If you have left Canada to work in another country or are considering it, you need to consider your income tax options.
Everyone who is a resident of Canada is required to pay income tax on their woldwide income. However, leaving Canada to take up residency in another country may not be enough to avoid Canada’s income tax. When you leave, you need to ensure you understand Canada’s residency requirements for income taxes and pay the exit tax.
What Is A Resident For Income Tax?
When determining if a person is a resident of Canada, the CRA will look at the fact surrounding each case. They will first look for residential ties. Residential ties include:
- A Home Available for Occupation: If you have a home in Canada that is available at will for your use is seen as a significant residential tie. If the property is leased to an unrelated third party weakens the tie to Canada.
- Spouse or Dependents: If you leave Canada but leave your spouse or dependent children here, this is seen as a significant residential tie to Canada.
Even if none of the above applies, the CRA will the look for secondary tests of residence. These items are looked at on a whole as opposed to individually and the more of these you have, the more likely you may be a resident. Secondary tests of residence include:
- Furniture, clothing, cars and RV’s in Canada,
- Memberships in clubs or other social organizations in Canada,
- Canadian bank accounts,
- Employment in Canada,
- Credit cards,
- RRSP’s, RRIF’s or other savings plans,
- Brokerage accounts,
- Actively managing a business,
- If you have landed immigrant status or have work permits in Canada,
- You have hospital or medical insurance in Canada,
- A Canadian driver’s license,
- A motor vehicle registered in a province or territory of Canada,
- A seasonal dwelling place in Canada,
- a Canadian passport, and
- Memberships in Canadian unions or professional organizations.
Even if you do not meet any of the primary or secondary tests for residency, you can still be considered a resident of Canada for tax purposes if you are in the country for 183 days in any given calendar year.
The Canada Revenue Agency has a number of resources available for those thinking of leaving Canada.
- Determination of an Individual’s Residence Status
- Residency for Individuals
- Leaving Canada (emigrants)
- NR73 Determination of Residency Status
The Exit Tax
Once you have left Canada, and severed your residential ties with Canada, the final tax hurrah is the so-called exit tax.
When you are no longer considered a resident of Canada, you are deemed to have sold all of your assets at their fair market value. Any net taxable capital gains will be included in your income.
You can sever tax residency for a period of time and then re-establish residency later. This is a highly complex set of rules, but cal allow you to come back and unwind the exit tax at a later date.
Final Words of Wisdom
If you are planning on leaving Canada and sever tax residency, be sure you plan accordingly. Get help from a tax accountant before you depart.
Related Articles
- Tax Implications For Canadian Marrying Foreigner And Residing Abroad
- Am I A Resident Of Canada?
- Becoming A Non-Resident & Taxes
- US Citizen & Resident Working in Canada
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Dear Sir/Madam,
My husband was here in canada like 3-4 years back but he had to go back to his country after i had to sponsor him outside canada he had a job and was working and were paying taxes each year. He was absent from canada in year 2009 and i had to support my self for the whole financial year, my questions is can i claim for my husband income taxs and how do i go about doing that and what documents do i require to claim for my husband and myself income tax. Please response soon, thanks.
If you had income, you are taxed on that income in Canada. Your husband is probably still a resident of Canada for tax purposes and must file a Canadian tax return despite the fact he was not in Canada.
If you supported your spouse and his income was less than $10,320, you may be entitled to the Spousal tax credit.
Hi . My husband and I are just going through the process of moving to Canada-BC. My husband works offshore for around 6 months of the year. As a resident of Canada do we still get taxed on the money he earns offshore or can he just pay it in the country hes working in?
Thanks
@Shel: All residents of Canada are taxed on their worldwide income. You pay provincial taxes based on the province you were resident in.
Hi,
Currently I am living in Taiwan for few years already. However, I sitll have an account in Canada which generate some interests each year. Other than this account, I don’t have any properties in Canada now. Am I fitted the condition of non-resident of Canada? For the interested earned, should I file the tax return to CRA? In your site, you mentioned about the “non-resident withholding taxes”. what does this mean? How do I do that? Should I tell my bank? Thank you for answering my questions.
@Kevin: You are probably not a resident for tax purposes. Since you are not a resident, you should change your address, but it is the bank that holds back and remits the non-resident tax. You need not file a return in Canada.
Hi,
I am a canadian citizen who was living overseas since 3.5 years. I am married and have 2 children. My wife and two children are not citizens nor residents of canada (i.e. not yet sponsored). If I file my taxes for the last three years can I claim Child tax benefit so that I can reduce the tax paid. My current income is 60000 CAD. Thank you
If you are not a preminent resident or factual resident of Canada, then you cannot claim or receive the CCTB.
You need to determine if you are a resident of Canada for tax purposes. If not, would the additional CCTB offset the tax you would pay in Canada?
Hi,
I believe I am a resident of since I have an address + Bank account in Canada. So, after filing my taxes declaring my foreign earned income, can I claim CTB for my kids who do not have status in canada (i.e. neither citizens nor immigrants). Thank you
@Abdo Dia:
It is difficult for me to say whether you would qualify. There are four requirements that must be met:
1. You must live with the child (the child must be under age18),
2. You must be a resident of Canada,
3. You must be a citizen of Canada, and
4. You must be primarily responsible for the upbringing of the child. The CRA normally considers the female parent to fill this role if they live with the child. I’m not sure if you would qualify under this particular condition.
The application and process information can be seen at this link – http://www.cra-arc.gc.ca/bnfts/cctb/fq_qlfyng-eng.html
Sorry, I forgot to answer your question,
It would not offset the tax but given that I am planning to sponsor my family to canada soon, statying resident will help in doing that. Any idea on how much I will be paying tax in those circumstances (60000 CAD Fincome-CTB)? Thank you
I am a australian citizen living in Canada with my Canadian wife. We moved here from Australia in March 2009 . I have been working here and currently in the process of applying for permanent residence. Can i claim moving expenses from australia to Canada as it was for a job ? what can i claim ?
@Phillip: At the time of the move, you would have had to have been a deemed or factual resident of Canada. See http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns206-236/219/q/q1-eng.html
Hi – I’ve been living abroad for the past 5 years.. I have residency status in Uruguay — and was actually deemed a non – resident in Canada (had to pay back some GST credits a few years back) I’m not really sure how they decided that I wasn’t a resident but anyway I’m not.
I work for a Canadian company as a freelancer — but pay my taxes etc down here.. (actually I am expempt from taxes and just pay into the retirement and health fund)
I am planning on sponsoring my husband and am planning on moving back to canada in May 2011 (with our 2 kids).
My question is will I have to pay taxes on the money that I’ve earned abroad? — If i don’t what proof do i have to show theM?
The money is currently in a Canadian bank account (my mom’s) as I am paid online (paypal). My mom pays the interest tax on the money in the account (since it is under her name) I just want to make sure that I am not doing anything illegal.. Tax is really confusing..
Let me know – thanks Tax Guy
Hi Misterborwnpants:
You mention that you are not a resident. If this is the case, then you will only have to pay Canadian income tax on your worldwide income at that point you become a resident of Canada again. The income tax would be on a go forward basis. If you have investments in Canada (Canadian stocks or bank accounts), the investment income would be subject to non-resident withholding tax of 25%.
Technically, the bank account in Canada should be in your name and then non-resident withholding tax applied (which is probably a little better than your mother paying tax on your investment income). The withholding rate on interest is the top rate of 25%. If your mother’s tax rate is higher than 25%, then you are overpaying anyway and I don’t feel the CRA will have an issue with that.
Overall, I would not worry too much, although I would suggest you hire a Canadian accounting firm to help you transition back to Canada.
Hi TaxMan,
So I will have to pay 25% on my income? I am already paying tax down here… that doesn’t make sense..
Dear Tax Guy,
I am a Canadian citizen but for the past 4 years have lived outside of Canada. In 2009 I got married to my husband in Japan who is not a Canadian citizen.
I filed income taxes for the past 4 years I’ve been away, but this year I can no longer check the ‘single’ box under marital status as I am now married. However my husband does not have a SIN number or any other information I can supply on the tax form.
I do not see myself returning to Canada any time soon, that being said, what do you think my options are in terms of filing this years tax return, and also, I guess I should apply for non-residency?
I appreciate your time, thank you.
Hi Vicky:
You should figure out if you are even a resident of Canada for tax purposes. Canada does not tax citizens, only residents. If you are no longer a resident, you need not file. It’s not a matter of applying for non-residency, since you either are a resident or are not. The CRA will only determine if you meet the requirements.
If you are a resident, you indicate your husband’s total income on the front of your tax return. Leave the SIN blank.
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