Immigrating to or emigrating from a new country is a major undertaking. From going through the immigration process to finding a place to live, to moving all of your possessions, it takes a considerable amount of work and coordination.
While you may be focused on your move to a new place, you do need to make sure you notify everyone that you are leaving. This should include the taxman. Non-residents of Canada are not entitled to various benefits such as the Canada Child Benefit (CCB) so waiting until you file your return to notify the Canada Revenue Agency (CRA) you left will often result in having to repay some of the money.
You should also notify any company or organization that pays you income and make sure they change your status in their system and not just your address. If you forget, you may continue to receive T slips instead of being subject to a different withholding tax amount, which will often trigger a letter from CRA asking you to file a return.
Don't forget to make sure you indicate the date of departure on the last tax return you file with the CRA to confirm the date that you left. This date is involved with the calculation of your deductions and credits in the year that you leave Canada.
Renting out your home can be appealing if you decide to return home but there are implications for your tax return.
Your residency status determines the taxability of your income in Canada. Non-residents are required to pay 25 per cent tax on most income from Canada under Part XIII of the Income Tax Act. But this rate can be reduced to a lower rate if the Tax Treaty with the other country you are living in specifies a lower rate. This tax is collected through withholding from amounts paid to you. You may also be exempt from withholding tax from certain types of payments you receive, depending on the treaty.
You may decide to keep your home in Canada while you work in another country for a few years or spend most of your retirement elsewhere. You should have a market assessment of your property so you know the fair market value when you leave the country. Once you move out of your principal residence, it is considered an investment and once you move out will be subject to capital gains. By knowing the market value when you move out, you have the details you need when you sell your home.
Renting out your home can be appealing if you decide to return home but there are implications for your tax return. If you are renting out your house, it is recommended that you have a property management company take care of collecting the rent and managing the place. Then they can withhold the portion of your rent for tax purposes under Part XIII non-resident tax withholding instead of leaving that burden to your tenant. Your property manager would be responsible for withholding and remitting the Part XIII tax at the correct rate.
The Home Buyers Plan (HBP) or Lifelong Learning Plan (LLP) can be another complication. Once you leave the country, you are required to repay the amount you borrowed from your Registered Retirement Savings Plan (RRSP) within 60 days of your departure from Canada or the date you file your return -- whichever is sooner. If not, it will be considered a withdrawal from your RRSP and reported as income in the year you leave.
Not being resident in Canada also affects your investments. You can no longer contribute to your Tax Free Savings Account (TFSA) and the country you are moving to may not recognize your account as tax-free either. Whether you invest yourself or have an advisor, non-residents are subject to different rules for contributions and investment purchases. So make sure you understand how your move will affect your investments.
Canada has Totalization Agreements with several countries when it comes to the Canada Pension Plan (CPP). These are similar to tax treaties only they deal with social security benefits like CPP and Old Age Security (OAS). These agreements ensure that contributions are not made simultaneously to multiple countries on the same income. For example, Canadians who are working in the U.S. for their Canadian employer on a temporary assignment can continue to contribute to CPP for up to 60 months instead of contributing to the U.S. Social Security and vice versa.
So while you are packing and making travel arrangements to start a life in a new country, you need to remember that the taxman also needs to know about your plans. You should probably get in touch with a tax professional to understand the tax rules in your new country. If you are a non-resident, your taxes are also subject to different rules that you will want to know before you file. Do not wait until you file your taxes to learn the rules.
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