It is important to seek professional advice and assistance when contemplating a move to or from Canada.  There are tricky details that you may not know about which could impact your tax situation for years to come.  By seeking the right help, it could save you a lot of money and headache later.  Below is only a highlight of the main points, and by no means should be substituted for advice.  Many fine details are not shown here which may be relevant in many situations.

An individual becomes a resident of Canada for tax purposes when significant residential ties are established, usually the date of arrival in Canada.  Likewise, an individual becomes a non-resident when their residential ties are severed which is usually the latest of the date of departure, the date the individual’s spouse and dependents depart, or the date the individual becomes a resident in the other country.

During the period of residency, income is taxable in Canada on worldwide income.  Therefore it is important to distinguish between income earned prior to the date of residency change and income earned subsequently.

It is important an individual seeks professional advice in the country they are moving to or leaving, because that country may have different rules regarding residency for tax purposes.  It is entirely possible to be resident for tax purposes in more than one country at the same time.

In the year of residency change, a tax return for a partial year is usually required, covering only the period of residency.

If an individual owns certain Canadian properties on the day they change residency, they are considered to have disposed of those properties and immediately reacquired them for the fair market value on that date.  This is called a “deemed disposition”.  For an individual leaving Canada, capital gains and losses may be calculated for inclusion in Canadian income in their final return.  For an individual entering Canada, the fair market value becomes the new adjusted cost base which may become relevant in calculating the capital gains and losses upon eventual disposition.

There are some allowances and restrictions on certain deductions and credits you can claim in the year of changing residency, as well as applying for or cessation of benefits, so planning ahead can be highly advantageous.

If an individual continues to own real estate in Canada after becoming a non-resident, it is crucial to contact a Canadian tax professional prior to becoming a non-resident as there are certain Canadian requirements that can result in significant tax liability if not met properly and within certain deadlines.  Canada Revenue Agency requires an arrangement to be made with a Canadian agent who would deduct and remit withholding taxes from the receipt of rental payments when necessary, and there are specified procedures and documentation required in this situation.

Please contact us for more information on how we can assist with your situation.