Moving is never easy, whether you are moving to another city, province, or country. The farther you move, the harder it becomes. Not only do you have to take care of your furniture, residence, and other things, you also have to take care of your taxes before you move. Taxes are not something you can leave for another day. Leaving them unattended can land you in hot water, and you don’t want to overburden yourself, especially when making such a massive change in your life. If you are leaving Canada for another country, here are some things you should keep in mind. Individuals are taxed differently in each country. Canadian residents are taxed on all of their worldwide income, whether they live in Canada or temporarily abroad, whether they are citizens or not;If you become a non-resident of Canada, Canada will tax you on the value of specific properties before you leave. Then, Canada will only tax certain income derived from Canadian sources. Your tax residency status depends on your facts and circumstances. For instance,
- Are you planning to return to Canada, and will your family stay behind?
- Will you be able to stay in and use your house/condo?
- Do you intend to keep your provincial driver's license, provincial health insurance, and professional and social affiliations)?
Canada intends to tax the appreciation (i.e. the gains) on ALL property before you sell it:
- Property in Canada (including resource and timber properties);
- Plan types such as RRSPs, RRIFs, RESPs, TFSAs, stock option plans, CPP, OAS, and certain other kinds of projects related to pensions, retirement, and profit-sharing; and
- A personal trust for which you didn't pay a fee (i.e. you weren't charged anything) such as a Canadian family trust or a non-resident (offshore) personal trust;
- If you owned property when you last became a tax resident (i.e. when you came to Canada), you still own it, and you have lived in Canada for no more than 60 months (5 years) during the last 120 months (10 years) (i.e. a short-term resident).
Property that triggers the Exit Tax includes:
- Securities traded on public exchanges (e.g. shares, bonds, mutual fund trust units);
- Property outside Canada
- Holdings in private companies (e.g. family companies);
What To Do BEFORE You Leave?
- Before you leave Canada, the first thing you need to do is contact an accounting firm in Toronto, or anywhere else you live. Doing your taxes is not something you should do on your own unless you are a tax or finance expert.
- Get an estimate of the fair market value and the cost of all your assets. Valuations or assessments might be needed in the case of private company shares (e.g. your holding or operating company).
- Notify your bank and investment advisor that you intend to leave and when you will no longer be a Canadian resident for tax purposes;
- The corporate structure of a private company (holding, investment, or operating company) should be reviewed. Think about ways to minimize Canadian (and possibly foreign) taxes upon exit as well as ongoing taxes for you and the company;
- If you are the trustee or a beneficiary of a Canadian trust (such as a discretionary family trust), you should review the filing requirements. There are possible pitfalls that could trigger more taxes or reporting requirements in Canada;
- If you plan to keep Canadian real estate, consider provincial and municipal real estate taxes (i.e. Vancouver Empty Homes Tax and BC Vacation and Speculation Tax). When renting out your property or when you sell it while a non-resident, watch for withholding tax requirements; and
- To learn how you will be taxed in your new country, be sure to speak to an adviser there.
What You Should Not Do
A lack of planning and inaction can be costly.There are additional considerations if you are moving to the U.S. Assets held outside the U.S. must be reported to the U.S., and there may be penalties for non-compliance. U.S. states tax their residents differently. Contact us if you want to talk to a CPA about your move from Canada.
Moving is a tricky step, so take care of your belongings, residence in the new place, what to do with your current home, and more. You have to ensure that it goes smoothly and there are no hitches in between. Take care of taxes before moving. We are a reputable, experienced accounting firm with a highly skilled CPA who can help you with your taxes and take this burden off your shoulders.