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Becoming a non-resident of Canada

If you are leaving Canada to work or live abroad and you are currently a Canadian resident, then the taxman can and will take a big bite from your wallet upon your departure.

There are 10 major tax implications that will directly affect you when you become a non resident of Canada, which are discussed below.

How do you become a non-resident of Canada?

Before we review the 10 major tax implications of becoming a non-resident of Canada, let’s first answer the question, “How do you become a non-resident of Canada?”

There are four factors that could cause you to become a non resident of Canada:

  1. You sold your home (or broke your lease) in Canada and purchased a home (or entered into a new lease) in your new country of residence.
  2. Your spouse and children moved with you to your new country of residence.
  3. You sold your personal possessions in Canada, such as your furniture, appliances, investments, and so forth and purchased personal possessions in your new country of residence.
  4. You severed your social ties with Canada and established social ties in your new country of residence.

If you are leaving Canada then you can fill out the determination of residency status form (NR73) from the Canada Revenue Agency (CRA) website.  This form is optional, and is not required to be completed.

Certain tax practitioners are of the view that form NR73 should be completed and submitted to the CRA, so that the CRA can provide you with a notice of determination on your non-residency status.  By doing so, you have very little uncertainty on your status as a tax resident of Canada, giving you peace of mine.

Other practitioners are of the view that form NR73 should not be completed and submitted to the CRA.  This is because you do not want to ‘invite the CRA’ to scrutinize your situation by filing form NR73.  The CRA often takes a conservative position in determining your Canadian residency status, and as tax collectors it’s in their best interest to have you pay tax as a Canadian resident.

Becoming a non-resident of Canada – 10 Major Tax Implications

There are 10 major tax implications of becoming a non resident of Canada.

1. Canada Child Tax Benefit – Becoming a non-resident of Canada

You will stop receiving the Canada Child Tax Benefit and Universal Child Care Benefit upon becoming a non-resident of Canada. You should inform the Canada Revenue Agency (CRA, 1-800-959-8281) of the change in your residency status, so that the payments will stop.

2. GST/HST Credits

You will stop receiving GST/HST tax credits (sent in the form of cheques to you by the CRA) upon becoming a non-resident of Canada.

3. Repay Home Buyers Plan and Life Long Learning Plan

You have 60 days from the date you become a non-resident (which is usually the date when you leave Canada) to repay any amounts that you owe under the home buyers plan or the life long learning plan. If you do not make payment within the 60 day period, the balances owing will be included in your income on your final tax return in Canada.

Tip: If you expect your income to be very low in the year of departure from Canada, then it may be advantageous to include the balances owing from the Home Buyers Plan and Life Long Learning Plan as income in your final Canadian tax return.  This way, you will pay low tax on the income included, and you will have no obligation to repay the balances owing.

4. Tax Free Savings Account – Becoming a Non Resident of Canada

The funds within your TFSA can remain even after you leave Canada and any earnings accrued in your account and withdrawals will not be taxed in Canada.  They may however be taxed in your current country of residence.  You will however not be able to accrue additional TFSA contribution room for any years in which you are non-resident of Canada.

If as a non-resident, you make a contribution that is neither a qualifying transfer nor an exempt contribution. you will be subject to a 1% tax for each month the contribution remains in the account.

5. Stop Contributing to Registered Retirement Savings Plan (RRSP)

You are allowed to contribute to your RRSP’s even after you become a non-resident of Canada, as long as you have RRSP room available. However, it doesn’t make sense to contribute to your RRSP after you leave Canada, because you won’t be able to deduct the RRSP contributions made. The reason being is that you most likely won’t have any income in Canada, after you leave.

Tip: If you expect to have a significant amount of income on your final Canadian tax return, then consider making a RRSP contribution in the year of departure.  The RRSP contribution will be tax deductible.

6. Call your Bank, Financial Advisor and Pension Administrator

Upon becoming a non-resident of Canada, you should call your bank, financial advisor and financial advisor to inform them of your change in residency status.

  • Your bank must begin withholding 25 percent tax from any interest that it pays you, as must other financial institutions. The same tax applies for dividends paid to you.
  • Tax of 25% will also be withheld from Old Age Security payments and Canada Pension Plan payments.
  • Payments made to you from a Registered Pension Plan will also be subject the 25% withholding tax.

As you can see, 25 percent tax is withheld from passive income paid to non residents of Canada. However, the withholding tax rate can be reduced by a Tax Treaty that Canada has with your new country of residence.  Please consult this chart to determine the new tax rates for each country.  Additionally, you can use this online calculator from the CRA to calculate your withholding tax.

Personal Story:  I have had clients, who are retired, that did not inform the CRA that they became non-residents of Canada.  As a result, they continued to receive the gross amount of CPP and OAS payments without withholding tax being properly deducted.  The taxman eventually caught on, and the penalties and interest amounted to more than the actual withholding tax liability.  The lesson here is that Pension Income is subject to withholding tax at a rate of 25% by the CRA and it should always be paid.

7. Disclose all Canadian Assets – Becoming a non-resident of Canada

When you become a non-resident of Canada, you must disclose all of the property that you own, having an aggregate cost of $25 000 or more, on your final personal tax return.  These are classified as ‘reportable properties’ and penalties up to $2,500 can be levied by the CRA for non disclosure.  There are a few notable exceptions including property that is an excluded right or interest (see point 8) and personal use property that has a fair market value of less than $10,000.

Tip: Real Estate, RRSPs, RESPs, and certain types of property do not have to be disclosed.

8. Deemed Disposition of Property

When you become a non-resident of Canada, you are deemed to dispose of all of your property at its fair market value and any unrealized gains will be subject to income tax even if you have, in fact, have not sold the property.  This is known as departure tax, and it can add up to a significant amount. Imagine selling all of the property you own today and having to pay tax on the profits, which is what actually happens when you emigrate from Canada.

Tax implications for becoming a non-resident of Canada

This illustrates which assets are subject to departure tax and which are exempt. Individuals who leave Canada and become a non-resident will have to disclose all of their assets and there will be a multitude of tax implications for becoming a non-resident of Canada.

Assets that are subject to departure tax include:

  • Stocks of all companies, private and public
  • Mutual funds, exchange-traded funds, partnership interests
  • Real estate situated outside of Canada
  • Foreign Trusts
  • Certain personal property, if it has appreciated in value

Departure Tax is not applicable to the following:

  • Real property situated in Canada, Canadian resource properties and timber resource properties;
  • The property of a business that is maintained through a permanent establishment. This includes capital property, eligible capital property and property described in the inventory of the business
  • Certain property of a returning former resident who last emigrated after October 1, 1996, will no longer be treated as having realized accrued gains on departure.
  • Property belonging to a short-term resident (an individual who is a resident in Canada for less than 60 months in the 120 month period preceding the disposition) when that resident came to Canada or any property acquired through inheritance after that individual became a resident of Canada.
  • Property that is deemed to be an “excluded right or interest” of the taxpayer. This refers to future benefits and payments under certain plans and arrangements, including pensions, RPPs, IPPs, RRSPs, RRIFs, RESPs, DSPs, and RCAs. For the full extensive list, please consult Section 128 of the Canada Income Tax Act.
  • Life Insurance policies also fall under this category. However this is only applicable to Canadian residents. Non-residents of Canada that own foreign life insurance will be subjected to departure tax.

For more detailed information on these exemptions, please take a look at our article on tax consequences on emigration to the United States for Canadians.

Most Canadians do not pay departure tax because of the exceptions. Those Canadians who own investments outside of their RRSPs, or are business owners, should be prepared to pay departure tax upon becoming a non-resident of Canada. (There is a special election available to defer paying departure tax by providing the CRA with security or collateral for paying it later).

Security and Deferring the Departure Tax

It is possible to defer the departure tax for those who intend to regain residency status or for those who do not have the funds to pay the tax.  This can be done by providing the Canada Revenue Agency with deemed acceptable security such as bank guarantees, letters of credit, shares of corporation which is equal in value to the taxes due.  In order to elect this payment you must file the form T1161.  Remember that security is only required if the tax owing on the deemed disposition is in excess of $14,500.  Also if you have already paid the departure tax and intend to return to Canada, then you are eligible for a tax refund.  The taxes that are owed on the deemed disposition is due by April 30 or (June 15 if you are claiming self-employment income) of the year following the year in which you move.

9. Selling Your Home After Leaving Canada

If you sell your home in Canada after you become a non-resident of Canada, you will have to pay 25 percent tax on the gross selling price of your home. For example, if you sold your home for $400, 000 after you left Canada, then you will have to pay tax of $100,000, or 25 percent. This can cause financial hardship for many Canadians.

Fortunately, there is 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 original purchase price.  You can claim the principal residence exemption for the period of time that you lived in the home.  With the principal residence exemption, the increase in the value of your home while you lived in it will not be subjected to capital gains tax.

Tip: If you rent your home while you are a non-resident, which many Canadians choose, you will need to file a Section 216 Tax Return to report the rental profits earned.  For more information on completing the Section 216 Tax Return, please see our article on non-residents receiving rental income.

For example, assume that the fair market value of your home when you left Canada was $390,000 and that you sold your for $400,000. In this example, the gain will be $10 000, which is subject to 25 percent tax, i.e. $2,500.

10. File Final Canadian Personal Tax Return

You must file a final Canadian tax return for the taxation year in which you leave Canada and:

  • You have to disclose your date of departure on the final tax return.
  • Your personal tax credits will be reduced by the number of days that you were outside of Canada.
  • You must list all of the assets that you own, if those assets have an aggregate cost of $25 000 or more.
  • You must pay departure tax or file the applicable forms for deferring departure tax.

About the Author – Allan Madan

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.

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Becoming a non-resident of Canada was last modified: November 18th, 2014 by superAmin
This entry was posted in International & non-resident tax and tagged , , , , , , . Bookmark the permalink.

About the author

is a Chartered Accountant, CPA and Tax Expert and enjoys working with business owners, individuals and entrepreneurs.

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.

149 Responses to Becoming a non-resident of Canada

  1. Petru says:

    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.

    • superAmin says:

      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

  2. Diane says:

    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

    • superAmin says:

      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

  3. Shabbir says:

    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

    • superAmin says:

      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

  4. Fernando Alexandre says:

    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.

    • superAmin says:

      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

  5. Scott says:

    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

    • superAmin says:

      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.

  6. Scott says:

    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

    • superAmin says:

      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.

  7. Derek says:

    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

    • superAmin says:

      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.

  8. Joseph says:

    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

    • superAmin says:

      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

  9. Liliana says:

    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

    • superAmin says:

      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

  10. Michelle.Wang says:

    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?

    • superAmin says:

      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

  11. Shane says:

    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?

    • superAmin says:

      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.

  12. monkeyballzjr says:

    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.

    • superAmin says:

      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

      • Chrissy says:

        Is it possible to collect CPP benefits even if one is not geographically located in Canada?

        • superAmin says:

          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

  13. Charles says:

    What type of tax and or legal implications if I fail to disclose all my foreign based assets when becoming a non-resident?

    • superAmin says:

      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

      • Thompson says:

        Is it possible to use foreign based assets as collateral in deferring departure tax?

        • superAmin says:

          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

  14. Cruz says:

    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?

    • superAmin says:

      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

  15. J.J. says:

    Is it possible to transfer my contributions made to the Canadian Pension Plan to another pension plan in another country?

    • superAmin says:

      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

      • Timothy says:

        How exactly would they go about transferring these contributions and how would the contributions be calculated in process?

        • superAmin says:

          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

  16. William Smith says:

    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

    • superAmin says:

      Non-residents and temporary workers that have contributed to the CPP in anyway are eligible receive at least some benefits

  17. Arielle says:

    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?

    • superAmin says:

      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

  18. Mahmoud says:

    Regarding the 1% penalty for TFSA accounts, does this apply to the entire contribution or just contribution I made as a non-resident?

    • superAmin says:

      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

  19. Sandra says:

    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.

    • superAmin says:

      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

  20. Timothy says:

    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

    • superAmin says:

      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

  21. Naresh Kumar says:

    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?

    • superAmin says:

      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

  22. Hari Krishna says:

    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

    • superAmin says:

      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

  23. superAmin says:

    Hi Allan,

    Is there anyway to reclaim departure tax if I become a Canadian resident again and have not disposed of that property?

  24. Saba says:

    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

  25. Saba says:

    I await your reply. saba

  26. Ben Q says:

    If I withdraw my TFSA after becoming a non-resident, is there a penalty?

    thanks.

    • superAmin says:

      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

  27. Spoo says:

    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

    • amadan says:

      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

  28. Mohan says:

    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?

    • amadan says:

      Yes if after the departure, the Canadian sourced income is 90% more than the worldwide income, the individual will get full credits.

  29. Henry Rollins says:

    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.

    • superAmin says:

      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

  30. Mike Brown says:

    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.

  31. Graeme Ogilvey says:

    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?

    • superAmin says:

      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

  32. yesar44 says:

    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?

    • amadan says:

      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.

  33. Ronald says:

    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?

    • superAmin says:

      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

  34. henryc says:

    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?

    • superAmin says:

      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

  35. ekta says:

    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.

    • amadan says:

      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,

  36. Kristi B. says:

    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?

    • superAmin says:

      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!

  37. benjamins says:

    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.

    • superAmin says:

      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

  38. Elizabeth Walker says:

    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?

    • superAmin says:

      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.

  39. Elise says:

    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?

    • superAmin says:

      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

  40. Amy Matheson says:

    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?

    • superAmin says:

      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

  41. Elizabeth says:

    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?

    • amadan says:

      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

  42. Michelle Fontaine says:

    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.

    • superAmin says:

      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

  43. ShaanMohamed says:

    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?

    • superAmin says:

      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

  44. Subhra Dutta says:

    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

    • amadan says:

      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,

  45. Kala Abhay says:

    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.

    • superAmin says:

      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

  46. Richard Klaus says:

    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?

    • superAmin says:

      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

  47. Ron Dircksens says:

    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?

    • superAmin says:

      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.

  48. Jess Henderson says:

    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!

    • superAmin says:

      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.

  49. Mike Forest says:

    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?

    • superAmin says:

      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).

  50. Willie Green says:

    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?

    • superAmin says:

      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.

      • Willie Green says:

        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?

  51. Karin Ely says:

    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?

    • superAmin says:

      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.

  52. Jaime Ewart says:

    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.

    • superAmin says:

      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.

  53. Parker Morgan says:

    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?

    • superAmin says:

      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.

  54. Monika says:

    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?

    • superAmin says:

      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.

  55. Joyce Davies says:

    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?

    • superAmin says:

      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.

  56. Sam says:

    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?

    • superAmin says:

      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.

  57. Wietzie gerber says:

    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

    • superAmin says:

      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.

  58. James says:

    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.

    • superAmin says:

      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

  59. Jonathan says:

    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?

    • superAmin says:

      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.

  60. Tim says:

    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!

    • superAmin says:

      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

  61. Sydney says:

    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

    • superAmin says:

      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

  62. Matthew says:

    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

    • superAmin says:

      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.

  63. Travis says:

    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

    • superAmin says:

      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

  64. Aaron says:

    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,

    • superAmin says:

      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

  65. Parisa says:

    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.

    • superAmin says:

      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

  66. Kristine says:

    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?

    • superAmin says:

      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

  67. Natalie says:

    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?

    • superAmin says:

      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!

  68. Grahame says:

    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.

    • superAmin says:

      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.

  69. Jeff says:

    Hi Allan, what happens to my retirement payments if I become a non-resident?

    • superAmin says:

      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.

  70. Pius Kamal says:

    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

    • superAmin says:

      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

  71. Jon says:

    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?

    • superAmin says:

      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.

  72. Sam says:

    Hello, just wondering if you have a comment on my question above?

    Thanks!

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