Know Your Tax Obligations 

The better prepared you are before leaving Canada, the better your experience abroad will be. Your tax obligations while living abroad depend largely on whether you’re a resident or non-resident of Canada. Your status is determined by a number of factors, including the purpose and permanence of your stay abroad, the duration and frequency of your visits to Canada and whether you’ve severed your residential ties with Canada. Be sure to review your situation with the Canada Revenue Agency (CRA) to avoid surprises.

Once you’ve confirmed your residency status, you can find information specific to your situation as a Canadian living abroad, such as the tax package you should use; your eligibility for the Foreign Tax Credit and Overseas Employment Tax Credit; your entitlement to other credits and benefits as a Canadian living abroad; and details on tax treaties between Canada and certain countries, which will allow you to avoid being taxed in two countries on the same income.

The CRA’s International Tax Services Office processes income tax returns for non-residents and deemed residents of Canada, including Canadians working abroad. It also provides assistance by postal correspondence and looks after all non-resident tax withholding accounts. See the Taxation for Canadians Travelling, Living or Working Outside Canada page for more information.

[su_spoiler title=”Did you know…?” icon=”arrow”]As a rule, you cannot receive welfare, disability or other forms of social assistance while living abroad. Contact your provincial or territorial authorities for details.[/su_spoiler]

Determining Your Residency Status

Under Canada’s tax system, your income tax obligations to Canada are based on your residency status. You need to know your residency status before you can know what your tax responsibilities and filing requirements to Canada are. The following steps can help you determine your residency status for income tax purposes and your tax obligations to Canada.

[su_accordion][su_spoiler title=”Step 1: Determine if you have residential ties with Canada”]

The most important thing to consider when determining your residency status in Canada for income tax purposes is whether or not you maintain, or you establish, residential ties with Canada.

Significant residential ties to Canada include:

• a home in Canada;
• a spouse or common-law partner in Canada; and
• dependants in Canada.

Secondary residential ties that may be relevant include:

• personal property in Canada, such as a car or furniture;
• social ties in Canada, such as memberships in Canadian recreational or religious organizations;
• economic ties in Canada, such as Canadian bank accounts or credit cards;
• a Canadian driver’s licence;
• a Canadian passport; and
• Health insurance with a Canadian province or territory.

To determine residence status, all of the relevant facts in each case must be considered, including residential ties with Canada and length of time, object, intent, and continuity while living inside and outside Canada. For more information on your residential ties, see Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status. [/su_spoiler]

[su_spoiler title=”Step 2: Determine your residency status and its tax implications”]

Your residency status if you left Canada:

• If you are working temporarily outside Canada, commuting from Canada to your place of work or attending school in another country, and you maintain residential ties with Canada, you may be considered a factual resident of Canada.
• If you left Canada and established a permanent home in another country and you severed your residential ties with Canada ceasing to be a resident of Canada in the tax year, you may be considered an emigrant.
• If you established ties in a country that Canada has a tax treaty with and you are considered a resident of that country, but you are otherwise a factual resident of Canada, you may be considered a deemed non-resident of Canada. The same rules apply to deemed non-residents as non-residents of Canada.
• If you left Canada and you are a government employee outside Canada. For more information, see Government employees outside Canada. [/su_spoiler][/su_accordion]

Departure Clearance 

It’s important to settle any obligations before leaving your host country. Make sure you’ve paid your local bills or made arrangements to do so. If you’ve obtained citizenship, permanent residency or any other form of legal status in the country, you may need departure clearance to leave. Approval usually depends on the satisfactory inspection of travel documents, permits or other official forms. For example, some countries ask for a statement from local tax authorities that you’ve met all obligations. Others will terminate your residency permit if you’re leaving for good or for an extended period.

Other Helpful Information

Have An Emergency Plan: Get Prepared.

What Travel Documents Do You Need? Passport Canada Website

Legal Matters & Consular Services: Consular Services or Embassies & Consulates

[su_accordion][su_spoiler title=”Links:”]

A Canadians Guide To Living Abroad

Individuals – Leaving or entering Canada and non-residents

Travel Advice & Advisories Page

Customs page.

Health Canada’s website.

Moving back to Canada

Travelling as A Dual Citizen

[/su_spoiler][/su_accordion]

For more information please call our office at 250-334-3797 or email us at office@ashcroftassociates.ca