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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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About the author

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

82 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. 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

  29. 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

  30. 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.

  31. 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

  32. 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

  33. 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!

  34. 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

  35. 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

  36. 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

  37. 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

  38. 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

  39. 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

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