# Living half the year in Canada, the other half in Costa Rica



## MarkCT (Jan 27, 2015)

Hey guys,

I am self-employed and work online. Clients are mainly overseas. 

Since I'm a big fan of snorkelling and warm weather (and have no dependants), I've been thinking of relocating to Costa Rica or Belize. However I don't want to be far from my family and friends for too long, so I was thinking of the idea of spending 6 months or so (per year) down south (winter months here), and the rest back home in Canada. 

What type of problems would I be facing in such a scneario? (especially in terms of taxation and health insurance) Would I owe taxes to Canada or to the other country, or both?

Thanks!


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## Guban (Jul 5, 2011)

The idea of tax residency is not black and white, but there are a few things to look at.

CRA will look at your residency. Where do you have a permanent home available to you? If you stay with a friend, or family for your time in Canada, and own or rent while you are abroad, you are likely considered a non-resident. If you become non-resident, you file an exit return, and are basically done with filing Canadian tax returns.

There is another active thread that I hope you've read:
http://canadianmoneyforum.com/showthread.php/33842-Keeping-Canadian-Tax-Residency

Someone more knowledgeable and experienced can chime in on insurance issues.


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## Eclectic12 (Oct 20, 2010)

Part of the question is whether you want to keep your Canadian tax residency. If you do, worst case - you may have two tax returns to do.

From a provincial health plan perspective ... as I understand it, you will need to plan to be present enough to qualify.
For example, with the Ontario plan:

Generally, to be eligible for Ontario health coverage you must :

be a Canadian citizen, permanent resident or among one of the newcomer to Canada groups who are eligible for OHIP as set out in Ontario’s Health Insurance Act ; and
be physically present in Ontario for 153 days in any 12-month period; and
be physically present in Ontario for at least 153 days of the first 183 days immediately after establishing residency in the province; and
make your primary place of residence in Ontario.


If you aren't keeping the health coverage - then it may not matter.


If you are using your TFSA - you probably will want to make sure to avoid being a non-resident as while you can keep & withdraw from a TFSA:
- contributions stop the date one becomes a non-resident.
- contribution room stops being added the date one becomes a non-resident.
- withdrawals can be made will become contribution room but can't be used (see first bullet) until one becomes a resident again.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/lgbl-eng.html


It sounds like you can make this work and that you'd like to keep your tax residency but you will have to figure out if it makes sense versus becoming a resident again some years down the road.


The other thing to factor in when becoming a non-resident is the deemed disposition of assets which trigger a departure tax.
If the tax savings by being a Costa Rica resident outweigh this, you can choose this route.


Cheers



*PS*

Canada and Costa Rica signed a tax treaty in 2011 that entered force in 2012. So when mulling over your options, make sure to take into account what the tax treaty does or does not do.


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## MarkCT (Jan 27, 2015)

That's very interesting info guys. Thanks a lot. 

From what I read, the only way to NOT be considered a taxable resident in Canada is to break all ties with Canada + my province, including health card.

Right now I have no dependants, but I own a condo in downtown Montreal. No other assets. No retirement plan since I'm self-employed and haven't set one up yet. 

At this point I have to see what's a better move financially for me I guess.

The way I look at it:

Canadian tax resident:

- I get to keep all my assets

- I get to keep my free healthcare

- Any other major advantage?

Costa Rica tax resident:

- 10% income tax for revenue up to 10k USD per month

- I need to get an international health coverage which can be pricey

- I need to liquidate Canadian assets


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## Eclectic12 (Oct 20, 2010)

MarkCT said:


> ... The way I look at it:
> 
> Canadian tax resident:
> 
> - I get to keep all my assets


More importantly, there's no departure tax to pay ... plus you can keep socking away money to the TFSA.





MarkCT said:


> ... - I get to keep my free healthcare


Not really ... you get to kept paying Canadian income tax ... which funds the healthcare plan as I understand it.

Then too, unless whatever ails you does not prevent travelling ... then you are limited to whatever the province plan pays for out of country treatment.
It may not be a big deal ... depending on what the Costa Rica has/charges.


For example, I know someone who was quoted something more than $800 for his dental work in Quebec. He waited until he visited El Salvador where he know a good dentist. The same work was done for about $200.




MarkCT said:


> ... - Any other major advantage?


If you hold Canadian eligible dividend paying stock, you'd keep the DTC, with the preferred tax treatment.




MarkCT said:


> ... Costa Rica tax resident: ....
> - I need to liquidate Canadian assets


I'll take your word for the other two (thought internation health coverage I'd expect to be pricey).

As for the Canadian assets, I'm not sure you have to liquidate them ... you have to pay a departure tax *as if* you liquidated them, unless they are on the exception or deferral list.
If you do keep them (ex. a dividend paying stock), you'd then have to pay any non-resident taxes.

For example, TransCanada's web site talks about non-residents in countries without a tax treaty as 25% withholding tax and generally, 15% where there is a tax treaty.
http://www.transcanada.com/tax-information.html


Cheers


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## Allan Madan (Jan 23, 2015)

Hi, 
A residency analysis would need to conducted to determine your tax implications. 
If you have closer ties to Canada, you will be deemed to be a resident of Canada and you will be required to pay taxes on your worldwide income. 
Based on the your situation, it appears that your primary ties will remain in Canada. Visiting Costa Rica or Belize will be considered to be long-term vacation.

Sincerely, 
http://www.madanca.com
Madan Chartered Accountant


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## OhGreatGuru (May 24, 2009)

MarkCT said:


> ...
> The way I look at it:
> 
> Canadian tax resident:
> ...


Eligibility for OAS, and the amount of OAS, is affected by years of residency. 
Can you contribute to CPP as a non-resident? Or would you have to on Canadian earnings anyway? 

I'm not sure you will have a choice. Once CRA looks at where your assets are and how you are earning your income.


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## kcowan (Jul 1, 2010)

You might want to check out numbeo, and insert the destination desired. It will help you form your decision. There are a number of people here in Mexico who work at consulting and artistic pursuits like writing and art. We live here as Residente Permanente for 6 months, but continue to pay Canadian taxes. Suffice to say that what you want to do is both doable and legal. In your case you will have to pay taxes in both countries based on how much you earn in each.


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## Guban (Jul 5, 2011)

kcowan said:


> You might want to check out numbeo, and insert the destination desired. It will help you form your decision. There are a number of people here in Mexico who work at consulting and artistic pursuits like writing and art. We live here as Residente Permanente for 6 months, but continue to pay Canadian taxes. Suffice to say that what you want to do is both doable and legal. In your case you will have to pay taxes in both countries based on how much you earn in each.


If you are still a Canadian resident for tax purposes, don't you have to file showing world wide income? I don't know how how high Mexican taxes are, but I imagine that they are generally lower than Canadian taxes, so you'd have to pay the difference after accounting for foreign tax credits.


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## MarkCT (Jan 27, 2015)

There is a lot of confusion on this thread guys. So many different views. 

First of all, to whoever suggested I would have to pay taxes in both countries, that doesn't make much sense to me. As someone pointed out before, Canada signed treaties with most countries specifically to avoid double taxation. I lived in the U.S. for 2 years before and I didn't need to pay taxes in Canada as I was paying them in the U.S. 

Second, Allan Madan, can you give me more details as to why you think my ties will remain in Canada? I said before that I only had a condo (that I would sell). No retirement plan of any kind. No dependants. No other assets here. 

I know tons of Canadians are currently doing this (escaping winters for a few months per year). I was hoping one of them would chime in.


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## Eclectic12 (Oct 20, 2010)

MarkCT said:


> ... First of all, to whoever suggested I would have to pay taxes in both countries, that doesn't make much sense to me. As someone pointed out before, Canada signed treaties with most countries specifically to avoid double taxation. I lived in the U.S. for 2 years before and I didn't need to pay taxes in Canada as I was paying them in the U.S.


Did you give up your Canadian residency (triggering the departure tax) when you were in the US?
Or maybe you mean you were filing a US and a Canadian tax return, where the foreign tax credit reduced what you owed?

I find this strange as I worked in the US when I was part of an accounting firm - where their tax specialists assisted in filing a US *and* a Canadian tax return. As I recall, the net effect was that my overall Canadian tax bill was reduced by the FTC giving credit for the taxes paid to the IRS. I seem to recall having to pay Canadian taxes for things like the provincial health plan etc.

So yes - double taxation was reduced/avoided but it was double in the sense that two income tax returns were filed where some of the tax money was paid to the IRS while the rest was paid to CRA.




MarkCT said:


> ... I know tons of Canadians are currently doing this (escaping winters for a few months per year). I was hoping one of them would chime in.


There's a big difference between a "few" months and half the year ... though most that I know are retired so there's no income being made in the warmer climate.


Cheers


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