If you are immigrating to or emigrating from Canada, there are complex tax rules that you will need to consider before and after you move. Considering tax rules related to moving including some planning opportunities will make your move as tax efficient as possible.
Ceasing Canadian Residence:
Take steps to cease Canadian residency if you are moving abroad permanently or for an extended period. When you are leaving Canada avoid keeping any ties with Canada such as maintaining home, club memberships, credit cards, medical plans and spouse or dependants remain in Canada. And when you come to visit, should not spend more than 183 days in a year, it will make consider you to resident in Canada and your income will be taxable.
Canadian departure tax
Beware of Canadian Departure tax on emigration. On departure, you will deem to have sold most of your assets in fair market value except taxable Canadian property. And for other property CRA will allow you to defer paying the tax on gains as long as you post acceptable security and in case of private company shares the CRA will act as any other commercial lender to ensure that the shares retain their value. You will not have to post security for departure tax on the first $100,000 of capital gains.
Capital gains exemption on emigration
If you have farm, fishing property you should crystallize your gains before you emigrate, you will be no longer eligible for the capital gain exemption of $750,000.
Reporting rules for emigrants with property worth over $25,000
If you own a property more than $25,000 you are required to file an information Form (T1161) listing all your significant assets ( excludes cash, RRSP, RESP, TFSA, items for personal use like car, clothes) with your final Canadian tax return in the year of emigration.
If you rent or sell your Canadian home after emigration
If you rent your property, the tenant should remit 25% of your gross rental income as non resident withhold tax. And if you have any expenses to earn the income you can submit Form NR6.
If you sell the residence you must notify CRA and obtain a clearance certificate. Generally, there is no Canadian income tax levied on the gain from selling the principal residence. However, if you sell more than one year after the year of your move, only a portion of the gain would be exempt.
If you have RRSPs or RESPs
For RRSP you can continue to contribute as long as you have contribution room available. If you withdrew any funds from RRSP you should repay the entire amount within 60 days, if you failed to do so the unpaid balance will be added to your income on your Canadian income tax return for the year of departure.
But in the case of RESP you cannot make any contributions after you become non-resident. And if the beneficiary is a non resident of Canada when withdrawals are made from an RESP any CESGs paid to the plan must be repaid to the federal government.
Ceasing Canadian Residence:
Take steps to cease Canadian residency if you are moving abroad permanently or for an extended period. When you are leaving Canada avoid keeping any ties with Canada such as maintaining home, club memberships, credit cards, medical plans and spouse or dependants remain in Canada. And when you come to visit, should not spend more than 183 days in a year, it will make consider you to resident in Canada and your income will be taxable.
Canadian departure tax
Beware of Canadian Departure tax on emigration. On departure, you will deem to have sold most of your assets in fair market value except taxable Canadian property. And for other property CRA will allow you to defer paying the tax on gains as long as you post acceptable security and in case of private company shares the CRA will act as any other commercial lender to ensure that the shares retain their value. You will not have to post security for departure tax on the first $100,000 of capital gains.
Capital gains exemption on emigration
If you have farm, fishing property you should crystallize your gains before you emigrate, you will be no longer eligible for the capital gain exemption of $750,000.
Reporting rules for emigrants with property worth over $25,000
If you own a property more than $25,000 you are required to file an information Form (T1161) listing all your significant assets ( excludes cash, RRSP, RESP, TFSA, items for personal use like car, clothes) with your final Canadian tax return in the year of emigration.
If you rent or sell your Canadian home after emigration
If you rent your property, the tenant should remit 25% of your gross rental income as non resident withhold tax. And if you have any expenses to earn the income you can submit Form NR6.
If you sell the residence you must notify CRA and obtain a clearance certificate. Generally, there is no Canadian income tax levied on the gain from selling the principal residence. However, if you sell more than one year after the year of your move, only a portion of the gain would be exempt.
If you have RRSPs or RESPs
For RRSP you can continue to contribute as long as you have contribution room available. If you withdrew any funds from RRSP you should repay the entire amount within 60 days, if you failed to do so the unpaid balance will be added to your income on your Canadian income tax return for the year of departure.
But in the case of RESP you cannot make any contributions after you become non-resident. And if the beneficiary is a non resident of Canada when withdrawals are made from an RESP any CESGs paid to the plan must be repaid to the federal government.
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