U.S. income tax rules and their impact on Canadians moving to the United States

Questions and Answers from an interview with Kerry Gray, partner in the Global Employment Solutions Network Group, Ernst Young Canada LLP

Q: One of the first questions that I would like to ask you about is the tax implication of moving away from Canada — of changing one’s residency status.

A: Under Canadian law, unlike U.S. law, we tax individuals based on residency. The U.S. income tax is based on residency and citizenship

Once a person leaves Canada, he or she is no longer taxable in Canada on non-Canadian income. There are still types of income generated in Canada that they are paying tax on, but in general they are longer subject to worldwide taxation in Canada. What Canada also does is deem individuals to have disposed of certain assets on the date of departure from Canada. Any appreciation that they have on those assets while they were residing in Canada will be subject to a tax. Departure tax is nothing different, it is just income tax that is levied at the time ones ceases to be a resident or departs from Canada.

Q: Do you crystallize everything when you leave Canada?

A: Generally, yes, you are deemed to have sold everything from a Canadian perspective the day that you cease to be a resident.

And all the normal tax rates and exemptions apply?

  • Answer. That’s correct. A couple of things that deemed disposition does not apply to includes assets like RRSPs because as a non-resident when you take money out of an RRSP, you still pay Canadian tax. It is not at the old regulated graduated rates and you don’t have to file a return, but Canada would still have the right to tax it. Deemed disposition would also not apply to real property in Canada.

Not until you actually sold the property?

  • Answer. Correct, because when you actually sell real estate later on you would still be taxed in Canada

So deemed disposition primarily applies to what we’d refer to as a non-registered investment portfolio?

  • Answer. Yes, most commonly to publicly traded stocks in a portfolio.

What else?

  • Answer. The deemed disposition rules also apply to personal-use property such as a car or boat, things like coins, paintings and jewellery — if the fair market value of each item or set is greater than $1,000 — foreign real estate and securities, bonds and other commercial paper, unlisted shares, and your interest in a segregated life insurance policy.

Do you have to ante up your departure tax in cold hard cash?

  • Answer. For small amounts of departure tax — under $50,000 in taxable capital gains — you don’t actually have to pay. If you sold the asset when you left you have to pay your tax. If you don’t sell it and you have your departure tax apply, you are supposed to post security with the Canada Customs and Revenue Agency.

What kind of security?

  • Answer CCRA normally favours letters of credit, bank guarantees, mortgages, negotiable stocks or bonds. When security is posted, the tax will be payable when the property is actually sold and taxpayers aren’t charged interest between the date of departure and the date of disposition.

Now since you’ve had to crystallize your gains, does this affect your adjusted cost base of the investments you may still be holding?

  • Answer. No, and that is where if you are moving to the U.S. you need to talk to a tax professional. On the U.S. side of the border, you are not deemed to have bought for the crystallized value on the day that you moved.

Ouch! You mean you are deemed to have bought it the day that you actually acquired the security?

  • Answer That’s right.

So you are going to have two sets of capital gains?

  • Answer. That’s correct. If someone’s moves into Canada, Canada deems you to buy things the day that you move in and sell things the day that you move out. The U.S. does not do that. Canada says, “Okay, we have some transitional rules because there is an exposure to double tax, in that the U.S. doesn’t say that your basis is the fair value the day that you move into U.S.” So there are some transitional provisions in place in Canada allow you to claim a foreign tax credit against the Canadian tax so you are not double taxed.

So since the U.S. doesn’t recognize the basis bump when you sell, if you have to pay U.S. tax, Canada will give you a credit for the amount of U.S. tax that you owe on the gain up to the point in time that you left Canada?

  • Answer Correct. So let’s say your deemed disposition is $100,000 when you left Canada, but it grows another $50,000. You can’t claim U.S. tax on a $150,000 against your Canadian tax on a $100,000. You can only pick up the U.S. tax on the $100,000.

So are there circumstances where it just makes sense to sell the investment to avoid all this complicated stuff?

  • Answer. Depending on what the asset is and what you think is going to happen with the asset and what state you are moving to you might want to actually sell the asset and rebuy it instead of just having the deemed disposition. This is where it the planning becomes interesting. The individual states in the U.S. have various tax rules. Some have no personal tax, some have personal tax, some don’t tax capital gains. So you have to understand where you are going, and know the beast you are looking at.

So it is not enough to say that I am moving to the U.S., you have to say I am moving to such-and-such a state. I don’t think that Canadians have that appreciation because while we have different tax rates provincially, barring Quebec, most of our tax rules are homogeneous. I don’t think Canadians have an appreciation for the independence that U.S. states have.
Anything else?

  • Answer. Can we go back for a moment on the real estate — to your Canadian home?
  • Generally you never pay tax on the gain on your principal residence in Canada. And that holds true in general so long as you sell your home it the year that you leave or by the end of the calendar year following the year of departure. In the U.S., however, there is a special provision on the Canada/U.S. income tax treaty that does give you a basis adjustment up on that home. So even if you close on your home sale after you arrived in the U.S., generally you won’t pay U.S. tax as long as you sell it for an amount of no greater than the value at the point of time that you left Canada.
  • So it is a special provision under the treaty that allows you to revalue your home. But once again, you have to check and see if the individual state [to which you’re moving] follows the treaty. It is not a slam-dunk that individual states do that.

So you can’t assume anything?

  • Answer. That’s right. You have to check out everything.

Professionals Planning to Work Abroad (or coming home) – March 3rd 2016

APEGGA Professional Speaker Series

On March 3rd The Expatriate Group did a presentation for APEGGA. The topic was “Canadians planning to work abroad (or come home)”. Living as an Expat Canadian is much more than tax implications. During the presentation we identified the 6 dimensions of Expat Planning: Goals, Tax, Lifestyle, Wills, Currency/Banking and Financial Planning. This presentation gave us the opportunity to have open dialogue and walk the attendees through what each dimension looked like as a non-resident. Some of the highlights we discussed were non-residency, culture shock and wealth and strategies for saving.

Non-Residency: Individuals looking to eliminate their tax obligation to the Canadian Government on world-wide income do so by…. Unfortunately, the answer is not so simple. In Canada, non-residency is not a straightforward test as some people might think. Each situation is unique and a case by case basis. We have individuals contacting us daily trying to find out what is required and not required as a non-resident. CRA looks at the total picture – investments, banking, tax, social benefits, and social ties. There are minor ties and major ties to both Canada and in the new country of residence that are used to evaluate tax residency status and obligations.

Culture Shock: Personal disorientation (culture shock) occurs when a person is experiencing an unfamiliar way of life different from their own. Successful adaptation to new a new cultural environment is an important part of the expat transition. There are so many differences when going to a new country: different times to eat, the direction of traffic, food, cultural norms for small talk (what to ask/not ask). Once the change has been identified the individual must come up with coping strategies to adapt. The faster you adapt the faster you are able to overcome culture shock. We find that reverse-culture shock when returning to Canada is much more difficult to overcome and requires much more preparation and concrete readjustment strategies in order to have a successful repatriation to Canada.

Wealth is Complex: Going abroad has many concerns. Most people take care of the urgent pieces of work (i.e. tax, house rental, etc.) however there are many considerations. Banking, currency exchange, pensions, cash, savings, investment accounts, corporate structure, company headquarters, spousal departure, property, capital gains, 10worldwide income, non-resident reporting requirements, tax treaties, Part XII, S216, capital cost allowance, rental expenses, international estate planning, return to Canada, immigration regulations, working visas, world-wide income, employment contracts, health care, repatriation of savings – the list is extensive. The more wealth one has, the more complex the picture gets. It is important to have a professional comprehensive review of these wealth issues – in fact there are tax implications on many of them.

Strategies for Saving: Keep in mind that if you are working overseas you should take advantage of the tax free situation by saving additional income that you might earn. We recommend that our clients keep track of their personal financial accounting prior to departure, while they are away and upon return to Canada. It is common for Expatriate Canadians to hold assets in many different jurisdictions. We recommend consolidating your accounts 11under one Canadian advisor and saving 1/3 of your salary while overseas in Canadian held investment accounts. We recommend this strategy for Estate planning purposes, your Canadian will covers your assets in Canada. Cash flow planning for retirement years should begin as early as possible – especially when the income tax liability in Canada has been reduced. Non-resident withholding taxes are applied to: dividends, rental payments, pension payments, OAS, CPP, RRSP payments, RRIF payments and annuity payments. However, capital gains may be tax-free for non-residents. Canada maintains international tax treaties with many different countries and the amount of withholding tax applied to non-resident income is based on a case-by-case basis.

What you should do today: The first step to successful expatriate work abroad professional is to write down some clear goals (both personal and financial). Spend as much time as possible planning and documenting your expatriation from Canada to ensure a clear roadmap for years ahead. You will be amazed by the growth of your net worth while overseas when sticking to a well thought out financial plan. Pick one dimension of the wealth map (Goals, Tax, Lifestyle, Wills, Currency/Banking and Financial Planning) and dedicate some time to it today. A few hours will pay off forever! We have many clients that are expatriating, repatriating, retired and just starting out with their careers and they all have two things in common: they have a plan and they follow a comprehensive approach to their wealth. Please contact our firm for a consultation if you are interested in a review of your non-residency questions and concerns.

About the Author: Jeanette Boleantu is a non-resident wealth strategist with The Expatriate Group. Her mission is to not only create better planning but also to implement those strategies. This approach gives clients peace-of-mind and helps them to meet both their personal and financial goals.

6 must-know tax facts for Canadians earning abroad – Repost

By Mark Gollom, CBC News Posted: Apr 25, 2012

The Canada Revenue Agency defines someone as a “factual resident” for taxation purposes if they maintain “significant residential ties” to Canada.

Canadians can travel far and wide, but never quite far enough to avoid paying taxes. Whether you’re working in a bar in Paris, or on a global trek, you may still be on the hook for paying tax on income earned.

Here are some things to keep in mind to make sure you don’t run afoul of the Canada Revenue Agency on your return to Canada if you’ve earned money in another country:

1. Canada can tax you based on money earned here and abroad

“Residents of Canada have to pay tax on their worldwide income to Canada no matter where they earn it,” says Georgina Tollstam, an accountant and Partner with KPMG.

This simply means that if you are living, working or travelling abroad but you’re still considered to be a resident of Canada, you’ll have to pay taxes to the federal government. So, when determining whether you are going to have a Canadian tax bill for money earned elsewhere, the first thing to figure out is if you’re still considered a “factual resident” or not.

The Canada Revenue Agency defines someone as a “factual resident” if they maintain “significant residential ties” to Canada. This means you may be temporarily working outside of Canada, vacationing but still have a home in Canada, have a family living in Canada and have a Canadian drivers licence.

To cease residency in Canada, and cease paying taxes to Canada, you have to go about the process of severing residential ties. This means you must no longer have a place to live in Canada, that you have set up a place to live somewhere else, set up financial accounts in a new place, and, if married, have taken your family with you.

Tollstam said that the CRA used to use a 24-month time period to determine non residency, but that has since been eliminated from its guide. She said that basically a minimum of 18 to 24 months away from Canada is now required to be a non-resident.

2.The place where you make your income has first right to tax

But Canada will give you  a credit for the tax you have to pay to the country where you earned the income.

For example, let’s say you are working in the U.S. but are still considered a resident of Canada, and you earn $50,000 in the United States. If the U.S. tax on that amount was $7,000 and the Canadian tax on that amount was $10,000, Canada would give you credit on the $7,000 you paid to the U.S.

This means you would have to pay an extra $3,000 to Canada.

“You will pay double tax occasionally, but you generally should not pay double tax,” Tollstam said.

3. It’s still possible to get double taxed

That said, while Canada has tax treaties with different countries that override the domestic law of Canada and laws of the other countries, some non-treaty countries won’t give you full credit for all the taxes paid.

4. You still have to file a return to Canada even if the tax rate is higher in the foreign country

If the tax rate is higher in the foreign country than Canada, you won’t pay anything to Canada on that income.

“But you would still have to file a return and disclose that you had that income, and show [officials] that you paid the tax to the country. [Canada] wants some proof that your paid it,” Tollstam said.

5. Non-residents of Canada are still taxed if they make money in Canada

Sorry, but there’s no exemption from tax just because you’re a non-resident.

“Let’s say you live in the Netherlands but you do come to Canada to do work here for three months,” Tollstam said. “Just because you live in the Netherlands doesn’t mean you’re not taxed on those three months of earnings.”

Once you’re a non-resident, generally speaking you’d cease filing regular returns. But Canadian citizens who are now non-residents may still have periodic income and investments that generate dividends that would also be subject to taxes. This income is generally taxed at a flat rate.

6. The U.S. resident formula

Unlike the factual test in Canada that determines residency, the U.S. taxes non-U.S. citizens based on a very mechanical formula. The calculation is thus: You take all the days you have lived in the United States during the current year, a third of the days you stayed in the U.S. in previous year, and one sixth of the number of days from the year before that. If the sum of those days exceeds 183, you are deemed a U.S. resident.

But it is possible to challenge that. A person can file a “closer connection” statement.

“You basically assert that you have a closer connection to another country and this is why you won’t file a U.S. return,” Tollstam said.

Canada Revenue Agency resources

The Canada Revenue Agency provides a lot of tax information for Canadians living or working abroad on its website:

Original Posting: http://www.cbc.ca/news/business/taxes/6-must-know-tax-facts-for-canadians-earning-abroad-1.1167892

Expert Tips for Managing Your Finances Abroad – Repost

Posted on: Currecnyfair.com

Living abroad can be complicated — you’re in a new culture, very likely grappling with at least one foreign language. There’s housing to consider, and if you’ve got children then there are issues related to child care and schools. Even managing your finances abroad can be complex, and that’s where some professional advice might come in handy.

Consolidating your banking will help keep your finances and financial planning organised instead of scattered across the globe. We’ve got some advice from experts to help you on your way.


First, a Site to Bookmark

A great site to bookmark is InterNations. It has financial planning page for expatriates with advice on everything buying property abroad to fiscal residency to dealing with inflation. An example of a before-you-go tip: Anyone moving abroad should have a contingency account. While that’s a solid piece of advice for anyone, it’s especially relevant for expats, who could find themselves needing funds for an emergency flight back home should someone experience a medical emergency.

And if you think you won’t need a contingency fund because of the enormous tax-free salary you’ll be earning with your new job in the UAE, be forewarned. A full 83% of expats in Dubai admit they haven’t saved a dirham, according to a recent Khaleej Times article. Many of the expatriates surveyed blamed the cost of living. “There are lots of different factors why it’s difficult to save,” says one, “but the cost of living here is disproportionate to earnings. Nowhere else in the world do you have to pay the entire year’s rent in two cheques or four cheques.”

Another agrees: “High utility prices and costly groceries don’t help. In addition, eating out, drinks and activities are more expensive here than in London and New York.”


It Really is Complicated

And when you do get to a point where you’re earning enough to be able to invest and save, the complications can kick into high gear.

In a case study of an American living in Hong Kong, wealth advisor Andrew Fisher at Maxim Global describes how complex the financial situations of expatriates can get. His client, who has a net worth of more than $5 million, owns three properties in three countries, plus “a significant amount of financial assets in company stock and options, qualified savings accounts in multiple countries, accumulated cash and diversified liquid investments.”

For just that client, Fisher has had to:

  • take inventory of all investments and accounts (one was a tax-free college fund; another a poorly performing offshore investment);
  • consult on compensation negotiations, which must take into account the employer’s cost-of-living allowance and net pay relative to the country where the employer is based;
  • enlist tax planning experts from each relevant country;
  • analyse the tax implications of having the client’s spouse own foreign property.

Investment advisor Tom Zachystal, who specialises in investment management and financial planning for expatriates at ExpatFocus, writes that US expatriates are finding it more difficult to successfully resolve financial matters of late. He blames FATCA (the Foreign Account Tax Compliance Act), which “has led to both US and non-US financial institutions being reluctant to deal with American expats.”

In a related article, Zachystal explains that the regulations, together with the KYC (“Know Your Customer”) rule, exist for a good reason: They make money laundering and tax evasion harder. Unfortunately, the people most affected are regular Americans working abroad, whose accounts simply aren’t large enough for the banks or brokerage companies to bother with burden of complying with all the additional reporting and account overseeing required. Those accounts are either frozen so their investments can no longer be changed or closed altogether.

But it’s not just American expats who have to navigate increasingly complicated tax laws.

Canadian expatriates, too, face “progressively stringent tax regulations,” warns the Expat Group, a Canadian firm that offers tax, wealth and life management services for Canadian expats as well as non-residents and foreigners moving to Canada. In fact, they add, “non-residents of Canada may be subject to Canadian tax on certain Canadian-source income.”

The lesson here is to make sure you research and discuss with a financial advisor any changes to tax laws of your home country and of your country of residence that might impact your investments and earning power.

The Global Tax Navigator at HSBC is a helpful tool that provides a quick overview of tax information on dozens of countries. A glance will tell you, for example, that the national income tax rate in Germany for residents earning 251,000 euros per year is 45%, and that Germany has double tax treaties with 92 countries. On the other hand, while Switzerland has the same number of double tax treaties, an average tax rate can’t be calculated due to its multi-layered taxation system.

This last fact means you’ll need to know the canton and municipality in which you’ll be living in order to determine the actual total taxes you’ll be paying. Having this information on hand can serve as a negotiating factor with an employer and must be known in order to be able to financially plan for your future with any degree of accuracy.


Navigating Exchange Rates

In BBC’s Money Talk, Richard Musty, Expat Banking Director at Lloyds TSB International, writes that people living overseas should really think about exchange rates. While his example is that retirees living mainly on small UK pensions in eurozone countries were badly affected when the pound plummeted in value a few years ago, it’s still a matter of concern to working expats who are trying to make wise investments and save for their own futures.

Depending on which way the currency moves, expats can of course benefit from exchange rate fluctuations. “The key point,” writes Musty, “is that they present a risk to your spending power. This risk can be reduced by shifting your money into the currency that you are most likely to need it in for the long-term.”

If you’ll be moving back home within the next year or so, he advises you to leave much of your savings in your home currency. If, however, your plan is to take up permanent residence in the new country, then you’d be in a better position to move all of your money from home into that local currency.

And Then There’s Death

We’ve looked at what happens in the event of an expatriate’s death before, specifically with respect to inheritance law in the UAE. More generally, though, while making financial plans, you should also research local estate law and include instructions that deal with your assets and property should anything happen while you’re overseas.

Nicole Gallop Mildon, solicitor and diplômée notaire at the UK law firm of Sykes Anderson Perry, recently wrote about expat death and how to help family members back home deal with an estate in a foreign legal system. In her piece for The Telegraph, she lists some steps expatriates should take that will help loved ones manage in event of death abroad:

  • Let your family, beneficiaries and executors know of your intended plans.
  • Keep a copy of relevant information in a place that can be easily accessed by your executor.
  • Have your will drawn up by a lawyer familiar with expatriate issues, particularly if the new EU succession regulations apply to you.
  • Ensure that you list your executor as someone who is to be notified in the event of your death.

And finally, writes Gallop Mildon, “get expert advice from a firm specialising in cross-border law for individuals. Give copies of their advice and their contact details to your executor and to your family.”

Original Posting: http://www.currencyfair.com/blog/tips-managing-finances-abroad/

Foreign Transaction Fee’s – Repost

How to get a U.S. dollar credit card

By Aaron Broverman

If you do a lot of spending in the States, you may be considering getting a U.S. dollar credit card, which will allow you to spend in American currency and avoid foreign transaction fees.

“If you’re a Canadian snowbird vacationing in Florida for five or six months [with a Canadian dollar credit card], those foreign transaction fees can definitely add up … about two and a half per cent on all your spending,” says Patrick Sojka, founder and CEO of Rewards Canada, a travel rewards information website.

While the process of getting a U.S. dollar credit card might be difficult through an American bank, you can apply for a U.S. dollar credit card at any of the major Canadian banks. us-credit-card

Getting a U.S. dollar credit card in Canada
Janette Boleantu, a wealth advisor for The Expatriate Group Inc., a Calgary-based organization providing financial advice to Canadian expats living abroad, says getting a U.S. dollar credit card from a U.S. bank can be a fairly complex and individualized process.

“Obtaining a U.S. dollar credit card is largely case-specific,” says Boleantu. “Just like … in any country, the issuer will look at your
credit history, and if you don’t have an American credit history or an American bank account, getting a credit card in the U.S. is going to
be extremely difficult for you.”

However, it’s a different story if you apply for your U.S. dollar credit
card from a Canadian bank. “You can get a U.S. dollar card issued by a Canadian bank, so it’s based on your Canadian credit rating,” says Sojka. Everything happens through the Canadian bank, he says, but you’ll spend in U.S. dollars.

Currently, all five of Canada’s major banks offer a U.S. dollar credit card. They all carry a 19.99 per cent interest rate on purchases and a 22.99 per cent interest rate on cash advances, with annual fees ranging from $35 to $65.

The application process is no different than applying for a Canadian credit card. You do not need a U.S. dollar bank account or a U.S. address, as you likely would if you applied through an American bank.

However, having a U.S. dollar bank account with the same Canadian bank that issues your U.S. dollar credit card may make things a little less costly for you, even if it isn’t necessary. With a U.S. dollar bank account, you’ll be able to pay your bill in U.S. dollars without worrying about the exchange rate or currency conversion fees (most banks charge about a 4 per cent conversion fee).

You can supplement the account in a couple of ways. First, if you have any income coming in from the U.S., you can simply deposit your U.S. dollars into the account. If not, Sojka recommends waiting until the exchange rate is favourable to Canadians, then funding your U.S. dollar account on the cheap.

A U.S. dollar bank account might be worth having if you do a lot of spending in the States — say, if you’re a snowbird who spends several months there out of the year. However, if you only use your U.S. dollar credit card occasionally, you might not worry too much about exchange rates when you pay off your purchases from a Canadian dollar bank account.

U.S. department store credit cards
Of course, you may only shop in the U.S. to access stores with no Canada location, or to get better deals than those found in Canada branches. In that case, you may want to get a U.S. store credit card instead. It’s easier than getting a general purpose U.S. dollar credit card from an American bank, according to Sojka, and it might be optimal for those who don’t spend anywhere else.

“Those department store credit cards are pretty interesting because they’ll issue them to Canadians without a U.S. tax number or credit rating,” he says. According to credit services at Bloomingdales, all you need is a Canadian passport and your Canadian social insurance number and you’re eligible for their department store card.

However, it may be a little more difficult to pay the balance from Canada. “You might be able to pay the balance online, but chances are better you’ll need a U.S. money order from your bank that you can send in,” says Sojka.

Best option for AmEx cardholders
If you are moving to the U.S. and you would like a U.S. dollar credit card from an American bank, one of the easiest cards to obtain without much hassle is American Express, as long as you already have a Canadian AmEx.

“Visa and MasterCard are accepted globally, but their brands are issued by banks in different countries,” says Sojka. “American Express is truly global, thanks to what’s called their Global Card Transfer, [which allows you to] transfer all of your Canadian American Express credit history to a new American Express card in the U.S. or other country.”

So if you know you’re moving to the U.S., Sojka recommends getting an AmEx card about six months before your move. Then, you’ll already have a head start toward a credit history in America.

Original Posting- http://canada.creditcards.com/credit-card-news/how-get-US_dollar-credit_card-1267.php

Updated: December 17, 2015

Non-Resident RRSP Redemption: Withholding Tax Explained

  • June 08, 2015 by Jeanette Boleantu

    The Expatriate Group strongly recommends that appropriate tax advice be sought prior to the withdrawal of any RRSP balances. There are two tax consequences that exist for withdrawing registered products before you retire –regardless of your tax residency status.

    1. The amount you redeem is taxable income: You have to report the amount you take out as part of your worldwide income. At that time, you may have to pay more tax on the money — on top of the withholding tax. It depends on your total income and tax situation.
    2. You pay a withholding tax: As a non-resident when you redeem RSP there is a 25% withholding tax that is due to CRA. This withholding tax is the NON-RESIDENT TAX LIABILITY on the income received. If a lower amount than 25% is withheld at source or a T3 slip is issued you need to file and pay the difference.

    The financial institution will issue an NR4 notifying tax withheld at source in order to avoid filing a tax return as a non-resident. The Section 217 election allows a non-resident to voluntarily file a tax return so that they will have the same tax obligation as if they were a resident of Canada. This is a hassle and we do not recommend doing this. The only time a non-resident should file with CRA is if they received a T3 slip as a result of not changing their residency status on the address maintained with their financial institution.

    Before you decide to withdraw your RRSPs, make sure that you consider all of your options. Consult with a 2knowledgeable financial professional who can help you figure out the best way to go about making your withdrawals, and who can help you plan for your tax payments. Canadian tax regulations may provide relief from tax and penalties provided that the appropriate tax forms are filed with the CRA. For this reason

    The following illustrates the standard amount withheld for Canadian tax residents.


    Non-Resident Tax Calculator – Results

    Country of residence: Malaysia

    Calculation date: 2015-06-05

    Income type 1 from Canadian sources: RRSP/RRIF – Lump Sum Payment

    Income amount: CAD $ 14,000.00

    Tax rate: 25.0 %

    Amount payable: CAD $ 3,500.00

    Minus tax amount already deducted: CAD $ 0.00

    Balance owing: CAD $ 3,500.00

Non-Resident Return to Canada: Canadian Repatriation

What you need to do when moving back home

The Expatriate Group strongly recommends that appropriate tax advice be sought prior to returning to Canada. As a Canadian citizen returning from abroad there is a lot to consider before you re-enter please consult a cross-border tax specialist. We can advise.

Step One: Determine Your Residency Date

Residency is based on establishing ties. You will still be a non-resident visitor for 1-2 months if until ties are established. In the year that you establish Canadian tax residency, you will be treated as a part-year tax resident. For the period of time you are a tax resident of Canada, you are subject to Canadian tax on your worldwide income. As a non-resident of Canada, you are only subject to Canadian tax on Canadian source income. Make sure that you receive foreign payments (bonus, severance package, final pay check, international savings transfer) prior to becoming a tax resident of Canada. If money is received after residency this will be included as taxable income.

You will file a tax return on April 30th deadline of the year that you arrive back in Canada (most likely a partial year return). On this return your re-entry date will reflect the day that you became a tax resident of Canada. Caution: Please ensure that all your financial affairs are in order prior to establishing any major ties back in Canada. It is important to keep a clear picture of you as a non-resident. Remember that your cash should arrive before you to avoid CRA viewing this money as taxable income. It is essential that you carefully plan the date when your Canadian residency starts. Seek professional advice on ties to Canada to establish residency date for tax filing purposes.

Please let me know your experience and provide feedback that other Expatriates returning home will find useful.