Tax Implications forCanadians Working

Abroad

Canadians Working Abroad, Overseas, Outside Canada –

Permanently • The first thing that you need to do as a Canadian

who is permanently working overseas is to determine your residency status.

• Are you a resident of Canada, or are you a non-resident of Canada? The CRA (Canadian Revenue Agency) looks at three primary factors when determining your Canadian residency status

Three Primary Factors

1. Where your permanent home is located;

2. Where your spouse and/or common law partner and children live; and

3. Where you live.

The Secondary Factors

• Canadian driver’s license• Bank account and credit cards• Investments in Canada (e.g.

RRSPs, TFSAs, Canadian pension, brokerage account, etc.)

• Health cards• Social ties (e.g. membership in

community club, professional organization, etc.)

• Personal possessions (e.g. furniture, household appliances, vehicles, clothing, etc.)

Secondary Ties• A single secondary tie, by itself, will not cause

you to remain or become a non-resident. • When examining the secondary ties and their

impact on your Canadian residency status, you must evaluate the ties as a whole.

Six Important Things To Do Before You Leave Canada:

1. File Departure Tax Return2. Submit Form NR733. Stop Receiving Tax

Credits4. Disclose All Assets5. Pay Departure Tax6. Talk To Your Financial

Advisor

File Departure Tax Return

• You need to file a departure tax return (this is like a personal tax return, due on April 30th but has a few special forms attached to it).

• On your departure tax return it is really important that you indicate the date that you emigrated from Canada, that is, the date that you left Canada.

Submit Form NR73

• You could file form NR73 (determination of resident status upon leaving Canada).

• It’s not mandatory to file this form with the CRA, however, as Canadians working abroad you may want to complete this several page questionnaire and submit it to the CRA for processing.

• This is because once the CRA has processed it, they will give you a determination in writing as to whether you are a resident of Canada or a non-resident of Canada, and so you’re not left in limbo guessing.

Stop Receiving Tax Credits

• Canadians working abroad, overseas, outside Canada must tell the CRA that they no longer want to receive payments or credits for GST, the Canada child tax benefit, and the universal child care benefit.

• If they continue to work abroad and receive these payments, they will end up having to pay all of that money back, plus interest, plus penalties, once the CRA finds out.

 Disclose All Assets• All Canadians working overseas must give the CRA

a complete list of all the Canadian and foreign assets that they own immediately prior to departure.

• You have to provide a description of your assets and the fair market value of those assets at the time that you leave.

• You are not required to file this form if the total value of all your assets is less than $25,000 when you leave Canada.

• If you don’t file this form the CRA will levy a significant penalty of $2,500

Pay Departure Tax• Canadians who leave Canada are required to pay

departure tax. • When you leave Canada and become a non-

resident you are deemed to dispose of all of your assets at their fair market value and you must pay tax on the accrued gains.

• Certain assets are exempt from departure tax, like your home, RSPs, and RIFs.

Talk To Your Financial Advisor

• (a) You should tell your financial advisor that you have become a non-resident, the date you became a non-resident, and that you want to receive non-resident tax slips from all the financial institutions, mutual fund companies and stock brokerages that you do business with. There are special non-resident tax slips for investment income that will be given to you.

• (b) You should tell your financial advisor that you no longer wish to contribute to your RSP, and also that you want to stop contributing to the tax free savings account (because you’re no longer permitted to do so once you become a non-resident of Canada).

Filing Tax Returns In Canada For Canadians Working Abroad

• You only have to file a tax return as a Canadian permanently working abroad in three specific circumstances:

1. You earned employment income in Canada.2. You carried on a business income in Canada.3. You disposed of taxable Canadian property such as

real estate property.

Withholding Tax For Canadians Living Abroad

• After you leave Canada, you will be subject to withholding tax. Withholding tax is applied at a rate of 25% on the Canadian source income that you receive.

• These items include interest, dividends, CPP, old age security and pension, RSP income and rents from real estate property.

Canadians Living Temporarily Abroad

• If you are briefly living abroad you are considered a factual resident of Canada because of your residential and personal ties with Canada.

• As Canadians working abroad, you could be a factual resident of Canada under the following circumstances. You worked temporarily outside of Canada You teach or attend a school outside of Canada You commute daily or weekly to work in the United States You regularly vacation outside of Canada

Tax Filing Obligations For Canadians Living Temporarily

Outside Canada•  As Canadians working

overseas, you will still have to:1. File a regular personal tax

return which is due on April 30th,

2. Pay tax on your worldwide income (income earned inside as well as outside of Canada),

3. Claim all deductions and tax credits just like all other Canadians,

4. Pay, both, Federal and Provincial tax.

Foreign Tax Credits• The Canada Income Tax Act does provide tax relief

by the way of a foreign tax credit. You can claim a foreign tax credit for the taxes that you paid in the foreign country

• The foreign tax credit is the lesser of two amounts:    

oThe income tax you paid on the foreign country andoThe second is the Canadian tax payable on the foreign

source income.

Disclaimer• The information provided in this presentation is

intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided in this presentation