In fact, it can pay handsomely to find a cross-border tax expert who can
help you determine with confidence what your filing status is, both before
and after you leave. Knowing that will help you comply and avoid costly
penalties and interest for failure to file various returns, especially if
you are compelled to do so retroactively.
You will also make better decisions about contributing to and withdrawing
from Canadian investments left behind, such as TFSAs, RRSPs, RRIFs, taxable
Canadian real estate, or business properties.
You should be especially concerned about your tax ties if you are going to
a country with which Canada does not have a tax treaty that prevents double
taxation. You must be prepared to show that you have severed ties with
Canada and have a permanent home elsewhere to avoid attachment to the
Canadian tax system. However, taxable assets left in Canada will still have
tax consequences for non-residents upon their disposition.
In addition to taxing the worldwide income of residents, the government of
Canada imposes income taxes on non-residents who earn income in Canada.
Except where there is an international tax agreement restricting the
collection of such taxes, anyone in Canada who pays income to a
non-resident is required to withhold income taxes from those payments.
In most cases, this is the only tax that the government will get on that
income, as the non-resident will generally not be filing a Canadian income
tax return. In fact, an expatriate of Canada may find that withholding
taxes on Canadian income earned while a non-resident is cheaper than paying
taxes in Canada.
Even in cases where there is little or no Canadian income, a non-resident
may wish to file a tax return in Canada, in order to attempt a refund of
the withholding taxes. There are three opportunities:
* Under Section 216 – Collection of rents and timber royalties. These
filings are not eligible for any personal amounts and so are subject to 48%
non-resident surtaxes, the same taxes levied to deemed residents.
* Under Section 216.1 – Non-resident actors may file a return in Canada
under this section to report net Canadian-source acting income.
* Under Section 217 – Non-residents receiving any of the following sources
of income may file a return for amounts that include:
1. Old Age Security pension, Canada Pension Plan or Quebec Pension Plan
benefits, most superannuation and pension benefits, deferred profit-
sharing plan payments, RRSP or RRIF payments, certain retiring allowances
or death benefits.
2. Employment Insurance benefits or registered supplementary unemployment
benefit plan payments, or amounts received from a retirement compensation
arrangement (RCA), or the purchase price of an interest in a retirement
3. Prescribed benefits under a government assistance program.
In these cases, if Canadian-source income is 90% or more of their worldwide
income, taxpayers will be allowed to claim full personal amounts. If
Canadian-source income is less than 90% of world income, then personal
amounts are limited to 15% of eligible income. The 48% non-resident surtax
will apply but will be reduced by the factor of eligible income divided by
non-eligible world income. Paying the 25% withholding taxes may be simpler
and less expensive.
It’s complicated, and that’s why you may need help from a tax professional
in making the right filing decisions when your life changes and takes you
across the border or overseas.
Excerpted from Evelyn Jacks’ latest book,
Essential Tax Facts: How to Make the Right Moves and Be
Audit-Proof, Too. Pick up your copy today as your guide for tax-efficiency at all life
© 2018 The Knowledge Bureau, Inc. All rights reserved. Reprinted with
is the founder and President of Knowledge Bureau, which
brings continuing financial education in the multiple areas of
specialization to advisors and their clients. She is the author of 52
books on tax and wealth planning. This article
originally appeared in the
Knowledge Bureau Report. Follow Evelyn Jacks on Twitter
@EvelynJacks. Visit her blog at www.evelynjacks.com.
Notes and Disclaimer
The foregoing is for general information purposes only and is the opinion
of the writer. No guarantee of investment performance is made or implied.
It is not intended to provide specific personalized advice including,
without limitation, investment, financial, legal, accounting or tax advice.