You’ve got a great opportunity in another country, and are looking at leaving Canada. This can affect you for taxes, as well as retirement; here we’ll only discuss tax purposes. We’ll look at when you are considered a non-resident by Canada Revenue Agency, and what you need to do.
Are you an emigrant?
Generally, you are an emigrant for income tax purposes if:
- you leave Canada to live in another country; and
- you sever your residential ties with Canada.
Severing your residential ties with Canada means that you do not keep your main ties with Canada. This could be your case if:
- you dispose of or give up your home in Canada and establish a permanent home in another country;
- your spouse or common-law partner or dependents leave Canada; and
- you dispose of personal property and break social ties in Canada, and acquire or establish them in another country.
If you leave Canada and keep residential ties in Canada, you are usually considered a factual resident, and not an emigrant. However, if you are also considered to be a resident of another country with which Canada has a tax treaty, you may be considered a deemed non-resident. Deemed non-residents are subject to the same rules as emigrants.
When do you become a non-resident?
When you leave Canada to settle in another country, you usually become a non-resident for income tax purposes on the latest of:
- the date you leave Canada;
- the date your spouse or common-law partner and dependents leave Canada; or
- the date you become a resident of the country you settle in.
If you lived in another country before living in Canada and you leave Canada to resettle in that country, you usually become a non-resident on the date you leave Canada. This applies even if your spouse or common-law partner temporarily stays in Canada to dispose of your home.
Do you have to file a tax return? Complete and send a Canadian tax return to the Canada Revenue Agency (CRA) if: you owe tax; or, you want to receive a refund because you paid too much tax in the tax year. For the tax year that you leave Canada, use the general income tax and benefit package for the province or territory where you resided on the date you left Canada. If you were a resident of Quebec before you left Canada and you want information on filing a Quebec tax return, visit Revenu Québec website.
After you leave Canada
Electing under section 217 of the Income Tax Act
If you receive certain types of income from Canada after you leave, the Canadian payer has to withhold non‑resident tax on the income and send it to the Canada Revenue Agency. This tax withheld is usually your final tax obligation to Canada on the income. However, you could benefit from choosing to elect under section 217 on your return.
Tax-Free Savings Account (TFSA), Home Buyers’ Plan (HBP), and Lifelong Learning Plan (LLP)
If you hold a TFSA when you leave Canada, you can keep it and continue to benefit from the exemption from Canadian tax on investment income and withdrawals. However, you cannot contribute to your TFSA while you are a non-resident of Canada, and your contribution room will not increase.
If you become a non-resident after you receive your funds but before you buy or build a qualifying home, you must do one of the following: cancel your participation in the HBP; or repay a portion or all of the funds to your RRSP(s) by December 31 of the year after the year you withdrew the funds. Enter the amount you did not repay on line 129 of your tax return for the year you withdraw the funds.
If you were a non-resident at the time you filed a tax return for the year you received the funds, your cancellation payments are due by the earliest of the following two dates: December 31 of the year after the year you received the funds; or the day you filed a tax return for the year you received the funds.
If you become a non-resident after you buy or build a qualifying home, you must choose one of the following options: repay the remaining HBP balance to your RRSP by the earliest of the following dates: before the time you file your tax return for the year that you become a non-resident; or 60 days after you become a non-resident; include the remaining HBP balance as RRSP income on line 129 of your tax return for the year that you become a non-resident.
If you become a non-resident of Canada after the year you made an LLP withdrawal, you have to include your LLP repayable balance in income on your income tax and benefit return for the year you become a non-resident or repay that balance to your RRSP or PRPP or both.
The due date for this repayment is 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; or 60 days after you become a non-resident.
If you become a non-resident before the end of the year in which you make an LLP withdrawal, you have to cancel your LLP withdrawals by paying them back to your RRSP or PRPP or both.
Receiving benefits and credits
It’s important that you tell the Canada Revenue Agency the date you leave Canada. Generally, as a non-resident, you are not eligible to receive:
- the goods and services tax/harmonized sales tax (GST/HST) credit;
- the Canada child benefit (CCB) payments (including those payments from certain related provincial or territorial programs).
If you receive such credits or payments after you leave Canada, contact the International and Ottawa Tax Services Office immediately.
As you can see Canada’s tax system is much different than the US, it’s based on residency, not citizenship. Even if you remain a citizen of Canada, but not a resident, you may not have any tax obligation in Canada at all. Always check with your accountant, tax preparer, or even Canada Revenue Agency whenever you may be permanently leaving the country.
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