Steps to Becoming a Non-Resident From Fort McMurray

Whether Canada has a tax treaty with the country you’re moving to will impact your actions significantly. Follow these steps based on treaty and non-treaty considerations:

Step 1: Determine if Canada Has a Tax Treaty with the Destination Country

1. Understand Your Residency Status: Moving to a country with a tax treaty may mean CRA uses the “tiebreaker” rule to determine your non-resident status.

• Primary Ties: Home, spouse, and dependents. Secondary Ties: Bank accounts, driver’s license, memberships.

2. Apply the Tiebreaker Tests: For tax treaty countries, CRA will look at:

• Permanent Home: Where do you own or rent a home? Economic Ties: Where is your work and financial activity based? Days Spent: Where did you spend most of the tax year? Example: Moving to the U.S.: Smith has homes in both New York and Toronto but works and spends more time in New York, making her a deemed U.S. resident.

Step 2: Set Your Departure Date

1. Departure Date Factors: This determines when CRA considers you a non-resident.

• The date can be based on when you leave, your family leaves, or when you obtain residency abroad.

2. Timing Strategy: Plan your departure date after severing all ties but consider factors like your spouse’s job or children’s schooling.

Step 3: Sever Primary and Secondary Ties

1. For Tax Treaty Countries:

• Use the tiebreaker rules to minimize primary ties in Canada.
• It’s advisable to sell Canadian property if you’re planning to become a non-resident.

2. For Non-Tax Treaty Countries:

• Sever all primary ties e.g. sell property, cancel leases, move your family.
• Reduce secondary ties by closing Canadian accounts and canceling memberships.

Step 4: Obtain Lawful Residency in the New Country

Ensure you have lawful residency status, not just a tourist visa. Consider types of residency like work permits, family visas, or business residencies that align with your purpose.

Step 5: Close Out Financial Ties

1. Clear Canadian Obligations: Settle the home buyers’ plan, lifelong learning plan, and taxes.
2. Notify Banks: If going to a treaty country, submit NR301 to your banks to apply the appropriate withholding tax.

Step 6: Appraise and Disclose Assets

1. Obtain Valuations: For assets like real estate and marketable securities, get appraisals to determine their fair market value.
2. File T1161: Disclose your assets to CRA to prepare for departure tax.

Step 7: Calculate and File Departure Tax

1. Calculate Departure Tax: Departure tax applies to unrealized gains on specific assets, like stocks or foreign real estate.

• Example: Gains on your Apple stock would be taxable if kept after leaving Canada.

2. Mitigate Tax Burden:

• Private corporations: Reduce net assets to $0 with a final dividend.
• Foreign real estate: Obtain a low-value appraisal to lower tax calculations.

3. Consider Deferral if Needed: Apply for a Departure Tax Deferral Agreement with CRA if unable to pay the tax immediately (T1244).

File Departure Tax Return

1. Update CRA with Your New Address: Ensure CRA has your new address to avoid tax complications.
2. Forms to Include: Your departure tax return will include T1, T1161, T1243, T1244 (optional for deferral), and T1135 for foreign property.

Ongoing Tax Obligations as a Non-Resident

1. Withholding Taxes: Canadian-sourced pensions, investment income, and rental income are taxed at source.
2. Filing Section 216 or Section 217 Returns: Report Canadian income sources and apply for any applicable tax reductions under treaty rules.

Maintaining Non-Resident Status

Avoid re-establishing ties, like spending over 183 days in Canada, or acquiring a Canadian home. Let’s make your departure smooth. Please contact us at Tax Return Filers Ltd.