Becoming a non-resident of Canada offers valuable personal and financial benefits, making it an increasingly popular choice for Canadians each year. The 2024 Federal Budget, which introduced tax hikes for high-net-worth individuals, has heightened interest in non-residency. Canadians across the country like Brampton, Mississauga, Toronto, Edmonton, Calgary, Fort McMurry, Vancouver, Halifax, and Montreal are looking to seek opportunities where taxes are low from young professionals seeking international career opportunities to business owners moving to tax-friendly locations like the Cayman Islands and, the Middle East, are exploring the advantages of establishing residency in lower-tax jurisdictions. By doing so, they can better align their lifestyle and financial goals.
However, the transition to non-residency requires careful planning, often spanning up to a year. Tax Return Filers Ltd. is here to guide you through every step, from assessing your options and filing departure taxes to managing your ongoing non-resident tax obligations.
Why Become a Non-Resident? Canadians consider non-residency for several reasons, some are listed below:
- Career Opportunities: Expanding internationally to pursue unique roles
- Business Expansion: Growing a startup or expanding a business in a new country
- Marriage: Moving abroad to live with a spouse
- Tax Advantages: Benefiting from lower-tax jurisdictions
- Retirement and Lifestyle Choices: Spending time abroad or seeking a better quality of life
- Global Mobility: Working remotely across multiple countries
- Family Reunification: Joining family members living abroad
Each of these reasons can trigger non-residency status under Canadian tax law.
Understanding Canadian Tax Residency Tax residency isn’t solely about physical location. Instead, it depends on the residential ties maintained with Canada. By assessing primary and secondary residential ties, the government determines whether someone is a factual resident, non-resident, emigrant, or deemed non-resident.
Primary vs. Secondary Ties
- Primary ties are strong connections, such as a dwelling in Canada, a spouse or common-law partner in Canada, or dependents residing in Canada. Retaining primary ties generally makes one a factual resident.
- Secondary ties are weaker but still considered, including bank accounts, health cards, pensions, and property ownership in Canada. The more secondary ties one holds, the more likely they will be considered a resident unless supported by a tax treaty.
Residency Classifications Your residency classification affects your tax obligations and determines whether you need to file as a non-resident. Canada has different residency classifications, including:
- Factual Resident: Maintains significant ties to Canada
- Non-Resident: Has severed all primary ties and minimized secondary ties
- Deemed Non-Resident: Retains some Canadian ties but qualifies for non-residency due to a tax treaty with another country
How Tax Treaties Help Tax treaties prevent individuals from being taxed on the same income in multiple countries. Canada’s extensive network of tax treaties ensures Canadians abroad are protected from double taxation. Tax Return Filers Ltd. can help you understand and leverage tax treaties, identifying potential reliefs based on your residency status and the country you’re moving to.
Tax Implications of Non-Residency Becoming a non-resident involves certain tax considerations:
- Departure Tax: When leaving Canada, you may be subject to departure tax, a tax on deemed disposition of assets such as real estate, stocks, and investments.
- Ongoing Tax Obligations: Even after becoming a non-resident, taxes may apply to Canadian-sourced income, such as pensions, rental income, and dividends. Tax Return Filers Ltd. will assist in meeting these obligations efficiently.
Declaring Non-Residency with CRA To formally declare non-residency, Canadians have the option of completing form NR73 (Determination of Residency Status) or indicating their departure on their final T1 tax return. At Tax Return Filers Ltd., we recommend declaring non-residency via your departure tax return (final T1), which allows for a straightforward self-declaration. On this form, you can: