TFSA (Must continue to file Form 3520).
My recommendation is to consider selling the investments that have unrealized profits inside the RRSP before you leave to the US. By doing so, you will get a step up in the cost basis of the RRSPs, and the taxable amount for US purposes on future withdrawals from the RRSP will be reduced.
Consider this example. Assume you have an RRSP portfolio with $100,000 in book value and market value is $160,000. If you do not file form 8891, you will realize a capital gain of $60,000 on the date you become a resident of the US. By filing form 8891, you will only pay tax to the IRS when the RRSP balance is withdrawn. Using the strategy of selling your investments inside your RRSP prior to departure, you can withdraw up to $160,000 from your RRSP in the future without paying US income taxes on that amount. LIRAs work similarly to RRSPs and can be unlocked if the CRA confirms your non residency but will be taxed on their withdrawals.
Allan Madan
Hi, I recently got married to my husband who is not a Canadian citizen. I am Canadian, but our wedding was in the USA. What do I need to put in my tax return to prove that we are married?
Thank you!
Hello Jess, keep a copy of your marriage certificate and the translation in case the CRA requests them. On your tax return, mark down that you are married and the date you got married. Add your husband’s name and his net world income. This is so that the system does not give you the spousal exemption and incorrectly pay credits to you (GST, provincial). CRA will more than likely question your husband’s lack of SIN, so you will need to send them a letter along with your marriage certificate copies.
I am a non-resident of Canada, living in California. I still have a bank account with BMO. I got an NR4 slip from BMO due to my RRSP withdrawal in 2013. I just want to confirm that I do not need to file a Canadian income tax return. 25% tax was withheld by BMO from my total RRSP withdraw. I was told by a BMO representative that the withholding tax will vary depending on how much I withdraw. Is this true?
As a non-resident of Canada, the withholding on your RRSP is 25% of the gross withdrawal regardless of how much you take out. The BMO representative is in error about your rate, but I believe this is because they may not have taken your non-resident status into account. When the 25% is withheld, BMO should issue a T4RSP-NR showing the gross withdrawal and the 25% withholding.
This is the end of your tax filing responsibility to Canada. This is unless the CRA specifically asked you for a worldwide income statement, which is within their right to ask for. If they were to make such a request, you would report your worldwide income and deduct it all on Line 256 of the T1 under Article IV of the US/Canada Income Tax Convention (Treaty).
Hi, I am a Canadian citizen and resident. I am planning on moving to the United States next year for work. This year I have gone back and forth between Canada and US to scout out potential houses, the area where I am going to work, and I have traveled around the country meeting up with old friends. On top of that, I have made some money from my new job through remote work here in Canada. Do I need to file a US tax return on the money I made from the US even though I am not a US citizen?
Hello, you may need to file a US tax return based on the information you have provided. Even though you are not a US citizen, you might be a resident alien. A resident alien is determined by meeting one of the following tests:
1) You are a legal permanent Resident (e.g., Green Card holder)
2) You meet an 183-day substantial presence test. This is a two-part test, if you fail the first part, you will generally be considered a US resident. If you fail only the second part of the test, you can file a Closer Connection Exception Statement for Aliens (form 8840) to claim a closer connection to a foreign country (in your case, Canada) and will not be considered a US resident.
a. Part 1 of the test: You are physically present in the US at least 183 days during the calendar year. If you are in the US for part of the day, it is still considered that you were there for a full day, the only exception is if you fly over the US on your way to another foreign destination.
b. Part 2 of the test: You are physically present in the US for at least 183 days using the following three-year formula:
i. Year 1: each day counts as one day
ii. Year 2: Each three days counts as one day
iii. Year 3: Each six days counts as one day
For example, if you spent 130 days each year, each of the last three years, the formula would look like this:
2013: 130 days in US, times 1/1 = 130 days
2012: 130 days in US, times 1/3 = 44 days
2011: 130 days in US, times 1/6 = 22 days
The total number of days you spent in the US based on this example is 196, meaning you failed part 2 of the test and are considered a US resident. Remember, you can file Form 8840 to be considered a non-US resident.
Thank you for the information! I have calculated based on your formula that I have been in the US 175 days over the past three years. I do not have a Green Card yet. With that all said, I am not deemed to be a US resident, correct?
That is correct! Feel free to call or email me directly if you have any other questions.
Hi, quick question: a job I am applying for in the US says I need something called an “identification number.” Is this the same thing as a Green Card? If not, how to I get an identification number?
Hello, the identification number is not a Green Card, but it is the next step after you do receive your Green Card or work Visa. An identification number is another term for a Social Security Number (SSN). An SSN signals to employers that you are legally allowed to work in the United States. The SSN is therefore restricted to only those people with certain types of visas or a Green Card.
To apply for an SSN simply complete the Application for a Social Security (Form SS-5) and mail or take it to the nearest Social Security Administration office.
Hi, I recently moved to America. When I got here, I received a $20,000 bonus from my old job in Canada. I was just wondering what the benefits would be for taking the tax paid on the income as a credit or as a deduction.
Hello Jaime, there are a few different benefits for each of these options. A deduction reduces your income that is subject to tax and is not a direct subtraction on your tax. The benefit of a deduction is based on the highest tax bracket you fall under (in other words, your marginal tax rate). For example, if you are marginal tax rate is 25 percent, you will reduce your tax $1 for every $4 deducted. However, a credit is a dollar-for-dollar offset of your tax, so for every $1 of credit, you will reduce your tax by $1. The catch is that you may not get to use every dollar of foreign tax paid as a credit because of various limitations.
If you want to contact me directly, we can go more in depth about the benefits and consequences for each of these options.
Hi, I am an Indian.i just moved to canada along with my husband and two kids through PR visa….planning to live here only for few years.I have two kids ,availing around 800 CAD/m.if i plan to go out and live in Gulf ,as my husband would be getting a better job in Gulf in future.what would happen to my child tax benefit and health card if i leave the country being an PR?Or else what would happen if i leave the country after becoming an canadian citizen.?
Should we pay tax to canada for the income earned in UAE?
How can i plan better to avail tax benefits,child benefits,as well as health card benefits?
Thanks and Regards,
Anu
Hi, I am a Canadian who received a job in the USA. Am I allowed to claim moving expenses for me and my family? Are there any restrictions if I can?
Hi Parker, you will be able to claim moving expenses when you move to the US. However, the requirements that you will need to meet are different if you are an employee of a company, or are self-employed.
For both employee or self-employed, you will need to move at least 50 miles farther from your old home or job location. You cannot deduct the moving expense if you return to Canada, these expenses would have to be deducted in Canada, if allowed.
To meet the length-of-employment test, an employee must be employed on a full-time basis at the new location for 39 weeks in the 12-month period following the move. If you are self-employed, you must work in the new location for 78 weeks during the next two years.
If you deduct moving expenses to the US, you cannot deduct travel expenses. Moving expense result from a change in your principal place of business, and travel expenses are based on a temporary absence from your principal place of business. You can only deduct moving expenses that are not reimbursed or paid by your employer.
Hi, I am a non-resident living in the United States. I was thinking of selling my property that I left behind in Canada when I moved. What Canadian tax forms do I need to fill out to ensure I get the most of my profits from the house?
Hello, you will need to file from T2062, which is a notice by a non-resident of Canada stating you are intending to sell your property. This will need to be filled before the property is sold. You will also need to report on form T2062A, which states how you will sell it.
Make sure you do file these forms. If you do not, there will be withholdings based on 25% of proceeds instead of on the estimated gain. The tax remitted with the T2062 and T2062A form generally exceeds the actual tax obligation. You will need to file a tax return in order to recover the remitted taxes.
Hi Allan
My 26 year old daughter was born in the U.S. We moved back to Canada when she was 4 months old. Since she is considered a U.S. citizen she has been filing U.S. tax returns. In 2012 she started teaching at an international school in Hong Kong. She is on a contact there which is renewed annually. She intends to stay there for at least a couple of more years. Hong Kong has a flat tax rate of 12% or 15%. She pays that tax in Hong Kong and then owes extra to the CRA when she files her Canadian return. She receives credit for foreign tax paid when she files her U.S. return so has owed them any additional money. Would she be better off to declare Canadian non-residency? Would that trigger some tax payable in the U.S? If she continues to file as a Canadian resident will contributions to her Canadian RRSP affect tax owing in the U.S.?
Thanks for your assistance.
Hello Allan, I am starting a new job in December that is located in the United States. I want to sell my Canadian house and buy a house in the US. The company that I will be working for has agreed to pay for the move, but will not cover the real estate expenses, like commissions and closing costs. I read that they would normally be tax deductible, but I am wondering if moving from one country to another will affect the taxes. Since I can only deduct the cost from my US income, and I am moving in December, I probably won’t have enough income to offset it. Am I allowed to claim the deductions in a later year when I can actually pay for it?
Hi Joyce, if you cannot fully use the deductions from the move, you may carry them forward to the next year.
You may run into some problems however. On IRS Pub 521, you will notice that selling or purchasing your home(s) will not result in any tax deductions. You can only deduct moving and storage costs, and the cost of one trip. It seems like your firm is only covering the bare minimum. If it is still possible, you should negotiate with your employer to try to get more reimbursement.
Hi Allan, hopefully this is the right place for this question. My grandmother, who is currently living in the US, wants to gift me her home. I am 20 years old living in Canada and will probably move into the house she is gifting me in the future. My question is, do I or my grandmother need to pay any gift taxes?
Hi Sam, unfortunately you will likely have to pay twice as much tax on this gift compared to others. This is because you will be hit by something called a “generation skipping transfer tax.” This tax is imposed on transfers from a donor (your grandmother) to her grandchildren or great grandchildren (you). The tax prevents someone from skipping tax on a generation by gifting directly to the next generation. The gift will be taxed at basically double the unified tax rate for gifts and estates. There are exemptions, exclusions, and credits that follow similar rules to those for gifts and estates.
Hi there. I left Canada for a sabatical in August 2013, under a french temporary residency permit allowing me to stay for one year. I have now applied for a three year permanent residency card and want to become a non- resident of Canada. Will CRA assess me as non- resident from Sept 2013 or 2014?
Best regards,
Wietzie
Hi Wietzie,
Hi, it really depends on your circumstances and your ties to Canada. For example, what was your intention in 2013 and where was your permanent home during that time? When did your intention change and do you have any evidence of such? (including changing mailing address, obtaining driver license in France, etc). Please speak with us for further details.
Hello,
My brother is Canadian. He left Canada more than 10 years ago with his family, he has severed all principal and secondary ties with Canada at the time he left with the exception for keeping his RRSP and a safety deposit box and a Canadian passport. Is he considered a non-resident of Canada?
He is now contemplating to come back to Canada to reside. He wants to know how best to bring his savings to Canada. Will it be ok to bring only some cash at time of arrival and then do an overseas wire transfer to Canada after? Will there be any tax implication when bringing funds after arrival? What steps does he need to take to ensure he is able to bring his savings back to Canada without any problem with Canadian customs/tax authority?
Your advice is greatly appreciated.
Hi James,
Your brother will likely be considered a non resident of Canada. Cash that he accumulated while he was a NR of Canada, will not be taxable to him when he brings it back to Canada.
Bank statements and tax documents in the foreign country can help identify the source of the funds, should the CRA ask to see them. Note: Canadian banks are required to report foreign transactions ins excess of $10,000 to the CRA.
Thanks,
Allan Madan, CPA, CA
Hi Allan, I am a farmer and am planning on retiring soon. I want to move to Florida so I can finally escape this cold! Are there any special rules for farmers who want to become non-residents of Canada?
Hi Jonathan, there are a few key things you will need to do before you are deemed a non-resident of Canada. First, like every other citizen, you must cut economic, social and family ties. Severing primary residential ties likely will require that you give up your home in Canada and establish a permanent home in the US. Your spouse and dependants must leave Canada as well and you must dispose of personal property and break social ties in Canada and acquire them in the US. Other secondary ties you may also need to cut include your Canadian driver’s licence and vehicle, Canadian bank accounts or credit cards, memberships, and health insurance with a Canadian province or territory.
In the year you leave the country, your Canadian tax return must report income from Canadian and non-Canadian sources for the part of the tax year that you’re still a resident of Canada. After that, you will only need to pay tax to Canada if you receive income from Canadian sources.
There are various tax implications that can arise from your required final departure tax return, particularly with the deemed disposition, based on fair market value, of certain assets referred to as “taxable Canadian property” (TCP). Fortunately for farmers, the deemed disposition rules do not apply to TCP such as Canadian real estate, capital property or inventory that is used to carry on business in Canada, and RRSPs, RRIFs and certain pensions.
These assets are excluded from the deemed disposition rules because Canada maintains the right to tax gains on the assets or income whether or not the individual is a resident of Canada. A farmer who emigrates from Canada to the US but still maintains a Canadian farmland would be subject to 25% Canadian withholding tax on the rental income payments made by the tenants. The non-resident also has the option of filing a Canadian rental return and reporting the rental income on a net basis to recover the previously withheld tax.
I’m relocating from Toronto to London, UK in January on a Tier 2 Intra-Company Transfer visa for 18 months. Although my employer will be doing my taxes while I am abroad, they will not assist with my wife’s taxes.
My wife is coming with me on a Tier 2 Partner visa. She is a sole-proprietor freelancer (with an HST number), and she contracts primarily with 1-2 Canadian companies. She will continue contracting to them while abroad, being paid in Canadian dollars into a Canadian bank account.
We have a few questions about her tax situation:
– Will she file and pay taxes in Canada or the UK? I’m not sure if she would be considered a Canadian Resident since she will be living in the UK with a Tier 2 Visa, while her business is in Canada. We do not own any property and do not have any dependents.
– Will she continue to charge her clients for HST?
– Will she have to pay any taxes in the UK?
Any insight you can offer would be appreciated.
As well, what does your company charge for filling out her required tax forms (Canadian and/or UK, as required)?
Thanks!
Hi Tim, please see my answers to your questions below:
1) She will likely be considered a NR so long as she breaks most secondary ties with Canada prior to departure. From what you’ve said, she will not maintain any primary ties in Canada (house, spouse, dependants). She should file a departure return. On the Statement of Business Activities, it’s important to indicate that his will be the final year of business.
2) Yes she will.
3) Business profits earned are taxable in the country where she maintains a permanent establishment (i.e. fixed place of business). Presuming that she closes her fixed place of business in Canada, and reopens in the UK, then business profits earned will be taxed in the UK, and not in Canada.
4)?Please email me privately for fees.
Regards,
Allan Madan
Hello,
I am Canadian working in Hong Kong for the last 11 months in 2014 (employment income). I have a house in Canada which I didn’t rent and I plan to keep my Canadian Residency for tax purposes for a few years. In 2014 I have no other income neither in Canada nor anywhere else. No spouse and no children.
After Hong Kong 15% tax my take home pay for the year will be $ 26,000 CAD. When I file my tax return in Canada how much tax will I pay in Ontario?
Am I eligible for Provincial and Federal Tax credits?
Does it make sense with my small income to maintain Canadian Residency and file tax return every year?
How can I indicate to CRA that I would like to stay Canadian Resident for tax purposes?
Thank you
Hi Sydney,
Thanks for contacting me. Since you are keeping a home in Canada, which is available for your use, you will be considered as a resident of Canada for tax purposes. Residents of Canada are required to pay Canadian income taxes on their worldwide income. You will receive a foreign tax credit for HK taxes paid on your Canadian tax return, by completing the appropriate tax forms. This helps avoid double taxation.
You do not have to pay CPP on foreign income. However, you can elect to do so, if you wish. You may be able to claim the GST Tax Refund quarterly, if you qualify based on your income, which is only available to Canadian tax residents (like you).
The advantage of becoming a non resident is that you will not need to report or pay tax on your overseas income in Canada. However, this would require you selling or renting out your house.
I am able to do personal Canadian tax returns. Email me if you are interested and I will be give you my fees.
Thank you,
Allan Madan, CPA, CA
I became PR in 1998, Canadian citizen in 2002, became Non-Resident living in India (2011-2014) and I intend to re-immigrate and become resident again in 2015. For calculation of future capital gain on sale of real estate, what would constitute the base cost — the FMV at the time of becoming a PR or citizen or at the time of re-entering as resident in 2015? The question arises because or break in resident status, thanks
Hi Matthew,
The ACB of the real estate is equal to its fair market value at the time you became a factual resident of Canada for tax purposes. The ACB of the real estate will not change if you emigrate from Canada or immigrate to Canada in the future.
You may have become a factual resident when you obtained your PR Card. However I require additional information from you to make this determination.
Hi Madan,
First let me tell you how i heard about you, I was going through some Canadian tax information videos and I came across your video series. I must say, those videos are excellent.
My name is Salman Ejaz. Me my wife and two sons (one is 2 year old and other is 9 months) became Canadian PR in July 2014 but didn’t live in Canada since then. Just to complete the landing process we were there for 1 week.
We are here is USA for past 9 years. Currently I am working here on H1B visa and get one W2 which is little more than 53K USD. My wife don’t work at all and we do not have any other source of income.
My question is: Do we have to pay Canadian tax on this income? If yes, how much? I would really appreciate your response.
Also please give me rough idea of your fees for situation like mine.
Regards,
Travis
Hi Travis
If your only tie to Canada is a PR card, and nothing else, then you are likely a non-resident of Canada. Non residents of Canada only pay Canadian income taxes on:
1. Employment income earned in Canada
2. Income from a business carried on in Canada
3. Sale of Canadian real estate
Unless one or more of the above three situations apply, you do not have to file a Canadian tax return, nor pay Canadian income taxes.
Thanks,
Allan Madan, CPA, CA
I’m holding Canadian PR Card for the last 8 years and working as consultant engineer in Oman in international consultant engineering firm, my monthly package income Canadian dollars approx 10,000 dollars. I’m Residing in Oman with my spouse who is Canadian citizen and living with me for the last 15 months. I transfer money by bank transaction to joint account with my wife to Canada bank approx 4500 dollars supporting my two kids school and monthly expenses plus the payment for the house mortgage which is registered on my spouse’s name.
Both me and my spouse just came to know that we have to apply for non-resident before we leave Canada, please advise how to do it now with thanks.
The above money is it taxable to CRA and how much tax we need to pay to Canadian CRA?
Regards,
You are likely a resident of Canada because you hold a Canadian PR card, your wife is a Canadian Citizen, a home is available for your use in Canada, and your children are in Canada.
As a tax resident of Canada, you are required to pay Canadian income taxes on your overseas income. You can receive a foreign tax credit on your Canadian tax return for foreign taxes paid. Based on 1 year’s income, your estimated tax bill (before foreign tax credits) is approximately $35,000.
If you would like to become a NR of Canada, there are many steps that you would need to take. Email me personally if you would like to know more information.
Thanks,
Allan Madan, CPA, CA
Hello,
I am writing regarding transferring my savings from abroad to Canada.
I am Iranian, studied/ worked in Switzerland in the past 5 years and I am also a Canadian permanent resident, which landed in Canada 3 years ago, but generally have not spent more than 2 weeks in Canada, have a bank account in Royal Bank( RBC) which is inactive now, no other Canadian tie. As I want to move to Canada permanently in next month, my questions are:
-When I am transferring my money from Switzerland to Canada shall I pay the Canadian government the differences in taxes between these two countries?
-Are there any ways to transfer my pension savings in a pension plan in Canada?
I would be grateful to have your advice on these matters.
Hi Parisa,
Income that you earned outside Canada while you were a non-resident of Canada, is not taxable in Canada. As such, you can repatriate these foreign funds to Canada, without having to pay Canadian tax on the amount transferred.
I am not aware of any rollover provisions for transferring a Swiss pension into a Canadian pension account on a tax free basis.
Allan Madan, CPA, CA
Hi Allan, I am moving to the States soon and will be a non-resident of Canada. A friend briefly mentioned that I might want to look into Windfall Elimination Provision. I have tried to look for information, but the information I have found has been really confusing. Can you try to dumb it down for me?
Hi Kristine, sure thing! WEP may apply whenever you worked in a job that you earned foreign social security benefits (like the CPP or QPP), without paying US social security taxes. If the WEP applies to you, your benefits can be reduced by as much as 60%. The good news is that the WEP rules don’t apply to you because of the Canada-US Agreement on Social Security. The bad news is that the Social Security Administration employees have little to no training on this subject. If the Social Security Administration is telling you that you are subject to the WEP, I suggest to read the Canada-US Agreement on Social Securities and appeal your case. This information can be found at Service Canada website http://www.servicecanada.gc.ca/eng/home.shtml
Hi Allan, my husband is a permanent resident in Canada and my son and I are Canadian citizens. My husband has completed 1.5 years in Canada as a PR. We don’t own any property in Canada. We will be moving to India for a 3 year contract job that I have received and accepted. I just have a few questions for you.
1) If we become non-residents of Canada and my husband and I both start working in India, will we have to pay taxes on the income earned?
2) If my husband stays with me outside of Canada, will he meet the PR requirement? Does this change if we both become non-residents?
3) If we come back to Canada after the completion of the 3 year contract, will we be considered to be residents of Canada during those 3 years?
4) If we considered to be residents during the 3 year contract period would we be entitled to receive the Canada Child Tax Benefit and the Universal Child Tax Benefit?
Hi Natalie,
1) You can declare yourself as a non-resident on your next tax return after you moved. They shouldn’t bother you again after that.
2) Becoming a non-resident for tax purposes doesn’t change anything. His PR will still be protected so long as he spends at least two out of the five years in Canada starting from the date he became a Canadian PR (please consult an immigration lawyer in all matters related to PR status).
3) No, you could ask the CRA but you would write something about it when you moved to Canada again on your next tax return.
4) You have to be living in Canada to get the child tax benefit.
Hope this helps!
Hi Allan, I just have a quick question. My wife and I moved to the US recently. She has a RRSP in Canada with $65,000 in it. She is not working currently. Should she take it all out at once?
Thanks for any advice.
Hi Grahme, if your spouse is not working, she can withdraw her RRSP tax free over a 5 year period without paying a single dollar of Canadian tax! On the other hand, if she withdrew it all at once, she would be hit with a 25% withholding tax resulting in a tax of $16,250 if she did not file the elective tax return on an annual basis.
Hi Allan, what happens to my retirement payments if I become a non-resident?
Hi, if you are receiving CPP, RRIF, or other retirement payments such as a retiring allowance you could receive approximately $17,000 a year tax free. If 100% of your worldwide income was from Canadian retirement benefits there would be a benefit even if you had retirement benefit income of close to $75,000, assuming the Canadian withholding rate would be 25%. Please note the potential savings also depend on how the income is taxed in the country you are now a resident of.
Hi Allan,
I have quick question that, I am a Canadian citizen and filed tax return till I was there i.e. up-to 2010. From 2011, Now a days, I am residing with my family outside of Canada and working for an Indian Company; but I have bank account in Canada and driving license. I assume, I am maintaining secondary ties with Canada as a non resident of Canadian. I am planning to return back to Canada in 2020 again. What happens, if I return back to Canada with my family after 10 years. Do I need to pay tax to CRA for the period of 10 years while I was outside of Canada and can I continue my residency with my family as resident of Canada afterwards; and getting all benefits which I paid earlier for CPP, RRSP, health care and others.
Thanks and best regards,
Pius Kamal
Hi Pius,
Did you file a departure tax return when you permanently left Canada in 2010? If not, this is the first thing you should do. Maintaing a couple of minor secondary ties will not affect your Canadian residency status. However, you should always break as many ties with Canada as you can.
When you return to Canada, you will file a part year resident tax return. This means you will be taxable in Canada on your worldwide income starting from the date that you permanently move back to Canada. The income that you earned abroad while you were a non-resident of Canada will not be taxable to you in Canada. You can repatriate this money back to Canada, without paying Canadian taxes. In terms of government benefits such as the CPP, you will only be entitled to receive pension upon retirement based on the amount of contributions you made. Since you will not have made any contributions from 2011 to 2020, it’s very likely that you will not be eligible for the maximum CPP benefit upon retirement, and will receive a reduced amount.
Allan Madan, CPA, CA
Hi, I will be a non-resident for at least five years starting next year. What should I do with my TFSA, HBP and LLP? Am I allowed to keep them and continue to contribute to them?
Hi Jon, to start, you will not be able to contribute to any of the above mentioned plans if you become a non-resident. I will go further in depth on each plan below:
TFSA: You are allowed to keep your Canadian TFSA while you are a Canadian non-resident. You will be able to continue to benefit from investment income and withdrawals tax free. However, you will not be allowed to contribute to the TFSA and you will not gain any more contribution room for the years you are gone.
HBP and LLP: The rules are similar for both your HBP and LLP. You have 60 days from the date you become a non-resident to repay any amounts that you owe under your HBP and LLP. If you do not make payments within the 60 day period, the balance owing will be included in your income on your last tax return in Canada.
Hello,
Thank you for your very helpful video. I’m a non-resident of Canada who is currently working in Dubai, UAE. I have completed forms 3.5 years ago to gain non-residency status. I want to double check that this is still the case – is there somewhere online that will tell me? Or do I need to call the CRA?
Hi Charlotte,
Call the CRA to find out if they have you recorded as a non resident of Canada on their system. If yes, then you do not need to do anything further.
Allan Madan, CPA, CA
You mentioned the need to declare my assets upon leaving Canada and if not could very well be fined $2,500. What if I own approximately $175,000 worth of personal stuff, but no real estate. Such as household appliances, tools, toys clothes etc. And I just want to take it all with me and move to the States, will I be taxed by the CRA? Exactly how does this work?
Thanks Steve
?Hi Steve,
If the assets are sold prior to leaving Canada, then you do not have to disclose them on your departure tax return. Note that you may have to pay capital gains taxes when you sell your assets, if they have gone up in value.
Allan Madan, CPA, CA
Hi Allan, I am becoming a non-resident of Canada soon but I still have a locked-in bank account. How do I go by getting rid of the account and withdrawing the money inside the account?
Hi Niklas, when you are determined by the CRA as a non-resident, you can apply to unlock and withdraw all the money in your locked-in account two years after you leave. Once you are a non-resident, you will need to complete and sign FSCO pension Form 5.
You then need to submit the form to the financial institution that holds your locked-in account. You will also need a written determination from the CRA that states you are a non-resident for tax purposes. You also need written consent from your spouse or a certification that you do not have a spouse.
Hi Allan, i have a question – if i moved (with wife+kids) to another country and sold the canadian house (ie no primary ties to canada) but kept all the secondary ties (passport, driver’s license, health coverage, bank accounts, credit cards, personal property, etc) – how likely is it that CRA would determine me to be non-resident?
i think it would be beneficial financially for me to remain resident (taxation of dividends is near-zero in canada up to 50k/p) while living elsewhere. Other than owning a house in canada, i’m wondering if the secondary ties are enough to ensure being deemed resident.
Hi John,
The answer depends on the rules surrounding residency contained in the tax-treaty that Canada has with the country you are moving to. In the absence of a tax treaty with Canada, it is possible that you will remain a resident of Canada, if you maintain a large number of material secondary ties, and if your intention is to return to Canada.
Thanks,
Allan Madan, CPA, CA
Hi,
I am Canadian citizen and working in USA. I am going to apply for Non residence to Canada. My question is if I do that and after 3-4 years if I want to come back to Canada permanently, is there any problem or If I want to come back to Canada after age 65 ,will I get old age benefit.
.
Reply:
The Old Age Security (OAS) pension is calculated based on how long you lived in Canada after the age of 18. You can either get the full pension or partial pension.
For the full pension, you either have to meet one of the two.
1. You resided in Canada for atleast 40 years after the age of 18, or
2. You were born on or before July 1, 1952 and
• on July 1, 1977, you resided in Canada, or
• on July 1, 1977, you did not reside in Canada but after turning 18, you did reside in Canada for a period of time, or
• on July 1, 1977, you possessed a valid Canadian immigration visa.
? In addition, you must have resided in Canada continuously for the 10 years immediately before the approval of your OAS pension. If you were absent from Canada during that 10-year period, you may still qualify for a full pension if:
o you resided in Canada for at least one year immediately before the approval of your OAS pension, and
o for every year you were absent, you had 3 times more years present in Canada between age 18 and before 55.
You get partial OAS pension if you cannot meet the above requirements. Also, if you do not want to wait for additional years to be eligible for full pension, you can opt to get partial pension instead.
A partial OAS pension is calculated at the rate of 1/40th of the full OAS pension for each complete year of residence in Canada after age 18.
You need to have resided in Canada for atleast 10 years after your 18th birthday to qualify for partial pension.
NOTE: Once your partial OAS pension is approved, there is no increase with additional years of residence in Canada.
If you live outside of Canada, you become eligible for OAS if
• you are 65 years old or older
• you have been a Canadian citizen on the day before you left Canada and
• you have resided in Canada for atleast 20 years after turning 18.
Hi,
I am a Canadian resident who is considering moving to the U.S. in the next year or two. I own a few investment/rental properties in the U.S. right now under my own name. What do I need to do to plan ahead to minimize the tax consequences upon departure from Canada? Thanks.
Hi Christine,
First, you need to determine whether you will be a resident or non-resident of Canada for tax purposes once you move to U.S. so that you are aware of which country you will be taxed in and on what income.
As a non-resident of Canada for tax purposes, you will not be paying Canadian tax on non-Canadian source income. You will pay tax only on Canadian-source income (if any). To be considered a non-resident of Canada, you must sever all your primary residential ties in Canada and majority of the secondary ties.
The following CRA bulletin discusses residential ties in more depth:
http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html
The most significant residential ties considered by the CRA are as follows:
• a home in Canada;
• a spouse or common-law partner in Canada; and
• dependants in Canada;
You can contact us if you would like to have a residency analysis performed regarding your situation.
Departure Tax Return
When you become a non-resident of Canada for tax purposes, you will have to file a departure tax return by April 30th of the following year. This will include filing Form T1243 – Deemed Disposition of Property by an Emigrant of Canada, and Form T1161 – List of Properties by an Emigrant of Canada. As you have investment/rental properties in U.S., these forms may be applicable to you.
Hi I left canada in 2003 and moved to USA for work, later moved to china/Singapore/china for work. I did sell my house when I left in 2003. But my mum stayed in canada (I applied her to move to canada). Have a few question I hope u can help
1) when I left canada I. 2003, I did not file non residence request. Should I do it now? Or it’s anyway too late to do it
2) lately I purchased a condo for investment purpose- so will rent it out upon completion, would this be ok? Or this will be considered strong tie?
3) as my mum stayed in canada, would thanbe considered strong tie?
4) do USA, Singapore and china have tax treaty with canada?
Thx a lot
Good Allan!
I work for Canadian Federal organization and I am Canadian citizen. I am planning to go on long leave with UNPAID (and no benefits) due to my personal obligation back home in INDIA. As a result, I may need to leave Canada with my family for at least five years.
As a result, I would to go on NON RESIDENT CANADIAN status and move to INDIA. However, I have following:
(1) Bank accounts (TFSA, RESP in mutual funds, registered pension amount locked-in account)
(2) Credit Cards
(3) dependents
Non Canadian Resident Status
(a)Should I cancel credit cards,
(b)Dependents will also move with me to INDIA
(c) Should I keep Bank accounts? Or which one supposed to be closed?
By doing above (a) – (c) is fine for Non Resident Canadian Status?
I am planning to move in June 2015. Please, advise.
Sincerely,
HR Puttur
Hi Haranadha,
You would have to complete and submit a NR73 Determination of Residency Status form to the CRA for them to assess your situation as you may have strong ties back to Canada including the fact that you plan to return. Also, you must file a departure return next year, outlining the date of departure to indicate you have left the country for a long-term. The more ties you have to Canada, the more difficult it is establishing a non-resident status. Canceling credit cards and closing everyday accounts will help your case during assessment of residency status.
Link to NR 73 form:
http://www.cra-arc.gc.ca/E/pbg/tf/nr73/README.html
Thank you.I have resigned for this position and no ties with Canada except RESP, Locked accounts.
I have sent the faxed and letter by Canada Post in April 2015. The CRA confirmed that letter was received.
Dr.Puttur
Hi Allan,
Firstly I would like to appreciate for such an informative blog.
I am a Permanent Resident of Canada and planning to invest in a Registered DC Pension Plan (DCPP). My concern is if in future I plan to emigrate from Canada will I be able to withdraw money from this Pension plan or do I have to wait till my retirement age?
Thanks in advance.
I have two questions. 1) As a non-resident who doesn’t need to file, what does my my husband record as spouse’s income on his return. He does have to
file (deemed residency). I will have to send my world income report to keep the children’s benefits in tact. My income isn’t really zero, I have interest from savings accounts.
2) Do you think it’s worthwhile for me to file as a deemed resident when the response to my nr73 said non-resident? I have no ties other than bank accounts
but also I’m in the US on a NATO2 visa. Not working while here for a few years.
Hello
This is very helpful but I have a question that I hope you can help me on.
We just moved from Canada to USA for business.
We have always lived in Canada and are Canadian citizens. Our primary residence is closing in Canada in June.
We just moved this month and we were working on the sale of our house while still in Canada.
Does the 25% holding of the house sale cost still apply to us?
Do I need to fill out the non-resident form even though my work visa is three years?
Please advise as I am trying to finalize a new place to live but the 25% holding would be my down payment.
Thanks for tor help
Melissa
I plan to become a non resident of Canada in 2015. I realize that on leaving Canada I must pay taxes on any deemed capital gain on taxable assets. But what if I will have a loss on the deemed taxable assets. can I use the carry back provision for the previous 3 years when I had a capital gain to offset the loss that I will have on becoming a non resident? Thanks
Hi Donald
The capital gain or loss resulting from the deemed disposition must be reported on Form T1243, Deemed Disposition of Property by an Emigrant of Canada. This gain or loss is then reported on Schedule 3 of your tax return. This loss can be carried back 3 years.
Hello Allan,
Thank you for your awesome info on this page. I am a Canadian citizen planning to move to Bahrain permanently for a long term job. I plan to severe all my ties except 1 bank account (none interest paying) and 1 credit card for emergency use, of course will keep my Canadian passport. With no primary ties, will my secondary ties be an issue?
what if I earn income in Canada from an online business, will that make me non-resident? I know I have to pay taxes on Canadian income but don’t want to risk world income.
does my spouse who doesn’t earn income need to severe her ties too?
Hi Kari,
Primary ties include owning a home, having dependants and having a spouse or common-law in Canada. To sever these ties, you must sell your house including all personal property such as car and furniture and have your spouse and dependents move with you and severe ties regardless if they are earning income.
Once you have no primary ties, the CRA may look into your secondary ties. These do including keeping your Canadian passport in addition to credit cards and bank accounts regardless if they are interest paying.
In regards to your earned income in Canada, you become a non-resident when you, your spouse and dependents leave Canada and you have become a resident in Bahrain. You will be taxed in Canada on your world income until you have become a non-resident.
In your specific case, you must prove that you have no intention of returning to Canada and your secondary ties are significant enough to prove that you might have the intention of returning.
Hello,
I’m a Canadian citizen selling my primary residence in Canada and emigrating to Europe at the same time.
Are there any tax implications related to the sale of my primary residence? If so, does it matter when the exact time is that I close the sale of the residence? Do I have to close the sale prior to departing or can I close the sale (using power of attorney) a week after emigrating without any tax implications?
Your help is appreciated. Thanks
Hi Nori,
If your desire is to become a non resident of Canada when you depart, then you should sell your primary residence before you leave. Having a home in Canada is a primary tie to Canada as per the CRA, and could cause you to remain a tax resident of Canada even while you live abroad.
Since Canada has tax treaties with most European countries, it’s very important that you review the article in the applicable treaty pertaining to ‘Resident of a Country’. A tax treaty will help you determine your tax residency and can help you avoid double taxation. You can find Canada’s tax treaties on the Department of Finance’s Website.
It’s also a good idea to sell your home before you leave, in order to avoid being caught with the dreaded 25% withholding tax. You see, the buyer of your home must withhold 25% of the selling price, unless you provide the buyer with a Clearance Certificate approved by the CRA. This is assuming that you are a non resident of Canada after you leave.
Best Regards,
Hello Allan,
My name is Rajesh. I was wondering if I can use my foreign income tax as a deduction under itemized deductions, rather than a credit – is this better for me?
Thanks,
Rajesh
Hello Rajesh,
Yes you can but it is a choice you will need to severely consider. You may not have a large mortgage interest deduction when living overseas. Therefore, the chances of being able to advantageously use itemized deductions over the standard deduction may be difficult. Don’t forget that you cannot claim a deduction for foreign taxes paid on income excluded under the foreign earned income exclusion or house exclusion.
Thanks,
Allan Madan
Hello Allan
My house closes on the 7th August and I am leaving Canada to live permanently in the UK on the 8th august.
My lawyer is insisting I need a Clearance Certificate from the CRA as ‘I will be non-resident shortly after closing’
Everything I’ve read states that as I’m selling the property before I leave canada I don’t need this
Who is right?
thanks
Antony
Hello Allan,
I am an international student at Ryerson and I do not work nor get any income within Canada. Am I
required to file income taxes?
Thank you
Maria
Hello Maria,
You are required o file taxes if:
• you receive any income in Canada (this can include scholarships or bursaries)
• you want to claim a refund
• you want to apply for the HST, Ontario Trillium Benefit and other tax credits
• If you and your partner was to start/continue receiving Canada Child Tax Benefit payments
Thank you
Allan
Hello –
I am moving to another country for work and just sold my primary residence in Canada. I assume therefore I will become a non-resident. However, I have significant cash from the sales of my primary residence that I do not want to take out of Canada (I plan to move back here in 2-3 years). I would like to invest that money so that it grows while I am away.
Considering that I am becoming a non-resident, how does that affect my ability to make the investment? In particular, I have to leave Canada before the money from my house sale “clears” in the bank, so I wouldn’t be able to make the investment until I have departed the country.
Hi Sarah,
Thanks for contacting me. You do not automatically become a non resident of Canada by selling your home and leaving Canada to move another country. The first step in assessing your residency status is to evaluate the ties that you still have to Canada after moving. Next, you must examine the ties that you have established with your new country of residence. Lastly, the tie-breaker rules (surrounding residency) contained in the tax treaty (if there is one) between Canada and your new country must be reviewed.
If you become a NR of Canada, it’s important to inform all of your Canadian financial institutions so that they can begin withholding taxes at source from interest and dividend payments made to you. Non residents of Canada can continue to make investments in Canada.
Would you like to setup a consultation to discuss further?
Hello Madan Team,
I have been living in the US for approximately 1.5 years now, however, I am returning to Canada shortly and I was wondering if I have to pay taxes on the money I earned while living overseas.
Thank you,
Gio.
Hello Gio,
This question is dependent on whether or not you have maintained Canadian residency. If you have few ties to Canada while you were in the US and established a clear US residency, you will be considered a non-resident and you could be liable to pay taxes on your earned income.
However, considering you have been gone for 1.5 years there is reason to believe you are still maintaining a Canadian residency; therefore you are liable to for Canadian taxes on your earned income. Canada and the US have a tax treaty that ensures double-taxation does not occur.
Thank you,
Allan Madan
Hello Allan
If I am penalized by the U.S. for my taxes, does the CRA aid the U.S. to collect it?
Thanks,
George
Hello George,
The Canada-U.S. tax treaty states that Canada can help the U.S. collect certain taxes. However, keep in mind that the CRA will not aid the IRS to collect your U.S. tax liability if you were a Canadian citizen when the liability occurred.
Thanks,
Allan
Hi Allan,
Thanks for the time you have contributed here. The video was excellent and the Q&A is very helpful. Lots of great info. I have a few things I’d like to clarify as well. My husband and I are exploring the possibility of leaving British Columbia and moving to Costa Rica this fall.
Are you saying that the date of departure , for tax and residency purposes, is the date you physically leave the country initially? Does it have anything to do with when you actually receive permanent residency in the new country? We plan on not being away more than 183 days at one time and spending a few months a year back in Canada until we establish permanent residency in 4 to 5 years.
Also is it correct that, if possible, it would be wise to max out our TFSAs and RRSPs using any available cash before we go? Then during periods that we have no other income for awhile, we can just withdraw small amounts over time without incurring the 25% departure tax anyway? It looks like any other unregistered savings ( here or in a Costa Rica bank) will all be subject to the 25% tax when we make the final leap.
Thanks so much,
Brenda
Hi
I am a Canadian citizen who left Canada in 2010. When I left Canada, I filed a departure return. Moreover, I have filed every year as a non-resident since my departure return and all my returns have been accepted; I was not aware that I did not need to file. Anyways, in 2013, I married a Thai citizen and notified the CRA about my marriage through the new online system (MyAccount). While overseas, I have been working as a teacher. In total, I worked in three different countries. In September, I am moving to a new country, Qatar, where my new employer requires me to complete the NR73 and get a Letter of Determination of Residency from the CRA. Starting in September, I will pay Canadian taxes on my new income and contribute to CPP and EI until I receive a CRA determination that deems me as a non-resident.
My wife, who is not a resident nor citizen of Canada, has lived with me overseas since we got married. However, when I move to Qatar in September, she may not be joining me for family reasons; she may need to stay in Thailand. I understand that if she were to live in Canada while I live in Qatar, I would most likely be deemed a resident for tax purposes. What if she lives in Thailand? Would this factor encourage the CRA to look at me as a non-resident? Resident? Or would it have neither effect?
Thanks
Hi Allan,
I plan on leaving Canada next year. I currently hold bank accounts like TFSA with a bank here in Canada. My question is, will I still be allowed to maintain my TFSA?
Thanks,
Ikaika
Yes! You will still be allowed to maintain your TFSA without being taxed on earnings in the particular account. However, keep in mind that you will no longer be able to contribute to your TFSA account. Also, no contribution room would accumulate for any year throughout which you remain a non-resident of Canada.
Hello Allan,
I want to leave Canada for work purposes, but return back and continue to live in Canada for several years. What happens to my housing situation?
Thanks,
Emmanuel
If you are thinking of selling or renting your Canadian home while being in another country, you should be aware of ‘rental income’ which is taxable in Canada. You will be obligated to pay a 25% withholding tax on the gross selling price of your home. Luckily, Canadians are allowed to file a Section 216 Tax Return form to recover a portion of the withholding tax.
I am a Canadian citizen who has been working on a TN1 visa in the US for the past 1 and a half years. When I was working in BC, I contributed funds to the BC Pension fund and this year I was given the option to leave the funds in the pension or close the account and transfer the funds. I chose to close the account, transfer some of the funds to an RRSP that I hold in Canada and have the rest mailed to me. The company that holds my RRSP initially stated they could accept the funds – they helped me to have the funds transferred from BC Pensions into my RRSP. However they are now saying they were mistaken and should not have made the transfer since I am a non-resident of Canada. My question is what can I do about this money that was transferred from my BC Pension account and is currently sitting in my RRSP? Your website indicates that one can keep contributing to a RRSP even when no longer a Canadian resident and I was wondering if that could work with these funds and how I could go about convincing my RRSP company of this. Thank you.
Hello Allan: I am considering living in Panama and currently work for a United States company in Australia. I am selling my condo and am severing all ties to Canada. My question is will I be able to keep my passports as I have 2 of them, both Canadian and once I leave Canada are there any restictions on how often I return. I recently lost my father and my mother’s health is questionable. Should her health deterioate I will need to return to Canada on my time off from my job in Australia.
I have already been to Panama and now have a lawyer there who will help me with my relocation needs on that end as well as set up a bank account and help with immigration concrns also.
Please advise…Allen
Once you become a non resident of Canada, you should not return to Canada for more than 182 days in any 12 month period. Also, you should not be financially supporting your mother, as she would then be considered to be a dependent, thereby making you a tax resident of Canada.
Hello Allan,
I really appreciate your website. Here is my situation. My family and I , we have two school aged children, moved to Europe in October 2014. We had sold our home previous to leaving. We were not sure where we would settle, it was between France and Spain. After a move we decided on France. It wasn’t until the end of December that we signed a lease for an apartment. In the January I found a part time job. Since then I was able to get into the French social system, sin number, health insurance. As of right now I am still a tax resident of Canada, I have yet to change that. We have investment back home stocks, Gics, rrsp, tfsa, resp etc. Our investment make more than my income here. What I am asking is what would be the best step to take next. We have decided we want to stay here indefinitely. At the same time I want to do the best thing in financial terms. Should I severe all ties with Canada, can we keep,our assets in Canada pay taxes in both countries, but still be in the French social system. I really need your help to make the best decision. I know the French tax system is very aggressive, and I want to make sure I do everything correctly, so as to not create problems for my family. Any help would be greatly appreciate. To I have to keep in mind the horrible exchange rate at the moment between the canadian dollar and euro. By the way I have dual nationalities Canadian and Italian.
Thanks so much, I away your reply
David
Hi David,
Thanks for contacting me. According to the Canada-France tax treaty, you are a resident of the country where your permanent home (either rented or owned) is located. If you have a permanent home in both Canada and France, then you are a resident of the country where your personal and economic ties are stronger to. It appears that you have only one permanent home which is in France, where you are living with your family. If this is true, then you are a non resident of Canada and a resident of France. Therefore, you will have to file a Departure Tax Return with the CRA (which my office can prepare) to cease your tax residency in Canada. Additionally, withholding taxes will be deducted from Canadian interest and dividend payments made to you, since you will be a non resident of Canada.
Please let me know if you would like to discuss further.
Hi Allan,
I’m thinking about making an internal job transfer to our Seattle location. Since I don’t plan to return to Canada for a while, and in order to take advantage of Seattle’s lower income tax rate, I would like to become a non-resident of Canada. These are what I have, what I plan to do with them, and some questions:
– House: Sell and cash out.
– RRSP & spousal RRSP: Leave all open in Canada.
– TFSA: Cash out and close.
– Bank accounts: Close all. (Do I really need to close all of them?)
– Restricted Stock Unit (RSU) from my job: I have some stocks that will continue to vest in Canada for next few years. I heard there will be withholding tax from both CRA and IRS on the vested amount. Is this true? Will I be able to get Canadian withholding tax back when I file income tax in the US?
– Private investment that generates interest income (T5 issued): Will there be withholding tax on the income from both CRA and IRS? If yes, will I be able to get Canadian withholding tax back when I file income tax in the US?
– Life insurance: Can I keep them open and continue to pay from my US bank account? Will the payout be taxed on any side of the border? (i.e. Estate tax in the US)
With all of these said, can my family still become non-resident of Canada on our departure date?
Thanks.
Hello Allan,
I hope you can give me your opinion on our situation. Our family left Canada in 08 on a foreign assignment. The company went bankrupt in 09 and we were left languishing in Asia. We had sold the house prior to the move and later sold the vehicle too. Our family with 3 children stayed in Asia since the initial move. It was our intention to “come” back to Canada when we left so we never declared non-resident. I have finally landed a professional position recently in Thailand, and want to stay here permanently. We now have local medical insurance, driver license, bank account and rental. I was informed that I could/should declare non-resident to reduce taxes. If that is the case, when should be the “date” that I left Canada? Or do I have to have a trip back to Canada so as to establish a “date of leaving”? Since we don’t want our child to grow up not knowing their own country, I am also thinking of sending our eldest to a private boarding school in Canada and the younger 2 will stay with us in Asia. The thinking is that while he is in Canada we will buy private medical insurance just like any international student. Would that (having a dependent in Canada) disqualify me from being able to claim non-resident?
Thanks,
Richard
Hi Allan,
First of all, thanks for the good work answering all these questions.
Here’s mine.
I have left the country since June 2015 for a new job in Hong Kong. I have not declared non-residency. I was wondering would declaring non-residency affect my citizenship? I see that a passport is a primary tie to Canada. I do want to keep my passport and I do plan to come back to Canada eventually.
Other than my citizenship, my only tie would be my bank account and my credit card, oh, and my expired driver’s licence.
What do I need to do? Would filling out the NR73 do anything to my citizenship?
Thanks!
Les
Can you please contact so we can discuss further.
Hi David,
Please feel free to email me with your questions (amadan@madanca.com) or call me at 905-268-0150.
Dear Allan, I really like your website and greatly appreciate all your responses. Here’s our situation: We are Canadian citizens. I got a great job opportunity in Austria and in a few weeks me and my children will be relocating and establishing our residency status there. My husband will stay in Canada in our house and will join us next year once we’re settled. We’re also keeping our RRSP, LIRA, TFSA, RESP in Canada. I’m also keeping my bank accounts, health card and drivers license. What would be my residency status in Canada? Factual resident or deemed non-resident? Would I have to file T1161 and T1243 with my 2015 tax return or pay departure tax? Also, I hold a foreign rental property that I do not intend to sell and plan on holding it for years after becoming a non-resident of Canada (a couple of years down the road once the family completely resettles in Austria and after severing all primary and most of the secondary ties). Is it somehow possible to recover the departure tax on the deemed sale of this property considering that the actual sale of the property and generation of capital gain won’t occur until years after becoming a non-resident? Your help would be greatly appreciated. If I would like to discuss more of these tax implications with you in the future and use your services where can i contact you and what are your fees for your tax services?
Hi Andrea,
Thanks for contacting me. According to the tax treaty between Austria and Canada, you will be a resident of the country where your permanent home is located. If you have a permanent home in both countries, then you are a resident of the country where your personal and economic ties are strongest (i.e. centre of vital interests).
What will you be doing with your house? Renting it, keeping it vacant or selling it? I will need to know this in order to determine your residency status.
You will have to fill out form T1161 to disclose your assets if the total value of your assets is more than $25,000. Certain assets are excluded. Form T1243 must also be completed and departure tax will apply to your real estate located outside Canada. You can potentially defer paying departure tax until the property is sold – see form T1244. Please let me know if you would like to arrange a consultation to discuss further.
Dear Allen,
Thanks you for the invaluable information on this blog and information you be able to provide in this forum is much appreciated.
I have been living and working in the UK for the past 2 years and have now decided to stay indefinitely. I have decided to become a non tax resident and in the process of severing secondary ties with Canada. I have 3 remaining ties which I hope you may be able to give your advice are:
1. Bank account to pay student loan from
2. Credit Card which I will cancel once the remaining balance is paid off (3 months)
3. Life insurance policy – would I be able to keep this or should I end this and what tax implication would this have? Should I do this before or after I declared non-residence?
You reply is very much appreciated.
Thanks in advance
Hi Simon,
These are good questions. According to the Tax Treaty between Canada & the UK, you are a tax resident of the country where your permanent home is located. A permanent home can either be rented or owned. If you have a permanent home in both Canada and the UK, then you are a tax resident of the country where your personal and economic ties are strongest.
The 3 secondary ties that you mention below are not, by themselves, a determining factor with respect to your tax residency. You don’t even have to terminate these 3 secondary ties, if you only have a permanent home in the UK and no home in Canada.
However, should you have a home in Canada and the UK, then by terminating these 3 ties, you are strengthening your case for declaring non residency for tax purposes from Canada. To error on the side of caution, terminate these 3 ties before declaring non residency.
Should you choose to keep the life insurance policy, you will have to pay departure tax if the market value of the policy is more than the cost amount. If you terminate the policy, there may be a capital gain.
Hello,
Thank you for your informative website. I have a question regarding my own status. I left to live in the United States in October of 2010. My parents filed my final tax return in 2010 on my behalf. I never filled out the NR73 form since we didn’t really feel it necessary at the time and we were uncertain as to whether or not life in the States would work out (I hold duo citizenship). Since then I have made the U.S. my permanent home. I never owned any assets in Canada worth more than the cutoff amount, since all I ever did was rent. At the time of my departure, the only asset I had was a 10 year car worth nothing more than $2000 which I took with me. The only ties I have in Canada are a bank account, a locked in RRSP ($17,000), one Credit card, line of credit, which I am working to pay down and eventually close once they are paid off. I do also have a valid passport which has yet to expire. My intention is to withdrawal from the RRSP to pay down the line of credit and the credit. I was told by RBC to file an NR73 form and submit it to the bank in order to withdrawal from the RRSP in order to do this. Besides the 25% on the locked-in RRSP is there anything I need to be aware of?
Thanks for your question. Based on what you wrote to me, you only have to concern yourself with the 25% withholding tax on RRSP withdrawals made. This amount can be credited to you on your US Tax Return as a foreign tax credit. Remember to include the RRSP withdrawals made on your US Return as income (1040).
Hello,
I have been working in a country for 5 years that has a tax treaty with Canada. Prior to leaving the country I sent a letter to the CRA to see if I qualified as a non-resident, they replied that based on the info I gave them I was a non-resident (no credit cards, no bank account, no property, no assets etc). When I left I had not worked full time ( I was a student) . I do not recall filing a final tax return before leaving and have not filed one since leaving. Is there anything I still need to do?
Hi Steve,
Your first step is to call the Canada Revenue Agency to ask if you have any past-due personal tax returns to be filed. If the answer is no, there is nothing further to do. If the answer is yes, then we will have to file those past due returns and a departure tax return for your final year in Canada.
Me,my wife and two children (One Age18+ and other under 18). We recently received US Green Card. I have RESP , RRSP. TFSA.
I have two contribution left for one RESP for my son under 18. My son is planning to finish grade12 in USA and want to do undergraduate in USA. What to do with RESP. Will he considered non resident of Canada and if so what will happen to RESP.
What should I do with my RRSP. Should I invest in Canadian Mutual Fund or just leave un invested. I have cash on my bank account. Can I invest in Stocks, ETF, Mutual Fund.
What will be implication on TAX.
When I will be considered non resident of Canada. Will my son considered non resident of Canada if he study on USA on US Green Card status. Please help me. I am confused.
I will retire in a year and will have a BC government pension as well as CPP/OAS on which I plan to live in the UK ( Buy a house there from the funds of selling mine here in Canada). I am single. Besides that I have a RSP and some savings (under 200,000) which will probably go to supporting a lifestyle of travel etc after retiring
I have read many posts on your site about becoming a non resident of Canada but cannot see the tax advantages of becoming non resident when I will have minimal interest income overseas ? Whereas I understand from my pension department that regardless of where I live my pensions will still be taxed at source here in BC by the government, what advantage can I have then in severing ties and declaring non resident status/ ? On teh other hand I could easily maintain my residence status by coming back once a year and maintaining ties instead of severing them.
I only see the disadvantage of losing my Health Card so if I wish to return in an emergency I dont have coverage and having to renounce drivers license and lastly being under CRA scrutiny if I become non resident.
Am I missing a key financial beneit of becoming a non resident in my case?
Thanks
Roger
Hi Allan,
I am planning to go to India for sometime. I have funds in RRSP and TFSA. I have checked with my bank and they said that I can keep funds during NRC period and trade also. Just wanted to confirm with you regarding the same.
I think I don’t have to file taxes every year in Canada for any gains/losses during financial year. Could you please confirm?
Also what would be tax implications in India if I get profit in a financial year in RRSP and TFSA. Could you please advise?
Thanks for your help!!
Regards,
Kiran
Hi Kiran,
Thanks for your question. Your understanding is correct from a tax standpoint. BUT, check with your financial institution if they will allow you to continue to trade stocks / investments inside your RRSP & TFSA without any restrictions.
You should consult with a local CA in India to understand of the Indian tax authorities recognize the tax deferred status of RRSPs and TFSAs.
Dear Allan,
I am a Canadian citizen leaving Canada to work in Germany. The closing date of the sale of my primary residence is the day after I leave Canada, but I will not apply for residence in Germany for a few weeks after I arrive. My lawyer wants me to fill out a T2062 and withhold tax as a non-resident, but I think I am still a resident of Canada until I become a resident of Germany. Is my lawyer right? What can I do to avoid the withholding?
Thank you,
Evan
Hi Evan,
You can argue that you are still a resident of Canada while you have a primary residence in Canada. Your lawyer is being cautious. BUT, the treaty between Germany and Canada clearly says that you are a resident of the country where your permanent home is located.
If you require me to prepare a departure return for you, plus the applicable schedules, please let me know.
Hello Allan,
First, I wish to say that this site is very helpful, I have read almost everything!
Now my question: I am a non-resident of Canada and under election 217, I must complete schedule A “Statement of World Income” but I do not understand what the “net world income” means.
As I pay or will pay taxes on that amount, here in Italy, I would like to know if taxes have to be deducted from the gross amount to get the “net income” to report in schedule A .
Thank you very much.
Hello Ermino,
The purpose of filing a Section 217 return is so that you can pay taxes on Canadian source income based on your marginal tax rate (as though you were a resident of Canada). For low income earners, a Section 217 return is helpful, because their marginal tax rate is usually lower than the withholding taxes deducted from their payments (e.g. CPP payments, OAS payments, etc.).
Net worldwide income means all income that you earned from each country, net of related expenses. Your net worldwide income is used to determine your marginal tax rate in Canada. You will not be taxed in Canada on foreign income that you earned while you were a nonresident of Canada.
Hello,
My husband is working for US based company and moved to Texas.The company also gave him 2 projects in Toronto where they paid him as Non resident of Canada.He already paid taxes in US.Me and my three kids live in Toronto and will not join him.
What are tax liability for him here?Can he keep the ties with Canada as his family lives here and pay taxes here too.Please advise
Hi Sadaf,
It’s likely that your husband is still a tax resident of Canada, because he has a permanent home in Canada and his spouse and children live in Canada. As such, he will have to file a Canadian tax return and pay Canadian taxes on his worldwide income. He can receive a foreign tax credit for the American taxes paid on his Canadian tax return.
Note that your husband will be considered a resident alien if he resides in the US for more than 183 days in the year, or if he meets the Substantial Presence Test. To get out of being a US tax resident, he should file form 8833 with his US 1040-NR tax return with the IRS. We can prepare both his US and Canadian tax returns if you would like us to do so.
Hi,
Thanks for the info re. emigration.
In regards to emigration, in case family leaves before selling occurs and myself later after selling (closing), would principle residence exemption be applicable and no gains tax will be incurred or otherwise?
Please advise.
Thanks,
Razi
Hi Razi,
Yes, you can claim the property as a principal residence if you leave after closing. More specifically, the principal residence exemption can be claimed for each year that you resided in the property.
The downside of staying back while the house sells, is that you and your wife will still be considered as residents of Canada up to the date of sale. Residents of Canada are taxable on their worldwide income. If Canada has a tax treaty with your new host country, then you must examine that treaty to see if you can get any tax relief from double taxation.
Hi,
Both my wife and I are considered as non.residents as of June 2014. I have a few questions.
1. My wife went back to Canada in 2015 helped their parents out for 2 months at their business and generated a income of approx 6k. How will that effect our status?
2 Can I register a business under my name and still maintain non residency as long as the company itself files taxes? Lets assume i incorporate.
Thanks for the great article.
Thanks for your question. Just because your wife came back to Canada for a short period of time to help them out does not result in her becoming a tax resident. BUT, she should be careful to limit her ties to Canada, because if she has lots of them, then she could be considered a resident of Canada.
Non residents are allowed to do business in Canada and so are corporations in Canada with nonresident shareholders. Again, be careful to limit the number of ties that you have to Canada to avoid being treated as a factual resident of Canada for tax purposes.
My husband has accepted a job in the USA on a TN visa, and starts work in 6-8 weeks. We would like to cut all ties to Canada for tax reasons. We need to sell our house, but there is no way it will sell or close before we leave (3-4 months is more likely). From what I understand, we need to file a T2062, T2062A, and T2091, on top of the T1161 that we file when we leave. I have a few questions. Our house has gained about $35k in value since we purchased it three years ago (significant renovations on our part!). For my questions, assume that it sells for $10k more.
1. If the purchaser is required to withhold 25% of the purchase price until the clearance certificate comes through, do we need to find the additional cash to discharge the mortgage? From what I understand, getting a clearance certificate can take months?
2. I assume that the USA will demand a chunk of the sale proceeds? Will they tax us on the full $35k or just the $10k? I understand that we can reduce this by a ‘foreign tax amount’, but I am worried that this will cost us thousands of dollars. I cannot find the answer to this question anywhere!
Hi Lily,
The purchaser’s lawyer will holdback 25% of the sale proceeds until you provide him/her with a Certificate of Compliance from the CRA. Since it can take several months for the Certificate of Compliance to be issued, you may have to arrange for temporary financing to discharge the mortgage.
The ‘cost’ of your foreign property for US tax purposes is equal to the market value of that property on the date that you become a US tax resident. Therefore, you will be taxed in the US on the sale of your foreign property to the extent that it has appreciated after arriving to the US. You can also claim a foreign tax credit for a portion of the Canadian taxes paid on the sale of the property.
Thanks for the great post.
How long can one maintain their residency status within Canada while living overseas? Are there any strategies to extend this? In my case, the goal is to avoid departure tax as I have shares in a non-liquid private company. My wife has a job offer in Europe – we would like to take the opportunity and eventually return to Canada.
Thanks again!
Hi Mark,
Keep a home in Canada that’s available for your use. A home can either be rented or owned. Come back to Canada as often as you can each year. Also, maintain as many personal and economic ties as you possibly can with Canada and limit the number of ties that you have in your host country. This will help to ferment your status as a tax resident of Canada.
Hi Alan,
I’m a non-resident of Canada (I’m a UAE resident) and I own a few rental properties in Quebec. They are currently under my name. I have the following questions for you:
1) would it be better to open an incorporated real-estate company and transfer them to the company. I was thinking of doing this so my children wouldn’t have to pay taxes on the capital gains.
2) if I buy other rental properties, do I need to file out any forms?
3) as a non-resident, can I buy life-insurance to cover my new mortgage?
4) you mentioned earlier, a non-resident can withdraw his rrsp tax free for a period of 5 yrs. what’s the annual cap he can withdraw annually and what are the conditions?
Thanks!
Kind Regards, Monica
Hi Mark,
I hope you can help me out here. I’m a Canadian citizen. I got very sick a couple of years ago and couldn’t support my self any more. I left Canada at the end of last year (Nov. 30/2015) and moved to Eastern Europe (my country where I was born in not the part of The EU). I’m unable to work anywhere. I sold my condo in Alberta and I’ll be coming to Canada for 3 weeks to finish the paper work. I authorized my brother to sell my place.
So, basically I was out of Canada 163 days but I’m planning to come back to Europe again and see if I will stay or come back to Canada. I have a brother in Canada. I’m worried that CRA might treat me as a non resident and that I might need to pay 25% of taxes after the sale of my condo is done. I want to avoid that at all cost as I haven’t decided where I’m going to be living due to my health situation. I let Services Canada and CRA that I might stay or I might come back to Canada. I believe I’m still a resident as I don’t have any particular ties in Bosnia where I live with my parents as a guest. They take care of me. I have a place to stay, sleep and eat.
On top of all of that. I might be forced to declare a bankruptcy in Canada. I’m still paying minimum payment on my unsecured LOC and credit cards. After the sale is over, a Canadian bank where which I had a mortgage with will get all of their money back, so I’ll stay without any assets and any income.
I was thinking to move money back to Europe until decide where I’m going to be living but I want to stay a resident of Canada. I just filed my tax return for 2015 to CRA. I don’t owe them anything, because I didn’t work at all. I didn’t receive any social help either. All RRSP money is gone already.
What do you suggest me to do? Shall I phone CRA and ask them if I’m still a resident? I’m so confused and helpless.
Thank you very much
Thank you for all the information. I need some insight on the following situation. My husband declared non-residency 3 years ago and went to work in Europe. Me and the kids were not sure if we were going to follow him (depending on how his work would do/kids health/etc) hence I have not declared non-residency. We have spent some time with him overseas and I have now decided to also declare non-residency as his overseas job becomes permanent. I am currently overseas with him.
So, what is the best way to do it? Come back to Canada, stay few days and then leave again so I can have a record of leaving the country? When is best to do this, right now or at the end of the year in order to declare non -residency when I file my tax return? I would like to do it as smooth as possible. I have filed taxes for the first 2 years but not for the last year. Your advice is much appreciated, thank you.
Hi Popy,
In this particular situation, I recommend that you file form NR73, Determination of Residency Status, with the CRA. This is because you potentially became a nonresident of Canada a couple of years ago when you left Canada. Once you receive a determination from the CRA, you may have to adjust your previous years’ tax filings.
Hello ,
I have inherited a property in the middle east from my father , actually it is occupied by my mother.
If I become Non resident to tax purpose , will this property be subjected to departure tax.
thx u
Hi Fady,
Yes, it will be subject to departure tax unless you become a nonresident of Canada within 5 years of moving to Canada and if you inherited the property while you were a nonresident of Canada.
Hello!
I am selling my home before leaving canada to get married in the U.S.
I am planning on leaving after “closing” and I plan to close out as many Canadian bank accounts
As possible. Will I be taxed on the cash I have in the Canadian bank? Should I move
This cash to the U.S.? If so how long do I have to do this after I leave? (I do have a U.S. Bank account)
Also, what do I do with my daughters RESP?
Thank you!
Hi Kristy,
You don’t have to close your bank accounts. If you decide to do so, the cash received is not taxable to you.
You can keep your RESP but don’t make any contributions to it. Withdrawals are taxable to you in the year they are made (Canada). In the US, any income earned in the RESP is taxable in the year that it’s earned, and form 3520/3520A must be submitted to the IRS in respect of the RESP.
Hi,
I became a Canadian citizen 4 years back along with my wife & son. Now we have received our family sponsored US immigrant visa, and are living Canada for good by the end of June. We don’t have any real estate in Canada. We’ll take all our household items with us including furniture as well as the car. We are planning to keep our bank account with TD to do cross border banking. We own a property in the US at which we are planning to reside. I would appreciate it very much if you could advise on what to do to declare ourselves as non-residents without having any tax implications. We don’t plan to come back to Canada to settle. Thanks!
Hi Tahseen,
You should file a departure tax return + form T1161 on or before April 30 of the following year. Also, provide your US mailing address to the CRA, Service Canada, and any financial institutions you deal with. You may be liable for departure tax on your US real estate. We can prepare the required returns and forms for you.
Dear Allan
Thank you for the excellent resources you have provided on your website – very helpful.
I married a US citizen last year and officially moved from Canada to the US on January 4, 2016 after obtaining my US permanent residency and Green Card. I am now living in the US. Before leaving Canada on Jan 4th, I sold my home, furnishings, car, non-RRSP investments, and divested my TFSA. Due to my elderly mother, I have come back to Canada to visit almost every 2 months for short stays and for the most part , I have used my mum’s home address in Canada as my mailing address for my ‘Canadian’ life still left there. The only financial assets I left were a significant amount of cash or term deposits in 2 Canadian financial institutions (the proceeds of my home sale), my RRSP, and my company pension plans that I wont be able to collect for another 5 years at the earliest. At the time I left, I also had my own HR Consulting company which I officially dissolved in May 2016 – taking $53000 in net proceeds from it as a dividend (issuing a T5). I also was in receipt of final 3 weeks EI due to me in the early part of the year when I was in Canada visiting – I checked with EI and confirmed I was entitled to it as long as I was on Canadian soil and looking for work (which I was) in the US. Finally, I filed an FBAR with the US government this past June. That said: 2 questions
1) I know you mention to advise of financial institutions (with whom I have bank accounts, credit cards etc.,) of address change so they can withhold appropriate taxes… however in using the calculator you have provided as a link on CRA’s site, for the $6000 Interest income I expect on deposits, it should tax due of $0. I really would like to my banking and financial life in Canada as is using my mums address (as I hope to move back there in 5 years) – is it absolutely essential to change my address with the FI’s? Can I not just report the interest when I file the joint US Tax return with my husband in 2017 and pay the tax to the US as worldwide income? What would be the implications if I left the address as a Canadian address?
2) I intent to file a departing ‘zero’ tax return in Canada in 2017 (for the 2016 tax year) for Jan 1 toJan 4, 2016. I plan on claiming the business dividend ($53000 T5 payout), the EI benefit (approx. 1$1500), and the Interest income mentioned above, on my joint US tax return with my husband in 2017. Any concerns from a Canada tax perspective on this approach?
My sincere thanks for your guidance and this excellent resource!
Sherry
Hi Sherry,
In response to your first question, you can keep your Canadian mailing address, so long as you inform the banks of your nonresident status. Banks and other financial institutions must follow special rules for nonresidents, part of which is deducting taxes on payments made to nonresidents. You are correct that the withholding rate is 0% for interest paid to American residents.
In response to your second question, your approach for filing is correct.
Allan,
I also forgot to ask, what happens to my CPP benefits when I retire if I’ve moved to the US and claimed non-residency in Canada prior to the retirement age? Do I lose them?
S
Hi Suzanne,
You will not lose your CCP benefits. However, they will not increase anymore, if you stop contribution to the CPP. When you begin receiving CPP benefits, a tax of 25% will be deducted from the payments made to you.
Hi Allan, Thanks for that information.
Does this taxation still occur if I am a dual citizen?
Thanks
Suzanne
Hi Suzanne,
Yes
I left Canada 2.5 years ago moving to UAE.
I worked here for 1 year and 10 months, own nothing in Canada only have a tax free savings which I have not contributed to at all.
I never have claimed non residency till this day nor filed any tax returns, and never called CRAz basically did nothing and just left. I am wondering what will happen when I go back and need to file a tax return what do I do and say?
Thanks so much.
Hi Sarah,
File a departure tax return with the CRA to establish your nonresidency status with the CRA. We can prepare this for you.
Hi Allan,
I’ve been a non-resident of Canada for three years, working in China. I’ve recently switched jobs to a Canadian company but still living in China. They initially wanted to pay me into my Canadian bank account (as they do for most of their employees, who are Canadians living in China but not non-residents), but I obviously don’t want that as then I would most likely be paying Canadian taxes on it. They can’t pay me in a Chinese bank account. How can I get paid and avoid paying taxes on it? They suggested instead invoicing them and getting paid like that? I also thought of maybe getting paid into my paypal account as it does not have an SS number on it. Any suggestions?
Hi Alan,
You can have your paychecks deposited to a Canadian bank account. Maintaining a Canadian bank account is a secondary tie and will not cause you to become a resident of Canada.
However, I do understand your concern as you do not want any red flags. Receiving payments through PayPal is a better option.
Hi, me and my girlfriend are leaving canada next summer, both from quebec city, 24yrs of age, still living in parents houses so we don’t own our own house, we will sell the car and the only thing we will have is our passeport, 2 RRSP(2019-2020), driver licence, banking and maybe credit card we will travel the world on working holiday visa one after another for around 5 years, we will stop where we feel home. Is it possible to become a non-resident of canada for taxes purposes in our case ? I will not get any income from canada and will work in each country for living and activities. btw the 2 RRSP are on my girlfriend name. is that matter. and with working holiday visa we will be ask to open a bank account, should we close our canadian bank account and credit card we lessen our ties with canada. thanks in advance.
Hi Steven,
You will likely become non-residents of Canada, because you have so few ties to Canada. To be conservative, you can cancel your bank account and credit cards.
Hi Steven,
“Thanks for your question. Note that there will not be a deemed disposition because your first home will still be a ‘personal use property.’ A deemed disposition occurs when there is a change in use, e.g. from personal to rental.
The principal residence exemption can be made on a year-by-year basis. So long as you live in both properties on a regular basis, you can claim either one of them as a principal residence. You won’t know which one is better to claim until you are about to sell one of the two properties. At that time, you will have to determine the appreciation in the house values per year and assess accordingly.”
Hello,I was deemed a nonresident in February of this year and was in the Canada for about 20 days In April I plan on going back this October for about 20 more days is this a problem cause I’ve read you need to stay out for a full year from the start. Also what if I don’t become a resident of another country and just travel is this also a problem ??
Hi Chad,
If you are not in Canada for 183 days or more AND do not maintain significant ties to Canada, then you will be considered a nonresident.
“Hi, I am divorced Canadian with a child under age of 18. They live with the other parent but we have shared custody. I currently live in another province in Canada but see them regularly.
Would having dependents that don’t reside with me prevent me from getting nonresdident status.
How would my child support be calculated if the country I have moving to has no treaty with Canada?
Thanks
Hi Charlene,
By having a dependent in Canada, which you do, you will be considered a factual resident of Canada. If you move to a country that has a tax treaty with Canada, you may be able to claim non-resident status with the CRA. Spousal & child support will be calculated according to provincial law.
“The dependent does not live with me and has not lived with me for almost 2 years.
We live in separate provinces. I am divorced from his father for 10 yeas now. I am remarried and my husband and son will be relocating with me.
The country I am moving to does not have a tax treaty with Canada.
I spoke with CRA today , based on this information they advised I should not have had a problem getting nonresident status… what do you think ??”
Hi Charlene
You will have a problem. Even though the dependent does not live with you, the dependent is financially dependent on you.
“I’ve been a non-resident of Canada for three years, working in China. I’ve recently switched jobs to a Canadian company but still living in China. They initially wanted to pay me into my Canadian bank account (as they do for most of their employees, who are Canadians living in China but not non-residents), but I obviously don’t want that as then I would most likely be paying Canadian taxes on it. They can’t pay me in a Chinese bank account. How can I get paid and avoid paying taxes on it? Did they suggest instead invoicing them and getting paid like that? I also thought of maybe getting paid into my PayPal account as it does not have an SS number on it. Any suggestions?
“
Hi Alan,
”
You can have your paychecks deposited to a Canadian bank account. Maintaining a Canadian bank account is a secondary tie and will not cause you to become a resident of Canada.
However, I do understand your concern as you do not want any red flags. Receiving payments through PayPal is a better option.”
“Hi,
We are a Canadian family (couple with 3 kids) living in Quebec and we had to leave Canada end of July due to family emergency back to our country of origin.
We are not renting anymore as the landlord repossessed the apartment and we’ve sold our furniture & cars. Me and my wife, we are still keeping around $15k dollars in our bank accounts. We are still receiving child benefits, tax credits, etc… from both Quebec & Canada. We are still keeping our driving licenses & medical cards.
We might stay outside Canada for many years, would you please let us know what we have to inform Revenu Quebec & CRA? And when?
Thanks,”
Hi Moe,
To properly answer your question, I need to know the name of the country where you are moving to. It’s possible that the country has a tax-treaty with Canada, which sets out the rules for determining your residency status. Based on the ties you have mentioned below, I do not believe you will be considered a factual resident of Canada once you and your immediately leave. Remember to file a departure return with the CRA and Revenue Quebec.
if I have investments in mutual funds with a bank do I have to sell them and pay a departure tax? or I keep them and only pay a withholding tax on the dividends?
“Hi Simon,
Thanks for your question. I assume that the mutual funds / shares have gone up in value since you bought them. If you sell these investments before you leave from Canada, you will pay capital gains tax. If you do not sell these investments before you leave from Canada, you will pay a departure tax. Note: Departure tax = capital gains tax.”
Hi Allan,
I am leaving Quebec for Australia on March 2017. I intend to stay in Australia temporarily and return back to Canada. I didn’t understand when do I have to submit my final personal tax return? You mentioned: “don’t forget to file a final Canadian personal tax return for the taxation year you leave before heading abroad”. Is that even possible that I file my tax return for year 2017 on March when my understanding is that we only start filing taxes on February of the next year (aka February 2018). Would you kindly clarify when I have to submit my last income tax?
Thank you,
Honey Lane
Hi Honey,
If you are permanently leaving Canada to move abroad in March 2017, then you must file a departure tax return by no later than April 30, 2018. The earliest that I can file this return for you is in February 2018, because that’s when the new forms are released by the CRA.
Hello,
I have a LIRA in Alberta that can be unlocked after 2 years of non-residency. I emigrated to Australia in early 2015 (and filed a departure return) and will soon be eligible to do this. I don’t need the money in the short term, but unlocking it would provide future flexibility if there is no penalty. Does unlocking a LIRA under these circumstances turn it into a regular RRSP (i.e., with no tax consequences) or does it terminate the tax shelter and trigger withholding taxes?
If this can be done with no tax consequences, I will need to submit an NR73 to obtain a letter from the CRA certifying my non-resident status. I have no ‘significant’ ties to Canada, but a number of secondary ties (bank accounts, credit cards, investment accounts, a professional membership, and a drivers license that hasn’t expired yet). Will the tax treaty override these secondary ties? The consensus seems to be never voluntarily submit NR73 and the risk of being declared a resident outweighs the benefits of unlocking a LIRA. I would not proceed if NR73 might cause other complications.
Much appreciated!
Hi Steph.
Check with your financial adviser if your unlocked LIRA can be transferred to a RRSP. If it can be transferred to a RRSP in full, then you won’t be liable for personal taxes. However, if you close the LIRA and cash-out, then a non-resident tax of 25% will be deducted from the cash withdrawn.
I understand that you are hesitant to complete form NR73. However, if the financial institution holding your LIRA requires this, then you have no choice. Note: The tax treaty between Canada and Australia over-rules Canadian domestic legislation regarding determination of your Canadian residency status (secondary and primary ties).
I have left canada in january and I have no primary ties to canada. As far as secondary ties go i still have a passport and a non interrest baring bank account wich I am trying to get closed. I am a permanent self employed traveller. Should I file the departure tax form with the 1161 form even though i have no physical possesions. Also since I have not established residency elsewhere how will that work for me. I live in international waters on a boat year round.
Hi Ari,
Generally speaking, you have to be a resident of a country. However, if you have a limited number of secondary ties and no primary ties you can argue that you have become a non-resident. In that case, file a departure tax return. You do not have to file form T1161 if your assets are less than $25,000 as of the date of your departure.
Greetings,
My family and I are considering moving Chicago next year but was wondering if we would qualify as NR if I was to rent my home via a 3rd party and keeping only our RRSP, LIRA, TSFA, cash accounts and RESP open would CRA still treat us as Canadian residents and only paying taxes on the Canadian source income?
Kind regards
Hi Ronnie,
Based on the facts that you provided, you will be considered to be a resident of the US and non-resident of Canada for tax purposes. This is because of the Canada-US tax treaty. You will only pay tax in Canada on Canadian-sourced income. We can file your Canadian departure return and dual-status return in the US for you.
Dear Allan,
Do I have to file T1135 if I am non-resident of Canada?
Thank you,
Ann
Hi Ann,
Only residents of Canada have to file form T1135.
Good day,
I quote: “Lastly, don’t forget to file a final Canadian personal tax return for the taxation year you leave before heading abroad”
We are planning to move abroad in July 2017.
Question: Will the filing of the final Canadian personal tax return not be before or on April 30, 2018, thus after heading abroad? Or should I file just before leaving Canada?
Hi Commonground,
The final return is due on or before April 30, 2018. You will have to file after you leave Canada. We can prepare this return for you.
Dear Allan,
I am planning to move permanently back to Germany in 2017.
I will have been contributing about 7 years to a health employees pension plan.
Upon permanently leaving Canada, is there an advantage in moving the commuted value of the pension plan into a LIRA?
I would like to get my pension plan contributions as a lump sum after 2 years of non residency in Canada
and will apply to CRA to get the contributions released.
Will the pension plan administrator or the LIRA institution retain 25% of the total?
If this is the case, will there be a way to get back some or all of the 25% tax?
Thank you.
Hi Maria,
If you transfer your pension savings to a LIRA, then there should not be any taxes deducted upon the transfer. If you cash-out your retirement savings after 2 years from becoming a non-resident, 25% taxes will be deducted from the cash paid to you. Note: The 25% withholding tax may be reduced by a tax-treaty.
I am a non resident worked in Canada for 5 years.
CPP and UI was deducted . I am leaving to my country of origin and most likely not return.
What will happen to my CPP and UI contributions ?
thanks
Thanks
Hi Charli,
When you reach the age of retirement, you will receive Canada Pension Plan benefits even if you live outside Canada, based on the contributions you made. You cannot recover the EI premiums you paid.
Hi Allan,
I am a co-owner of a parcel of land worth 25,000$ which I am not planning to sell. I have TFSAs and RRSPs as well. I would just like to make sure I understand it properly. You said I wouldn’t have to declare any of those and file departure tax for those right?
Secondly, do you know if RRSP withdrawal in Australia are taxed in Australia?
Thank you,
Honey Lane
Hi Honey,
If the land is located in Canada, then departure tax will not apply to it. Also, departure tax will not apply to RRSPs and TFSAs. Remember to complete form T1161 to report the market value of the land on the date of departure. Form T1161 should be attached to your departure tax return.
Please confirm with an Australian accountant if foreign pension withdrawals (i.e. RRSP withdrawals) are taxable in Australia.
Hello Allan,
Ive gotten a job in michigan and would have to move over to the state . I currently possess a canadian passport, driving license , health card, costco membership, gym membership & bank cards. I do not possess any other ties to Canada.
Since my job is only for 3 years (TN Visa) & the visa is attached to my passport, can I still be considered a non resident of canada?
Thanks
Adithya
Hi Adithya,
Yes, you can be treated as a non-resident of Canada once you move, because of the Canada-US Tax Treaty. According to the Treaty, you are a resident of the country (Canada or US) where your permanent home is located. A permanent home can either be rented or owned. So long as you do not have a permanent home in Canada, and have a permanent home in the US, you will be classified as a non-resident of Canada.
Remember to file a departure tax return with the CRA and dual-status return with the IRS. I can help you with this.
How is FMV of a principal residence determined and what documents would be asked to support the choosen value?
Hi Wenyi,
FMV of a property can be determine by an appraiser or experienced real estate agent. The FMV is a property is derived by comparing it to similar properties that have recently sold. There should be at least 3 comparable properties.
I have been living in the US for over 3 years now and want to file the NR73e form to declare that I am a non-resident as of Jun 1, 2016 for my 2016 tax year. I have a rental property in Canada and have not setup a Witholding account. I was told to contact 855-284-5946 to setup such an account. I have been receiving rental income for 2016 without such an account. Will I be penalized for setting up such an account late? What are the estimated fees? Additionally, my wife would like to claim her non-resident status as of Jan 1, 2016. Will there be a point of contention if my wife and I file for non-resident status on two separate dates? Thanks, D
Hi Dwayne,
Instead of filing form NR73, Determination of Residency Status, consider filing a departure return for the 2016 tax year along with form T1161 to report your assets remaining in Canada. The fee is $250 / person plus disbursements and taxes.
Also, you and your wife need to file a Section 216 Non-resident Return with the CRA. This return is still not due. You will face some penalties for failure to pay monthly taxes equal to 25% of the gross rents collected. The fee to file a Section 216 Non Resident Return is $225 / person plus disbursements and taxes.
Hi,
I left Canada on Dec 8th, 2008, and 8 filled a tax return forms on 2009, but I did not mentioned that I will leave Canada. Can I know fill a form to determine my residency status? Since 2008, I’m a resident of UAE, and I dont have any primary or secondary assets,
Hi Rafa,
Since you already filed a tax return for the 2008 year without mentioning your departure date, you will now have to file form NR73 in order to correct it.
I believe I am still receiving GST/HST credits and left Canada in august in 2014. My family accountant has been filing my income as $0 since I left. Is there a way to pay these credits back? Is there a penalty of doing so?
Hi James,
If you became a non-resident of Canada, you should have filed a departure tax return with the CRA. Instead, your accountant is continuing to file tax returns with the CRA with an income of $0. This is why you are still receiving tax credits. To solve the problem, file form NR73, Determination of Residency Status, with the CRA. Once you receive a determination from the CRA that you are in fact a non-resident of Canada, then amend the previous returns that you incorrectly filed with $0 income.
Hi,
i just moved in here in the usa nov. 4, 2016. i am filing my income tax return in canada since i still worked from jan-oct. 2016. is there any special forms that i need to sign? or is there any possible refund i can get? i dont have any investments or rrsp etc.. also, how about my cpp contributions? i lived in canada for 8 years as permanent residence. pls. help. thanks!
Hi Mari,
If you have permanently left Canada to live abroad (e.g US) then you should file a departure tax return with the CRA plus form T1161 (if required). This will be your final tax filing with the CRA, unless you continue to earn income in Canada. I can prepare these returns / forms for you.
Hello,
I didn’t file my tax return in Canada for 2015 because I was working abroad in Belgium. I paid my taxes and everything else in Belgium and I only used my bank account in Canada to pay for my student loans every month. I returned in 2016 and I want to file my tax return for 2015 and 2016 this year but I’m not sure how I should mention that I wasn’t a resident in 2015 while still filing my tax return. I have my pay slips as proof. Help plz. Do I fill out an NR73 even though I have left and come back already??
Hi Waleed,
File a departure tax return for the 2015 tax year to establish your non-residency status with the CRA. Then file a part-year resident return for the 2016 tax year with the CRA to establish your re-entry to Canada. I can prepare both returns for you.
Hi
Your article is informative. I plan to move to united states by the end of march 2017. I have non-registered mutual funds with two different financial institutes in Canada,. Should I sell my funds before departing to avoid departure tax or withholding tax? Thanks
Hi, ZM
Yes, sell the funds that have appreciated in value to avoid departure tax and withholding taxes.
Hi there, what type of tax accounting will I need if I decide to sell my home and live overseas?
At 65, I will sell my house and have those proceeds to invest. My only other income with be CPP/OAS. Can I continue to have my investment accounts in Canada?
Thank you,
Richard
p.s. Do you tax accounting for non profit foundations ?
Hi Richard,
To become a non-resident of Canada, you have to break all of your primary ties and most of your secondary ties with Canada. Also, you will have to file a departure return with the CRA.
Yes, you can still invest your money in Canada even if you are a non-resident. However, there may be some restrictions if you invest in marketable securities through a Canadian brokerage / Canadian financial institution. You should speak to your financial adviser about these restrictions.
In addition, withholding taxes at a tax rate of 25% will be deducted from OAS and CPP payments made to you while you are a non-resident of Canada. This tax rate can be reduced if there is a tax treaty in place with Canada and your new home country.
Hi Allan,
Thank you kindly for this information. I find it very helpful!
I have a question and do need your help, please. My husband and I are Thai, but we obtained the Canadian citizenship years ago. We decided to move back to Thailand so we applied for the non resident. I was wondering if my Canadian passport is still valid to travel to other countries? Can it get cancelled after becoming non resident of Canada?
Thanks in advance for your help.
Regards,
Lulu
Hi lulu,
If you are a citizen of Canada, you do not have to give up your Canadian passport. However, it does have to be renewed after a certain time period.
Hello Allan,
This is a very helpful site.
Myself and my family have been residents of canada for the past 6 years and arer already canadian citizens. I have an opportunity to go for work outside canada for a 2-3 years on a project and would like to take my family with me. Is it actually mandatory to declare non-residence or can i just inform citizenship to stop my child benefit and GST/HST credits for the period I am outside?
Hi, George. You and your wife should file departure tax returns with the CRA. Otherwise, you will continue to receive notices to file your tax returns and may receive benefits which you are not entitled to.
Hi Allan,
Thank you for your very informative videos and articles. I have a few questions as follows:
The Tip at the end of item 7. (“Disclose All Canadian Assets”) states that Canadian real estate does not have to be disclosed on Form 1161. When I read the list of exclusions on the form itself, I don’t see a reference to this specific exclusion. Am I missing something?
Also, under item 8. (“Deemed Disposition of Property”), it is mentioned that the Departure Tax in not applicable to Real property situated in Canada. However, in your article entitled “Canadian Departure tax Rules” dated Sept. 4, 2015, you do calculate a departure tax on the Canadian Rental Property referred to under Situation 2 of the example presented in that article. Could you please clarify if a departure tax should indeed be levied on Real estate properties (both in or outside of Canada)?
Finally, you state the following in item 9. (“Selling Your Home After Leaving Canada”): “Fortunately, there is a special tax election that you can make to reduce the amount of tax to 25% of the gain on sale of your home (i.e. instead of 25% on the gross selling price of the home).”. Could you please clarify how can I make this election (which form must be used for that)?
Thank you!
Hi, Manny. Thank you for your questions. I need to update the article. Canadian and foreign real estate must be disclosed on form T1161. However, departure tax does not apply to Canadian real estate. Furthermore, an application for a Certificate of Compliance (Form T2062) must be filed with the CRA within 10 days of the closing date. Once the Certificate is issued by the CRA, the buyer’s lawyer (or title company) will release the funds held-back (i.e. 25% of the sales proceeds).
Hi,
I would like to know if I need to declare taxes for this year if I didn’t have any income and I am not in the country at the moment. I would like to stay for some time outside Canada but I would like to keep my bank account and credit card. Will I lose that if I declare myself as a non-resident? Do I need to declare any income if I won’t be living there? My dad has a similar situation but he does receive CPP which is around only $7. He will be living in Ecuador from now on and there is a tax treaty with both countries. Can we wait to file his taxes? I feel a little confused in what to do and what my residence status will be if I keep small ties with Canada. I would like to come every other year. What do you recommend me?
Hi, Elizabeth. If you have a few secondary ties, it’s unlikely that you will be classified as a resident of Canada. The correct procedure to become a nonresident of Canada is to file a departure return for the year that you permanently left Canada.
After filing a departure return, you do not have to file another return with the CRA, unless:
– you carried on business in Canada
– you were employed in Canada
– you sold Canadian real estate
– you want to file an optional return to reduce taxes on certain types of Canadian income
Thank you so much for your answer. What kind of form is this so I can file a “departure return”? Can I do this online or it needs to be sent in physical form?
Hi, Priscilla. Download a T1 General Return from the CRA’s website, or use a tax preparation software. On the T1 General Return specify the date of departure and your new foreign address. In addition, you may have to complete forms T1161 and T1243.
Very interesting Mr. Madan and I have learnt a lot . Thank you.
I have a question, my husband is 83 years, 84 in October, with a pace-maker. We left Canada, January 15th of this year, for our usual visit to my son who lives in Costa Rica, where my husband enjoys his walks without snow. We planned on returning July 1st but he got very sick and now we are still out of Canada and it is September 9th. Will we have to pay the August payments back to OAS and CPP with the penalties. We are now filing the NR 73 Determination of Status Form to become non- residents of Canada. We have no assets any more in Canada, only a bank account each and a credit card each. Cancelled the health care of B.C. What are our circumstances.
Hi Elaine, if you do not intend to return to Canada, and you have only a few ties (as mentioned in your message) to Canada, then it’s very likely that you will be classified as a non-residents of Canada, along with your husband. After filing form NR73, you will each receive a “Notice of Determination” from the CRA, likely confirming that you both became non-residents. Once the Notice is received, both of you should file a departure return with the CRA, which will be your final tax filing.
Note that 25% taxes will be deducted from your OAS and CPP payments. This rate may be reduced by a tax treaty. Consider filing a Section 217 return with the CRA to recover a portion of the taxes withheld.
What if you own a small business and have some retained earnings that you haven’t withdrawn as dividends? Do they tax them and at what rate? The capital gains rate?
Hi Stu, the value of your shares is subject to departure tax (i.e. a capital gains tax) on the date you become a non-resident of Canada. The value of your shares is derived from the value of your business. If your business has no goodwill, then its value is equal to its retained earnings.
Consider paying a dividend to reduce the retained earnings to $0 in order to avoid paying departure tax.
Allan,
I understand that a non-resident can be a director of a Canadian corporation as long as he/she is a Canadian citizen and has a Canadian address, (not a PO Box), but possibly a UPS store box (which includes an address & unit number).
Assuming this is true, would this be considered a “secondary tie”?
Thanks in advance,
Mike
Hi Mike, a Canadian mailing address is considered a secondary tie, as is being a non-resident director.
Hi,
I am try to understand what is the tax treaty between canada and India for TFSA.
If I move back to India, will the returns from my TFSA be taxed in India ?
I also have the same question for RRSP and RESP.
Hi Kuberan, the tax treaty between India and Canada specifies the maximum withholding taxes that can be levied on payments made from a RRSP, RIF or other Canadian pension to a resident of India. The treaty does not discuss the taxation of RRSPs, RESPs, and TFSAs in India.
Hi Allan,
I left Canada at the very end of 2015 thinking I would be away for only a year (working overseas in Europe) but have since been gone and working for a total of 2 years. I have decided I won’t return to Canada for at least a few years. I owe money on my HBP and have been contributing the minimum since I planned to return to Canada but since I’ve decided not to for the time being, do I notify the CRA of my non-residency based on the 2015 year or based on the current year (2018)? What does this mean in terms of the HBP payback, I read it must be either 60 days of notification of non-residency or prior to submitting my income tax claim for the taxation year? What happens if you do not have the lump sum to pay back the amount owing? Finally, what happens to the investments I have in Canada? They have just been renewed for a 30 month period, so I cannot withdraw to payback my HBP even though I have the funds.
I appreciate your help.
Karen.
Hi Karen, if you would like to establish that you became a non-resident as of 2015, then you will have to submit form NR73, Determination of Residency Status, to the CRA for processing. Should the CRA determine that you became a non-resident in 2015, then the unpaid balance of the Home Buyers Plan as of 2015 will be added to your income for the 2015 tax year. As a result, you will owe tax and interest on the unpaid balance.
That was really awesome.
One question or maybe an area I would love a little more info. on, and possible strategies on, is breaking your primary tie to your residence. I know one can sell their place (obviously) but is there a way to rent without having substantial income? I believe the rental must be to a non-arms length individual or is that flexible?
Hi Clayton, you can rent your property to family member. BUT, you will have to remit a 25% withholding tax for the rents collected to the CRA and file a Section 216 non-resident return in respect of he rents collected and rental expenses incurred. In addition, if you are charging less than market value rents, then you cannot claim a loss.
Your blog says that the bank must withhold a 25% tax on interest earned. I thought the rules changed on Jan 1st 2008 .
Here’s an extract from the government’s website “ Generally, the interest that you receive or that is credited to you is exempt from Canadian withholding tax if the payer is unrelated (arm’s length) to you.”
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html#txblgtns
Hi Lama, you are correct. Withholding tax is not applicable anymore on interest paid to non-residents of Canada.
Hi Allan,
Thank you for very informative website. I left Canada about 7 years ago. During this period I visited Canada a few time. At the time of my leaving Canada I did not Surrender my health card. My question is that can I do so now. I did not use my health card in Canada since I left Canada.
I will greatly appreciate your guidance.
Thanks and best regards,
M. Ali
Hi, surrender your health card as soon as possible.
Hi Allan,
I and my husband jointly owned our property in Canada. It was our primary residence and we’ll be renting it from next month since we are moving to US for work. While moving from Canada to US, do we have to list that property on T1161 form as well as fill out forms T1243 and T1244? We will definitely be coming back to Canada since it is our home.
Thanks
Hi Neha, if you are becoming non-residents of Canada, then report the property on form T1161. The other forms you mentioned are not needed for this property. Departure tax does not apply to Canadian real estate.
Hi Allan,
Your site is great and best one out there. I am moving to US for work and have GICs in my RRSP and also in my TFSA. Can I keep them or should I sell them? I plan to return to Canada after few years and would surely need my savings as a fall-back on my return.
Thanks a lot and appreciate your help,
Sam
Hi Allan,
Nice writing. Your blog article is the best one I read so far about the topic of tax.
My husband(PR) and I(Canadian citizen) left Canada in December 2015. Although we didn’t stay in Canada for the last 2 years, we filed the tax for both 2015 and 2016 because we were not sure if we will go back soon. Recently, we decided to stay outside of the country because we both got job offers.
Few questions:
1. How do I inform Canadian government that we decided to change our residential status to “non-resident”?
2. What should I do to complete the file for the tax of 2017 by April 30?
thank you very much.
Hi, file a departure tax return with an effective departure date of January 1, 2017, so long as you have no primary ties to Canada and no more than a handful of secondary ties to Canada.
I am planning on going to university overseas to study for 3 years and wondering as a citizen and student, what are the tax implications and info I need to know if I were to rent my house while I’m out of the country?
Thank you!
Hi Tony, if you become a non-resident of Canada, and rent your house in Canada, then you must remit a monthly withholding tax of 25% of the rents collected to the CRA. This tax can be recovered by filing a Section 216 Non-Resident Return each year with the CRA.
Hi Allan !!! Thanks for posting on this blog.
I’m a permanent resident from 2016 and planing to leave Canada or request citizenship and become non-resident. I don’t own canadian assets only foreign property and I have some questions about the departure tax and disposition of property.
1) please explain this “property you owned when you last became a resident of Canada, or property you inherited after you last became a resident of Canada, if you were a resident of Canada for 60 months or less during the 10-year period before you emigrated”.
As I was on work permit(temporary resident) from 2012-2013, 2013-2015, 2015-2016, and 2016 – present became Permanent Resident (PR), do I qualify for this rule since the last time I became resident was 2016, or my residency will be counted from 2012 ???
2) If i sell all my foreign property before the date of leaving do I still have to pay departure tax???
3) If I will ask for my PR status to be revoked do I still have to file with CRA and pay departue tax?
4) what forms do i exactly need to file ? T1 and T1161 plus applicabable shedules? and can I file them before departure even if the year has not ended?
Your advice would be very helpfull in taking a decision on my options and still be entiteled on my CPP contributions.
Thank you
Hi Dan, if you moved to Canada in 2012 and permanently resided in Canada since then, except for occasional trips outside Canada, then you effectively became a tax resident of Canada in 2012. As such, you have 60 months from the month that you moved to Canada in 2012, to depart from Canada in order to avoid paying departure tax on foreign assets acquired prior to 2012.
It’s a bad idea to sell your foreign assets while you are a resident of Canada, since you will have to pay capital gains tax on the profit made on the sale. Revoking your PR status in Canada will not help you avoid payment of departure tax. To compute the departure tax payable, complete form T1161 and form T1243. These forms should be attached to your departure tax return.
Lastly, don’t forget to file a final Canadian personal tax return for the taxation year you leave before heading abroad
The above is confusing as if i need to file tax before I leave. If I leave in this month, I will have to pay tax only before next year Apr 30 2019; However inform the CRA so that you dont receive any benefits. Is tat correct?
Hi Subbiah, if you permanently leave Canada in the 2018 year, then you must file a departure tax return with the CRA by April 30, 2019. Shortly after you leave, update your foreign mailing address with the CRA, Service Canada and any financial institutions that you deal with.
Hi Allan, if I become a non-resident and owned Canadian public shares through a Canadian broker (Questrade), I have to report the gains at the market value, correct? How about gains I will make when I actually sell them? Do I have to report the gains as a non-resident?
Hi Andy, yes, you have to report the gains at the market value as of the date of your departure from Canada. If you eventually sell the shares after leaving Canada, then you do not have to pay capital gains tax.
Hi there,
I’m hoping you can clarify the following for me.
1. I left Canada on Jan. 2, 2016 to work abroad. The last tax return I filed was for the 2015 year (I did not earn any income on Jan. 1, 2016 so didn’t think I needed to submit anything for 2016) – should I have filed a tax return for 2016 stating that my departure date was Jan. 2, 2016?
2. I broke nearly all ties with Canada when I left in 2016 (no primary ties, only 2 secondary ties – a bank account which was mostly inactive, and a Canadian passport). I returned my drivers license and health card. Now I am planning to go back to Canada for 1 week, get my license and health card back and travel for at least 1 year (after which point I have no intention of settling permanently in Canada). I have a 1 year visa for Australia that allowed me to work, and I will have to pay tax in Australia on that income. However because the visa is only for 1 year, Australia would not consider me as a resident for tax purposes. Would I then be considered a resident in Canada? Should I fill out an NR73 form when I go back to Canada, even though I will only be in Canada for 1 week in 2018?
Many thanks
Hi Ina,
My answers to your questions are as follows:
1. File a departure tax return for the 2016 tax year with a departure date of January 2, 2016.
2. Filing form NR73 is optional. The downside of filing it out, is that you open yourself up to scrutiny from the CRA.
3. You should not apply for your health-card if you are a non-resident of Canada for tax purposes.
4. If you only have a few minor secondary ties, as you do, and no primary ties to Canada, then you are a non-resident of Canada, even though you do not have residency in Australia.
Hi Allan,
Very informative post, thanks for taking the time to answer our questions!
I’m planning to move to Vietnam to retire and would prefer the factual resident option since I project that my average taxation level will be below 25% with the credits and would still like to contribute to my TFSA.
As far as primary ties, I have a house and my 18 year old son lives in Canada. I also have secondary ties… Bank account, RRSP, TFSA, driver permit, plan on spending 2 months a year in Canada,…
My questions:
-The fact that my son will permanently live in Canada, is that enough to have the factual resident designation? Does my son always remain a dependent even if he’s major? If not, when does he start not being a dependent??
-I would prefer to sell my house before leaving but would consider keeping it and renting it part time, if it’s necessary to be considered as a factual resident.
Thanks in advance for your help!
Daniel
Hi Daniel,
Your dependent child will remain your dependent so long as you financially support him. Once you stop supporting him, he will no longer be your dependent. More importantly, however, is your place of residence. I understand that you are selling your residence in Canada and are permanently moving to Vietnam with your house. According to the Canada-Vietnam tax treaty, you are a resident of the country where you have a permanent home. If you have a permanent home in both Canada and Vietnam, then you are a resident of the country where your personal and economic relations are closer.
Since you and your spouse are only going to have a home in Vietnam, you will both become tax residents of Vietnam and non-residents of Canada.
Hi Allan,
I left Canada to Taiwan in 1995 for study and work (my parents are still in Canada). I still have secondary ties such as driver’s licenses, bank account and health card in Canada. Am I still considered as non-resident? If I need to transfer money to my bank account in Canada to pay for a deposit for a property (since I plan to return to Canada in 2-3 years), do I need to file or report the money that I transfer to my Canadian account?
Hi Ash,
You are a non-resident of Canada, because you have been away from Canada for more than 20 years. I assume that you do not have a spouse nor a house available for your use in Canada.
You should give up your health card. You do not have to report transfers of funds from your foreign accounts to your Canadian bank account. Note: Once the property in Canada is constructed and available for your use, you will become a resident of Canada for tax purposes.
Thanks for the great tips and videos!
If a person was a resident before, but has been living in Canada for less than 5 years in the last 10 years, but bought stocks during this time, does this exempt them from having to do a deemed disposition of assets for the capital gains on the stocks?
What happens if a person leaves Canada, but does not realize they should inform the CRA of their non-resident status, and then later does inform them of the year they left, what should they do about any investment income that was bought after becoming a non-resident, and that they have gained dividends on that wasn’t withheld properly?
Thank you,
George
Hi Allan,
First of all thank you for your summary, it’s really informative!
I have a couple of questions:
1. I am moving to work aboard in a couple of weeks and is selling my condo right now. The transaction might not be complete before my departure. Is that a problem or it’s considered deposed as soon as I list my property?
2. I have no significant ties to Canada, but I plan to maintain my bank account, driver licence to convert abroad, withdraw my RRSP as non-resident after the 2018 tax year. I should still qualify as non-resident right?
Thanks,
Hi Charles,
You should take the position that you are a resident of Canada until the property is closed and title transferred to the new owner. In this way, you will not have to worry about a 25% non-resident withholding tax on the gross sales proceeds.
Yes, you will still qualify as a non-resident. There is a 25% withholding tax on RRSP withdrawals made by a non-resident of Canada.
what happen with my RRSP and LIRA account when I leave Canada?
Hi Alejandra,
Your LIRA will become unlocked within 2 years of becoming a non-resident of Canada. You can then make withdrawals from your LIRA subject to a 25% non-resident withholding tax rate.
RRSP withdrawals made by a non-resident of Canada are also subject to a non-resident withholding tax of 25%.
Hi! Thank for the info.
We (couple without kids) became tax resident in 2015 after landed in 2012.
We are considering to spend more time in our origin country which has tax treaty with Canada for personal obligations in 2019 for the next 2 – 3 years.
We do not own a house in Canada. But we will keep bank account, atm cards, investment account, TFSA, PR status and visit Canada about 3-4 months every calendar year.
Are we able to claim non-resident status from 2019 onwards?
Thank you.
Hi May,
Yes, you can claim non-resident status with Canada, if you only have a few secondary ties to Canada, and are a tax resident of a treaty-country. Make sure that you do not exceed 183 days in Canada in any 12 month period; if you do, then you will be a deemed resident of Canada for tax purposes.
I am divorced with an ex and child under 18 still living in Canada. I have moved permanently to the USA, buying a house. I do not have a house or car in canada, use hotel when I visit, and have cut all other ties except some secondary. because I have a line of credit still in Canada, I need to keep a PO Box active to receive statements (bank requirement). I come back less than 60 days each year. I forgot to mark on my 2017 tax return that this was my final return. What other steps do I need to do to be deemed non-resident? (I was told that the primary thing CRA look at is whether residency has been established in the USA and severed in Canada). My fear is that having a dependent will make me a resident no matter what….
Hi Mark,
Having a dependent child in Canada is a primary tie and will make you a factual resident of Canada. However, according to the Canada-US Tax Treaty, you are a resident of the country where your permanent home is located. You do not have a permanent home in Canada, as your child is living with your ex-spouse, but you have a permanent home in the US. Note: A permanent home can either be rented or owned.
Since you already filed a 2017 tax return as a resident of Canada, you have two options:
1. File form NR73, Determination of Residency Status with the CRA. Once you receive a positive response from the CRA (i.e. you are a non-resident), then file an Amended Tax Return for the 2017 year with your correct departure date. OR
2. File a departure return with a departure date of January 1, 2018.
Option 1 is the technically correct approach, but is more time consuming.
Hello,
Thank you for this article.
I will be moving to the US for work in 2 months. If I do not have any primary ties, and my only secondary ties are membership with a professional organization, a bank account, and a Canadian passport, would I be considered a resident if I maintain casual employment and work 6-8 shifts a year (doing so to maintain seniority as I plan to come back home after 5 years) in Canada?
Other pertinent info would be that my permanent residence will be in the US, I will be paying taxes there and deemed a resident there, and I will likely travel back to Canada 8-10 times per year (total days not exceeding 30).
Thank you
Peter
Hi Peter,
You will be a non-resident of Canada and a resident of the US once you relocate to the US. According to the tax treaty between Canada and the US, you are a resident of the country where your permanent home is located. As your only permanent residence will be in the US (after relocating to the US), you will be a resident of the US only for tax purposes.
I currently work for a Canadian company in Sarajevo Bosnia.
Right now I am still a resident of Canada
When I retire in 2020 I will probably remain here (I married a Bosnian woman)
Would I save on taxes if I became a non-resident and would that affect my retirement income?
Also —what if I decide to become a resident again one day?
Thanks
Hi Brian,
If you are still working for a Canadian employer (while residing in Bosnia), you will be liable for Canadian income taxes on your Canadian employment income, regardless if you are a resident or non-resident of Canada. If your primary source of income is from your Canadian employer, then you are unlikely to save tax by becoming a non-resident of Canada. Your eligibility for the Canadian Old Age Security (OAS) benefit may be impacted if you have not resided in Canada for at least 20 years after turning 18. Also, withholding taxes will apply to the payments of OAS and CPP benefits made to you while you are a non-resident of Canada.
Canadian citizens and eligible Permanent Residents can return to Canada again and re-establish tax residency. Any income earned outside Canada during the period of non-residency will not be taxed in Canada upon returning to Canada.
Hi, i been living in the states for the last 6 years and now the states is home, Im not planning going back to Canada but I want to bring a locked in rrsps because i need the money right now, I know I have to fill out the NR73, my only tie to Canada is my daughter who is 25 year old and she is leaving with my ex (her dad) now I don’t remember owing any money to the CRA but not sure, if i owe them can they take more than 25% of rrsps?
Thank you
Hi Rosa,
The maximum withholding tax rate on RRSP withdrawals made by a non-resident of Canada and a resident of the US is 25%. The financial institution holding your RRSPs will not deduct more than the maximum amount allowed.
Hi,
Thank you for this post. I am planning to move to the US, and I’m currently a Canadian citizen. If I co-own my house with both my parents in Canada (and will continue to pay for mortgage payments after I move), will I be considered a non-resident or a resident? What would you suggest I do?
I don’t have a spouse or kids, so that eliminates the other primary ties to Canada.
Thanks,
Lexi
Hi Lexi,
If you have a permanent home in both Canada and the US, then you are a resident of the country where your personal and economic ties are strongest. A permanent home includes a leased property or a property that you own (in part or whole).
if I was a resident of Canada for more that 60 months before I emigrated and I inherited money during that time, would this money inheritance be taxed if I moved out of Canada permanently?
Thanks
Hi David,
A cash inheritance placed in a Canadian bank account is not subject to departure tax.
Hello,
Does a U.S. bank account have to be reported on Form T1161 for a long term resident (greater than 60 months).
Thanks
Hi David,
Cash (including US bank accounts) are not reported on form T1161.
Hi Allan,
Thank you for your article. This is very informative!
I have two questions.
1. If I become a non-resident of Canada in Dec 2019, but my I sold my principle residence in Jan 2020. Will I get taxed on the sale of my principle residence?
2. I have signed a pre-sale condo while I was a Canadian resident. (1) Do I need to pay the 15% non-resident speculation tax if I am a non-resident at the time of condo completion ? (2) If I transfer my contract to an assignee, is there any tax I need to pay other than the 13% HST? Is there a way for me to get the HST rebate? Do I need to declare this sale when I file the tax of that year?
Thank you in advance!
Best,
Daisy
Hi Daisy,
Thank you for your questions. My answers are below:
1. A non-resident withholding tax of 25% of the gross sales proceeds will apply if you are a non-resident as of the closing date. You can recover this tax by filing an application for a Certificate of Compliance with the CRA. With this application, you will not have to make an additional payment of tax, because the property sold was your primary residence.
2. If you make an assignment sale of a property in Canada while you are a non-resident, then you will have to apply for a Certificate of Compliance. With this application, make a payment of 25% of the gain realized upon the sale of the property. In addition, you will have to file a Non-Resident tax return to report the profit made. Note that if the assignment amount is more than $30,000, then you must charge GST/HST to the buyer.
Thanks for the well written article! Is there a guidance how many credit cards one can keep when leaves Canada?
Hi Farid,
There is no maximum limit as to the number of Canadian credit cards that a non-resident can keep. Having said that, I recommend that you keep 1 or fewer Canadian credit cards, to minimize your ties with Canada.
Thank you so much! This site is exactly what I have been looking for.
I moved from South Korea in 2000 and became a Canadian citizen 2006. I am recently divorced with no dependents. I live in a small Northern AB city where I don’t have any Korean community to answer my question regarding the plan to move back to Korea as I have no ties here anymore. I am currently employed and live in an apartment. I would like to settle in Korea and have no plan to come back at all. I am just not sure where to start the process, perhaps your company could help me this process step by step over the phone or email and I am willing to pay. What confuses me at this point is regarding “SECONDARY RESIDENTIAL TIES”. Without Canadian bank accounts, driver’s license or Canadian passport, how would I prove that I am Canadian when I enter Korea? This may be a dumb question, but if you could answer that would be greatly appreciated.
Hi Leah,
If you are permanently relocating to South Korea, you can still become a non-resident of Canada for tax purposes and keep some of your secondary ties, so long as you do not have a home in Canada, spouse in Canada, or children in Canada. This is because of the tax treaty between Canada and South Korea.
I left Canada to live in a EU country for new employment and we don’t plan on returning back. Does my spouse need to fill out the nr73 also? Our family left on the same date.
Hi Julien,
Filing form NR73, Determination of Residency Status, is optional. You and your wife must file a departure return to become a non-resident of Canada.
Hi Allan,
Thank you for taking the time to write the very interesting blog posts and for answering the questions of all readers. Over the years the information you provided has been very, very interesting and useful.
I am wondering whether or not it would be possible for spouses to become Canadian non-residents at different times. For example, if I left Canada on 1 June, I would qualify permanent residency in Portugal in early December (after 183 days there).
If my wife left Canada in mid-July, she wouldn’t qualify for permanent residency in Portugal until mid-January next year.
Would it be possible for me to file a departure tax return and my wife file a regular one, then file her own departure return the year after that?
Thanks for any input that you could provide.
Cristian
Hi Cristian,
If you both have severed your ties to Canada and you both plan on living outside Canada permanently, and the only difference is that your wife left Canada 6 weeks after you, then the CRA will honor your departure date of June 1 and your wife’s departure date of mid-July. Therefore, you will both file a departure return with the CRA for the same tax year, but with different departure dates.
Is a single person that teaches in another country for a couple of years and is a resident of that county (Japan) then a non-resident of Canada. They have no ties to Canada other than her parents but assets etc. She does plan to come back to Canada to live in a few years after being abroad.
Is it wise to deem her a non-resident?
Hi Dolores,
Based on the tax treaty between Canada and Japan, she appears to be a non-resident of Canada. In this case, she needs to file a departure return with the CRA. Note: The determination of a person’s residency status is based on the facts, and cannot be chosen arbitrarily.
Hi Allan,
Thank you – this has been very helpful. If I leave in August of 2020 – that would mean I have been in Canada for more than 183 days in the calendar year. Would I then be taxed in my world income from August 2020-Dec 2020 even if I file a departure tax on August 2020?
Hi Linds,
The 183-day rule applies to exist non-residents that are visiting Canada. You are currently a resident of Canada, who is leaving Canada to become a non-resident. In this case, the 183 day rule does not apply to you. As such, you will become a non-resident effective the date you leave Canada (August 2020), providing that you have severed all of your primary ties and most of your secondary ties to Canada. Furthermore, you will not be liable for Canadian income taxes on income earned outside of Canada after your departure (August 2020).
Great post! I need to become non-tax resident for about a year and a half, then return to Canada to resume my PR. Do I just call CRA to let them know I will be out for the time period and that’s it? Is there any problem for resuming my PR status when I come back?
Hi Alvin,
You should check with an immigration lawyer with respect to your PR status. Having said that, if you leave Canada for less than 2 years and then come back to Canada, the CRA could argue that you never permanently left Canada. As a result, you could be considered a tax resident of Canada for the entire period. Tax residents of Canada are liable for Canadian income tax on their global income.
My family and I did a first trip to explore, now we decide to stay here in this country. I’m returning to Canada to close any tied. Should my husband go with me or I can go alone?
We should filled sing the papers to sold our house, house is sold now. Next step is declare as no resident, inform CRA and all the process.
Do they will take 25% of my equity if I declare no resident?
Which Tax form I should fill?
Thanks
Hi Carolina,
You should sell your home, and your husband should move with you abroad. If you have dependents in Canada, then they should also move with you. Furthermore, you should cancel most of your secondary ties to Canada. A departure return should be filed by you and your husband with the CRA. A withholding tax of 25% will not apply to the sales proceeds if you are a resident of Canada up to and including the closing date.
Do I have to report Saving account and GIC account on Form T1161? If I have to report them what to enter as fare market value of the date of emigration. Please provide an example for each. Thank you.
Hi Mira,
Generally speaking, savings and checking accounts are not reported on Form T1161. GICs and their values should be reported on the date of emigration. GICs do not fluctuate in value and so record the principal amount of the GIC on form T1161.
Hello, I watched your video (well done) with the thought of retiring in the sunny south with my wife and to become a non resident of Canada for tax saving purposes etc…… you mention the need to break all primary ties ie) personal residence, spouse, dependents living in Canada…..am I right to assume that by dependents you mean any children under the age of 18? My kids are 19 & 21 and are University Students. So are my kids dependents in the eyes of CRA?
Another question: once I am a non residence am I able to come back to Canada as long as I do not spend more than 182 days per tax year in Canada?
Thank you for your questions.
Dependents are defined as family members that you financially support. A dependent can be your parent, a minor child, or an adult child that is receiving financial support from you.
Yes, you can visit Canada up to 182 days in any 12 month period. If you exceed this threshold, then you will be a deemed resident of Canada.
Hi, I will have to move to Canada for my US working visa issue (H1-B lottery). I plan to apply for Canadian PR and my employer will support it.
I might be back to US after one and half year, as my wife is there, but, after that, would I be considered as non-resident of Canada and stop paying extra tax to Canada? I will have no things like income or property in Canada.
Moreover, I can still go to Canada every now and the for maintaining residency obligation, right?
I originally come from Asia, and am not citizen or PR of either US or Canada
Thanks
If you move to Canada with the intention to apply for a Canadian PR card and you stay in Canada for 1.5 years or longer, then you will be considered a factual resident of Canada on the date of your arrival to Canada. As a resident of Canada, you are liable for Canadian income taxes on your global income. To become a non-resident of Canada, you must permanently leave Canada with the intention to never come back (other than occasional visits), and sever your primary ties, plus most of your secondary ties.
Hi,
I am moving to US permanently for work. My wife is not leaving Canada, and we are in the process of divorce. The arrangement is I will have no custody on children. I will have to have 1% title on my previous primary resident because mortgage requirements. I may not have free access to the property without my ex-wife’s consent. I will continue paying the mortgage to keep my ex-wife and children living in the same place. I will pay children support to child. I will cancel all Canadian Driver’s license, bank accounts, credit cards, health insurance etc. In this case, am I considered to be (factual) resident of Canada? Thanks
Yes, you are a factual resident because you are providing financial support to your children who live in Canada.
in the sequence of events… I need to fly out first… get new bank local (where I would be living) bank account as resident. How do I sequence the events after, I mean, I can transfer all my Canadian corporation shares to my new broker and establish the date I left and the closing price of that day for the calculation of the deemed disposition value and potential capital gains done and pay later when I actually file my last income tax report for the year I left? Just wondering about the whole sequence of events… Thanks!
Hi Mike,
A determination needs to be made as to when you became a non-resident of Canada. To do so, we need to examine your primary and secondary ties to Canada, when they were terminated, when you left Canada, and a host of other factors. Once your departure date for tax purposes is determined, you will be liable for departure tax as of that time (i.e. on any gains resulting from the deemed disposition of your shares and assets on your departure date).
I’m a Canadian married an American man for 13 years . I moved to the US I dont remember filling out any departure forms and I’ve been here 15years . I would return every year I just let the pension department know I’d be leaving for more than 6months . Do I have to fill out any tax forms.
Hi Sheila, You should have filed a Departure Return with the Canada Revenue Agency (CRA) for the year that you left Canada permanently. However, the CRA generally does not go back beyond 10 tax years, so there’s nothing for you to file at this time. I am assuming you have no primary ties to Canada: house, spouse or dependents in Canada.
My son owns a rental property in Florida and married an American in 2021. He has filed as a Resident of Canada every year even though he has worked outside Canada for 12 years. He has now applied for his green card and will be taking up residence in Michigan. Is the tax treatment with regards to the rental house in Florida when he become a non-resident different than if he sold the property before that?
Hi Keith, If he sells the house prior to becoming a non-resident of Canada, then the capital gain will be equal to the net sales proceeds in excess of the original purchase price (including closing costs). 1/2 of the capital gain will be included in his Canadian income in the year of sale and he will pay Canadian tax at his marginal rate. In order to avoid a double tax, he can claim a foreign tax credit on his Canadian return for the American capital gains taxes paid.
If he sells the house after becoming a non-resident of Canada, then at the time of his departure from Canada, he will owe capital gains tax to the CRA. More specifically, he will be deemed to have sold the house for Canadian tax purposes for its market value on the date of departure. To avoid a double tax, he can make an election pursuant to the Canada US tax treaty to have also disposed of the house for US tax purposes for the same amount on his departure date. This will trigger a US capital gains tax, which can be credited against his Canadian taxes payable. When the property is actually sold, the US will only tax the appreciation in the property from the date he departed Canada to the date of sale.
Hi,
We find your blog very informative and timely. Thank you for the time you spend helping people understand the issues.
My wife and I are seniors and wish to move back to the U.S. so we are close to our family. We have no one left here.
We are U.S. citizens who came to Canada 20 years ago as permanent residents and then became Canadian citizens, holding dual citizenship.
Once we move back to the U.S., we will not return to Canada. We want to be sure we are taking the correct steps to avoid any difficulties.
So, our objective is to properly obtain non resident status once we leave Canada–for the purpose of no longer paying Canadian taxes..
Other than a small OAS pension, we have no Canadian-sourced income. Our income is U.S.-sourced pensions–we’ve been paying taxes to both countries for the past 20 years.
Our plan is to sell our primary residence prior to leaving Canada so to take advantage of the primary residence exemption on the gain. This is our only home.
The only assets we possess in Canada are our home, a vehicle, personal belongings, and a small bank account. (We bring up whatever we need to cover household expenses from our U.S. banking account each month.)
The only assets we currently possess in the U.S. are our pensions and banking account.
We know we need to sever all primary ties as well as most or all of the secondary ties you mention to become non resident and no longer owe taxes to Canada.
A question-
When we sell our primary residence (while still living in Canada), do you anticipate any issue with transferring the sale proceeds to the U.S.–currently slightly under 1 million CAD? We will have the sales documents as provenance there’s no money laundering going on…
We understand there will be no capital gain on our primary residence as we will have lived there full time for more than 5 years. (Unfortunately, we understand dealing with the U.S. IRS about the sale may be another matter as the primary residence exemption there is less generous–only $500,000.00 per couple unless that has changed…)
Our personal belongings and our vehicle will go with us to the U.S. Nothing will be left in Canada.
We will close our Canadian bank account, cancel Canadian credit cards, driver’s license, and health cards. We don’t have memberships, and we will file our final (departure) return with CRA.
Is there anything else we need to be aware of?
We most deeply appreciate your comments- Thank you.
Given that you are cutting all of your primary ties and relocating to the US on a permanent basis, you and your wife will become non-residents of Canada upon your departure from Canada. You are correct in that the US provides an exemption of up to $500,000 USD of gain realized on the sale of a primary residence. Please inform Service Canada that you / your wife became non-residents of Canada, so that they issue an NR4 slip for payments made to you in respect of CPP / OAS. Lastly, file a departure tax return to change your status to a non-resident of Canada.
Hi there,
I emigrated from Canada in late Jan 2022 (to US). I had a small amount of Canadian employment income prior to departure. After departure I liquidated my RRSP (non resident withholding taxes were withheld). I also had an active HBP balance which would be considered income, and made a loss on a rental property I own. A NR6 was filed and some taxes were withheld prior to approval. According to cra’s website it seems I should file using the province I lived in’s tax package. Is that right? Do I need to file a two returns(one for when I was a resident, and one for when I was not). Can my rental loss be deducted from my income on that form ? Can my HBP income have my rental loss deducted from it?
Thanks for any help you can provide
Please complete a T1 General Return using the provincial schedules for the Province that you last lived in. Specify the departure date on the return. Also, complete a Section 216 Non-Resident Return and NR4 Slip for the period that you rented out the property in 2022 while you were a non-resident of Canada.
The rental loss incurred during your residency period can be offset against other sources of taxable income earned during your residence period.
Hello Madan,
Need your info, our family planning to declare non resident – next year however we need your suggestions
My wife got L1A visa traveling to US this month along with my daughter(10th grade)
I am working here, planning to move US next year
my son currently 20 years studing Eng in University of Toronto, next year Aug 18 2024 become 21
1. we need to wait next year Aug 2024, will declare non resident? or before also we can declare?
2. if we sell our property before non resident decalre and pay 25% capital gain on profit of the house
3. If we sell our property after non resident declare – what are the taxes are applicable
4. we can Keep RRSP,TFSA as it is, no more contributions towards RRSP and TFSA
5. My daughtern have RESP contribution, can we stop or leave it now after 18 we can draw?
6. My RRSP and TFSA are with canadian Banks, can i leave bank accounts as it is or i have to close
Hi SATYANARAYANA,
The fact that you are still residing in Canada in a primary residence owned by you and your wife is a very strong indicator that both you and your wife are tax residents of Canada. When you sell your home and move to the US permanently to join your wife and child, then you and your wife can claim non-resident status with Canada.
In order to avoid a non-resident tax on the sale of your home, I recommend that you remain in Canada until the house sells and title is transferred to the buyer. However, if you have to move prior to the sale of the primary residence in Canada, then a non-resident tax of 25% will be deducted from the sales proceeds. This can be recovered by filing an Application for a Certificate of Compliance with the CRA. In addition, an election can be filed with your and your wife’s US returns to eliminate the capital gains tax payable on the sale of the home.
You can continue to keep your financial accounts in Canada, including RRSPs, TFSAs, and RESPs. Note that TFSAs and RESPs are taxable accounts in the US, and all financial accounts outside the US should be reported on the US FBAR. STOP contributing to your TFSA and RESP once you become a non-resident of Canada.
Thank you for your efforts here
I have a simple question
If my dependent ( my mother) is a factual resident of canada just cause she has a house in canada, but she doesn’t live in canada. So she’s a resident of canada for tax purposes since she has a significant tie to canada.
However she lives in bahrain with me and I financially support her in BAHRAIN only and transfer funds to her in bahrain. Does that make me having a significant tie to Canada ? Or the support has to be exclusively to someone living in canada physically and not just having status of a resident of canada.
Thank you very much once again
That’s a very good question, and I have not encountered such a scenario before. However, if your Mom is a tax resident of Canada and you are financially supporting her, then she is your dependent, which makes you a tax resident of Canada.
We have sold our house last year and are moving to Mexico, we already have permanent residency there. My oldest son is 18 and wants to remain in Canada to attend university. As he’s over 18 does that mean he’s no longer a primary tie? I read the age of 22 years old somewhere but could be wrong. Thanks!
Hi Jake,
An adult child (18 or older) can still be your dependent if you are financially supporting him / her. A dependent is a primary tie to Canada.
Hi Allan,
We settled as retirees (husband and wife) in Romania leaving Canada in 2023 and we want to become non-residents of Canada. Our secondary ties in Canada are the bank account for our pensions and investments, and own a rented apartment under a written contract that will be put up for sale in May 2024. A 25% withholding tax on all income from Canada is expected. Questions:
1. If we will not have capital gain when selling the apartment, are there other taxes that must be paid?
2. Do we both have to fill in the NR73 form?
3. Can I send (fax or mail) form NR73 to any CRA agency or a specific one?
Thank you
Hi Michael,
Form NR73 is optional. The mailing address and fax number are both written on the form. You can either mail or fax the form to the CRA.
When you sell your apartment, even if there is no capital gain, your lawyer will hold-back 25% of the sales proceeds. The hold-back can be refunded to you by filing an Application for a Certificate of Compliance with the CRA within 10 days of the sale.
Hello,
Thank you for creating this guide – this was super helpful.
I am emigrating from Canada in 2024 and want to become a non-resident. I don’t have any primary ties in Canada and will keep very few secondary ties – one credit card, one savings account, passport, drivers license (expires in 2027, will not renew) and health card (expires in 2024, will not renew). I plan on withdrawing and closing my TFSA and RRSPs before departure. The country I am moving to has a tax treaty with Canada (https://www.treaty-accord.gc.ca/text-texte.aspx?lang=eng&id=102409).
Can you please confirm if the following next steps are correct for me?
1. It is not mandatory for me to fill out and submit form NR73
2. I should file Departure Tax return on or before April 30, 2025 including my 2024 departure date
3. I should inform my bank, financial advisor and pension administrator prior to my departure about my plans to become a non-resident
4. I should file my taxes in 2024 (for the 2023 tax period) as normal
Am I missing anything? Any guidance would be helpful.
Thanks again!
Hi Katyayni,
Please see my responses below:
* It is not mandatory to file form NR73 with the CRA.
* You should file the Departure Tax Return on or before April 30, 2025, and specify your departure date in 2024.
* Inform your bank, financial advisor and pension administrator that you became a non-resident of Canada.
* File your 2023 tax return as you normally would.
Hi Allan,
What happens please if I leave Canada but my wife / kids stay for 1 or 2 extra months? Should we leave all together the same date to avoid being considered as tax resident for the 1 or 2 months?
Also, for income from renting property, if the bank doesn’t change my account to non resident. Is it fine taking 100% of the money and then declaring this as part of my tax return and pay taxes at that time?
Thanks!
Hi Karim,
If you are returning to a country where you are a citizen/permanent resident and your wife and children stay in Canada for 2 months to wind down the family’s affairs, then the CRA will treat the date you left Canada as your departure date. Otherwise, you will continue to be a tax resident of Canada until your family joins you.
As a non-resident landlord, you must remit a monthly tax of 25% of the rent collected. This is refundable upon filing a Section 216 Non-Resident return with the CRA.
I am moving to Mexico from Canada and plan on becoming a non-resident of Canada. I already purchased land in Mexico to build a home once I leave. Do I have to pay the departure tax?
Hi Sean,
Foreign real estate is subject to departure tax. The first step is to determine the cost basis of the land. The cost basis is equal to the purchase price, plus closing costs, expressed in Canadian dollars. The next step is to determine the sales proceeds. Hire a Certified Appraiser or Realtor in Mexico to determine the land’s fair market value as of your departure date. The appraisal report should reference 3 comparable properties sold close to your departure date. Third, use the foreign exchange rate on your departure date to convert the sales proceeds into Canadian dollars. If the fair market value exceeds the cost basis, there will be a deemed capital gain.