Leaving Canada: Tax Implications in 2024

Leaving Canada involves important tax considerations. As you transition to non-resident status, notify relevant parties, understand withholding tax rules for investments, and file any necessary tax returns. Seek professional advice tailored to your situation to ensure compliance with tax laws

Key Takeaways

Before we delve into the details, here are the essential points to remember when leaving Canada:

1. Change in Tax Status: Upon permanently leaving Canada, your tax status shifts to that of a non-resident. This change has implications for tax reporting and payment.
2. Notify Canadian Payers and Financial Institutions: Inform any Canadian payers and financial institutions of your non-resident status upon leaving Canada. This ensures that you are only subject to taxation on income originating in Canada.

Understanding Tax Implications

1. Emigrant Status

Generally, you are considered an emigrant for income tax purposes if you meet the following conditions:

• You leave Canada to live in another country.
• You sever your residential ties with Canada, which means you no longer maintain your main ties here. Examples include selling your Canadian home, establishing a permanent home abroad, or having your spouse, common-law partner, or dependents leave Canada.
• If you leave Canada but maintain residential ties, you may be considered a factual resident or a deemed non-resident, depending on other factors such as tax treaties with other countries.

2. Becoming a Non-Resident

You become a non-resident of Canada for income tax purposes on the latest of the following dates:

• The date you physically leave Canada.
• The date your spouse, common-law partner, and dependents leave Canada.
• The date you become a resident of the country you settle in.
• If you previously lived in another country before Canada and return there, you become a non-resident on the date you leave Canada, even if your spouse or partner temporarily stays behind to handle matters like selling your Canadian home.

3. Tax Reporting Obligations

When you become an emigrant, consider the following steps:

• Notify Canadian Payers and Financial Institutions: If you still have bank accounts or receive payments from Canada, inform relevant payers and institutions that you are no longer a resident.
• File a Tax Return: Complete and send a Canadian tax return if you owe tax or want to claim a refund. Non-residents may need to file a return even if they have no tax owing.

4. Investment Accounts and Taxation

Leaving investments in Canada does not automatically make you a tax resident. Here’s what to keep in mind:

• RRSP/RRIF Withdrawals: These are subject to withholding tax at source in Canada.
• Non-Registered Income: Interest, dividends, and fund distributions are also subject to withholding tax.
• Capital Gains: Non-residents are generally not subject to capital gains tax in Canada.

Table 1: Tax Implications Summary

Table 2: Tax Treaty Countries

Conclusion

Leaving Canada involves important tax considerations. By understanding your emigrant status, notifying relevant parties, and managing your investments, you can navigate the tax implications effectively. Remember to seek professional advice tailored to your specific situation to ensure compliance with tax laws and regulations. If you have any further questions, consult ASAN Group or visit the Canada Revenue Agency’s website for detailed guidance.

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Disclaimer:
The information provided in this blog is intended for general guidance and informational purposes only and should not be considered as professional accounting, audit, or assurance advice. Please consult with a certified professional for specific advice tailored to your situation.