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, contact me to help you you plan accordingly.
Related Articles
- Tax Implications For Canadian Marrying Foreigner And Residing Abroad
- Am I A Resident Of Canada?
- US Citizen & Resident Working in Canada
- Becoming A Non-Resident & Taxes
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I moved out of Canada 3 years ago, but have investments, bank acct and Visa card in Canada. I also earn income in Canada. I gave my investments my new address Jan 09, and received an NR4. Am I now a non-resident? Does this affect my common-law who receives CPP?
The NR4 only indicates you are not physically resident in Canada (your address is not in Canada). Whether you are a resident for tax purposes is a question of fact. It is difficult for me to say whether you are a resident fort tax purposes, but I would suggest that if you have sizable investment assets with accrued gains you should seek help from an accounting firm (PwC, Deliotte, or BDO Dunwoody).
If not, then you file a document with the CRA to get a determination yourself although this is not required.
Whether you are a resident or not does not affect CPP!
In October, 2009, I married a woman in China, who is currently living in China. I plan to try and bring her to Canada as soon as we both have our documents in order to submit to Canada Immigration. In the mean time I have supported her since November 2008. I have sent her money each month to survive on and am still doing so. She has been enrolled in a full time English class learning how to speak and write English since November 2008.
My question is– can I claim her on my income tax return as a spouse, since I am supporting her full time?
Mike,
You cannot claim the amounts paid to your spouse as a deduction nor any costs associated with her being overseas. However, you can claim the spousal tax credit.
Hi, i would like to clarify residency and tax implication. For 2008 tax year i was in canada and my husband recently married did his landing stayed for a month and left canada, For the year 2008 we have declared my income tax and him as having no income during the time he was in canada.
for the tax year 2009, i am working as a freelancer in canada going back and forth to visit my husband out of town, my husband resides out of canada. would he need to file taxes as a resident or would he be considered non resident for 2009?
Also he will be coming back to canada by the end of the year. In that case will he need to declare his world income for future and will he be taxed on any money that he is bringing with him into canada when landing that was not declared in his list in his first landing?
Hi KN2001:
You husband became a resident of Canada for tax purposes when he married you. He needs to file for 2008 and 2009.
Hi Taxguy, Thanks for answering my question. Based on your answer i would like to clarify the second part of my question which was being that you stated that my husband would be considered a resident of canada for tax purposes would he be then taxed on any money he is bringing with him into canada when he comes back to canada finally? and what do we declare on his 2009 returns since he has no income in canada?
Thanks for your help
Hello KN2001:
Canada taxes residents and deemed residents on their worldwide “income.” Therefore, the physical location of the assets is not relevant: Only that the “income earned” from those assets is taxed as income from the point they became a resident forward.
Bringing money to Canada is not an issue.
I am Canadian living in Eastern Europe. I work for the same Canadian software company that I have worked at these last 5 years. However, I live in Europe, visiting clients, representing my company and I continue to do software work online for them – working from home. I am paid in Canada into my Canadian bank account. My employer has no field offices, only the Canadian office. I am on contract, technically self employed, but have no other employer. Last year I was away for 3 months, but this year I have been away all year except the 2 months I spent visiting home in Canada and trips back to the head office. My family is with me in Europe, although they are all also Canadian. My wife is a dual citizen which allows me the residence permit here. So the net net is that I spend more than 6 months a year outside of Canada, I work outside of Canada online and in different countries, but all my income is with one Canadian employer paid into a Canadian bank account. I also maintain my Canadian health insurance, and intend to return to Canada in a couple of years. Currently I own no property, but rent here in Europe, rent a storage unit and maintain a mailing address in Canada. Should I continue file Canadian taxes as a deemed resident? I would prefer to just to avoid the hassle of figuring out how to pay taxes here in Europe, and avoid getting into trouble in Canada later.
Hello Dean:
I can’t say if you are a resident, but if you don’t maintain a residence here, you may not be a resident and are not liable for tax in Canada.
I am helping a woman who is a live in caregiver in Canada prepare her tax return. She is a citizen of an African country and was resident in Canada for 2009 working under a temporary permit of the type issued to live in caregivers. Her husband has never been to Canada and continues to live and work in Tanzania and is not planning to immigrate here. He has no Canadian sourced income. They are separated by circumstance and not as a result of a dispute. I presume that she should not claim the spousal amount. Is this correct?
There is no requirement he be a resident. Only that she is supporting him.
She has to report his total income on her return. If it exceeds $10,320 CDN, then she cannot claim the credit.
See http://www.cra-arc.gc.ca/E/pub/tp/it513r/it513r-e.html#P178_25861
Hi Tax Guy,
I have been going my taxes and have a few questions.
I have been working in Korea now for about 2 and a half years. I have no primary ties to Canada, but a few secondary ties which i need since my Visa in Korea depends on me having a job here. I plan to go back to Canada eventually but for now i am deemed a non-resident for tax purposes.
The only problem i am having is that i have a considerable about of interest from savings bonds/GIC’s/etc., and i need to know if i file a return for them, even as a non-resident.
The returns are all co-signed with my parents but they usually gave the forms for taxes in the previous years. Now that i am a non-resident im not sure how i will fill them out in the tax return, or do i even fill one at all? Also do i have to report my “World income” if i fill in a tax form even if i am a non-resident?
Also i have one last question about the address. For the mailing address do i put my Korean address or my Canadian one if i am retuning home in time to be able to send in my taxes?
Hello Ken,
None of the investments you have listed would require you to file a tax return in Canada.
If you are not a resident, and meet the requirements, you do not file a tax return.
Hi Tax Guy,
I’ve moved out of Canada for more than 5 years. I don’t have any primary ties to Canada now. However, I do have an account which is GIC and it will generate some amount of interest each year in Canada. My question is, do I need to file a tax return to report these interest even I am a non-resident now?
I have another question regarding to the tax return. Later this year, I will be an expat to Canada for one year assignment. I will still get salary in my home country while I am in Canada and I will receive some allowances to meet the living standard in Canada. My second question is: Do I need to file a return next year for these allowance? Do I also include the salary paid in my country for the “world income” purpose?
Thank you for answering my questions.
Hello Kevin,
If, as you say, you are not a resident of Canada, you do not have to file a Canadian tax return, unless you dispose of taxable Canadian property. The GIC is not taxable Canadian property and you do not have to file a Canadian tax return.
With respect to your second question, If you are in Canada for 183 days, you are a resident of Canada am must pay tax on your worldwide income. After 1 year, you will need to file a return and declare worldwide income.
Hi Tax Guy,
Thank you for your quick response. I appriciated it.
For the second question I asked previously, so if I stay for more than 183 days, then I will have to file the world income. Does that include the allowance? (The allowance is wired to my account directly from my company)
One more question, after next year (2011), say if I didn’t stay for more than 183 days in 2011, how do I tell CCRA that I am a non-resident again in 2011 when I do the tax in 2012? Do I still need to do tax return for year 2011? Or I can just ignore it and do nothing?
Thanks.
Hello Kevin,
An allowance is taxable in Canada. Also, note that its not 183 “consecutive” days.
After your year is up, you will have a deemes disposition and will need to file a final return for partial year. Its a matter of filing.
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