Expat Tax Issues & Non-Resident Status

Double taxation is the main thing people are concerned about when they are considering working abroad. There are a few ways to avoid this depending on your income, assets in the respective countries and how long you have been abroad. Most countries have taxation treaties with Canada to avoid double taxation so it should be relatively easy to sort things out.

Establishing non-resident status is essential if you wish to take advantage of the lower rates of tax available in other parts of the world. It is best to hire someone that specialises in this process to advise you and help you get affairs in order. If time is of the essence, or if your finances are complicated, you could well overlook some important rules or loopholes and end up paying much more tax than necessary.

It is important to think carefully about obtaining non-resident status because although you are always able to come back to Canada, it can be a tricky process. Here are few things to consider.

Sever Residential Ties to Canada -in order to do this you must close your bank accounts, cancel your provincial health insurance, let your club memberships expire and take any dependants and your spouse with you. Non-residency claims are considered on a case-by-case basis and just one major tie can be enough to prevent your claim from going through.

Make New Ties in Your New Country- the CCRA is weighing ties with your new country more and more heavily. It can only help your application to join a social or religious club and get on the property ladder as soon as possible.

Visits Home -During the first couple of years as a non-resident, it is wise to visit Canada as little as possible. This doesn’t mean that you can’t visit at Christmas for a couple of weeks but any significant time spent in the country should be scheduled for at least 2 years after you apply for non-resident status. Non-residents who have held status for a number of years are able to visit Canada for up to 182 days per year without forfeiting.

Departure tax

In order to be declared a non-resident, you must dispose of all your assets before leaving the country. You are required to pay tax on any capital gains realised as a result of the sale with a few exception. Good news though! As a non-resident, you can receive capital gains from most investments tax-fee as long as they are based in Canada. You should check your finances carefully however, since,RRSP withdrawals, pension payments and other dividends are subject to withholding taxes.