Are you planning to move out of Canada or live abroad? There are several tax implications that you need to consider before making the move. In this blog post, we’ll provide you with everything you need to know about moving out of Canada or living abroad.
- Tax Residency
The first thing you need to determine is your tax residency status. If you are a Canadian resident for tax purposes, you are required to pay taxes on your worldwide income, regardless of where you live. However, if you are no longer a Canadian resident for tax purposes, you will only be required to pay taxes on your Canadian-sourced income.
To be considered a non-resident for tax purposes, you need to sever your residential ties with Canada. This means you need to dispose of your Canadian home, cancel your health insurance, and close your Canadian bank accounts, among other things.
- Tax Obligations
If you are a non-resident for tax purposes, you are still required to file a Canadian tax return if you earned Canadian-sourced income, such as rental income, pension income, or capital gains from the sale of Canadian property. You may also be eligible to claim certain deductions and credits to reduce your Canadian tax liability.
If you are a Canadian resident for tax purposes and you move abroad, you are still required to file a Canadian tax return and report your worldwide income. However, you may be eligible to claim foreign tax credits to reduce your Canadian tax liability.
- Tax Treaties
Canada has tax treaties with over 90 countries to prevent double taxation on foreign income. If you are a Canadian resident for tax purposes and you earn income from a country with which Canada has a tax treaty, you may be eligible for certain tax benefits, such as reduced withholding tax rates.
- Reporting Requirements
If you have foreign assets worth over $100,000 CAD, you are required to report them to the Canada Revenue Agency (CRA) on Form T1135, Foreign Income Verification Statement. Failure to report foreign assets can result in significant penalties.
- Departure Tax
If you are a Canadian resident for tax purposes and you dispose of your Canadian assets before leaving Canada, you may be subject to departure tax. Departure tax is a tax on any unrealized capital gains on your Canadian assets at the time of departure.
In conclusion, if you are planning to move out of Canada or live abroad, it’s important to understand the tax implications before making the move. You may want to consult with a tax professional to ensure that you are complying with all Canadian tax laws and regulations.