How is Canadian depature tax calculated?
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Thread: How is Canadian depature tax calculated?

  1. #1
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    How is Canadian depature tax calculated?

    Hello
    I moved from Canada to the US to work during 2011 and am trying to figure out if I'm a Canadian resident still for tax purposes or not, and if not how much departure tax might be owed.
    I have a H1B visa and live in the US now and work for a US company and pay US taxes and deductions etc. But I still have residential ties to Canada (still own an apartment there and have some bank accounts).

    Am I still considered a Canadian resident from a tax perspective? If not am I liable for departure tax? If so how is that calculated? If I sell the Canadian residential apartment does any of that get taxed under departure tax? (it would be sold for a loss, not a profit).

    Thanks


  2. #2
    Senior Member caricole's Avatar
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    To be considered as a CANADIAN RESIDENT, you must not have been absent from Canada for a period OVER 180 days

    If ABSENT for over 180 days you will be taxed as NON RESIDENT and all transactions shall require a NON RESIDENT WITHOLDING TAX

    So the bank and your broker must be advised of your NON RESIDENCY

    In case of a transaction in real estate..the same thing applies...declare NON RESIDENCY at the Notary

    If you file a Canadian Income tax form....all taxes witheld could be partially recuperated in many cases

    To my kmowledge..there is no departure tax for abandoning Canadian Residency

    Its only a tax on the income and earnings you made in Canada where the governement wants its share

    my opinion

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    Start here. http://www.cra-arc.gc.ca/tx/nnrsdnts.../lvng-eng.html

    You are at least taxed on world-wide income you earndd up until your date of departure in 2011. The more complicated issue is whether or not you sufficiently severed your reisidential ties to be considered a non-resident after your departure. The rules on this can be pretty subjective. You may have to talk to CRA to get a ruling. Or at least file a return stating that assumption, and let them correct you.

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    Senior Member kcowan's Avatar
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    If you still hold properties like a PR and investment accounts, you will be still considered resident for tax purposes.

    When you are officially considered non-resident a one time tax of 25% is charged when you remove your holdings. You should be sure you are not returning because this tax is not refundable. Because of the tax treaty, you might find it attractive to remain a resident for tax reasons.

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    Quote Originally Posted by kcowan View Post
    If you still hold properties like a PR and investment accounts, you will be still considered resident for tax purposes.

    When you are officially considered non-resident a one time tax of 25% is charged when you remove your holdings. You should be sure you are not returning because this tax is not refundable. Because of the tax treaty, you might find it attractive to remain a resident for tax reasons.
    The 25% charge sounds like the tax for cashing out an RRSP as a non-resident, but does not apply to many other assets like cash or your principal residence.

    The OP may be referring to the deemed disposition of other assets as the Canadian departure tax. As such, there may be capital gains owing on an emigrant's tax return.

  6. #6
    Senior Member uptoolate's Avatar
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    The CRA's criteria for non-resident status are laid out in their website which is given above. They are not cut and dried by any means. The more ties you sever the better, the more you continue to have the worse. You may still own property in Canada and be considered a non-resident for tax purposes. If you continue to own what was previously your primary residence you are better to rent it out. Preferably not to a family member. You should have a formal rental agreement and from the CRA's point-of-view, you should not be able to reoccupy it on short notice. You can still hold a Canadian bank account and credit card though it is certainly best to have ongoing banking done in your new country of residence and have a primary credit card there. You do not have to cash in your RRSP but in some cases this may be desirable. As mentioned, the main goal is to cut as many ties as possible. If you happen to have a spouse and/or children that you have taken with you then you are in good shape. If you left them behind then you are not (unless through divorce I guess)! One thing you should definitely cancel is your provincial health insurance. There is no 'departure tax' per se. Just the income tax return that includes all income from employment and investments up until the time of your departure.
    Last edited by uptoolate; 2012-04-30 at 05:15 PM.
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  7. #7
    Senior Member kcowan's Avatar
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    Quote Originally Posted by Guban View Post
    The 25% charge sounds like the tax for cashing out an RRSP as a non-resident, but does not apply to many other assets like cash or your principal residence...
    Yes that was a rule of thumb. You actually liquidate all your holdings and pay tax in the year that you leave. So your RRSP would be 100% taxable whereas your sale of PR would be tax free. Any gains in investment accounts would become taxable. And all in the same year.

    Here is one of many references.And here is the reference to the tax rate for non-residents:
    •The usual Part XIII tax rate is 25%
    Last edited by kcowan; 2012-05-01 at 11:07 AM. Reason: Added Part III reference

  8. #8
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    There's a bit of judgement in the resident/non resident determination. OGG gave the guidelines. If your move is temporary and less than 2 yrs, and given your VISA status you may well still be a cdn resident. (or maybe not ).

    Tax is much easier. The 25% is only for RRSP withdraws after you become a non res. You do not have to withdraw or cash it out if you choose not to. So there's no tax on your RRSP until you draw it out.

    The rest of your stuff is deemed sold when you leave so you trigger tax on any gains. If your real estate is at a loss -- there's no tax.

    A few complications owning real estate as a non-res, including withholding tax by the renter, and extra forms and filings annually and when you sell.


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