If you decide to move to another country and become non-resident then you must pay a departure tax. This departure tax is calculated based on a deemed disposition of most of your assets (even though you may not have necessarily sold them) at the fair market value. You then must pay the regular capital gains tax.
Among the assets that are not subject to this calculation are registered assets (such as RRSPs, RRIFs and pensions), real estate and some other classes of assets.
Since it’s possible that you have not actually sold property, but still owe the departure tax, the government does allow you to defer payment on those taxes (with zero interest on the balance) if you put up some collateral. Further, actual collateral is not required on the first $100,000 of capital gains. For any amount of departure tax owing, you can defer the payment until you actually do sell the assets.
How do the Govt decide you are leaving to be a non resident? Do you declare or do they just make a call depending on the number of days you are abroad.
I have paid airport departure taxes, but have not heard about this departure tax.
The onus is on you since if you retain residency status in Canada you have to pay tax on your worldwide income, whereas if you are a non-resident you only owe tax to Canada on your Canadian sourced income. Since it would be better not to pay tax twice, you would want to prove to the Government you are non-resident. I’ll be covering that off in a future post, but essentially you need to sever all ties with Canada (credit cards, memberships, driver’s licenses, etc), in addition to spending ‘substantially more than’ 183 days outside of Canada. The final decision is actually made on a case by case basis I believe.
As always, please consult with a professional tax advisor for advice particular to your own situation, and for clarification on anything appearing on this site for entertainment purposes only. :)
A timely post this is. I was just considering taking a job in the states. I havent researched too deeply in to it yet, but I was wondering about the effects of non-residency on a non-registered account. More specifically, would I be able to transfer funds into it and purchase securities while being non-resident? I would plan to return to Canada eventually so it would be better if I could have the unrealized cap gain continue to grow in Canada instead purchasing them in the US and facing tax upon departure.
Thanks
@epps – Sure, you can have a non-resident investment account. I’ll defer you to use a professional tax advisor for detailed cross-border taxation issues though… :)
Hi folks
Don’t forget that your RRSP must be liquidated as well. CRA states that a RRSP is only for resident canadians and no for non residents or foriegnors, although this policy does have a large hole in it as one could move to either the US and or the UK and not require to close the RRSP account. Plus if you move to the UK you can withdraw from your RRSP and not be subject to the withholding amounts (starting at 5%).