www.pwc.com/ca
Working abroad
A guide for Canadians
Global Mobility Services
Part of the Arrivals and Departures Series
Creating leaders, inspiring people and bringing
perspectives together to achieve what matters most.
Contents
Introduction .................................................................................................................................... 1
Part 1: Canadian residency ........................................................................................................... 2
Evidence of intention to permanently sever residential ties .................................................. 2
Residential ties to Canada versus residential ties elsewhere ............................................... 2
Regularity and length of visits to Canada .............................................................................. 2
Residency determined by tax treaty ...................................................................................... 3
Date residency ends .............................................................................................................. 3
Keeping track of your days .................................................................................................... 3
Provincial or territorial taxes .................................................................................................. 3
Part-year residents ................................................................................................................ 3
Period resident in Canada ..................................................................................................... 4
Non-resident period ............................................................................................................... 4
Withholding taxes while a non-resident ................................................................................. 4
Continuing Canadian residents ............................................................................................. 4
Part 2: Departure tax and reporting requirements when you leave .......................................... 5
Reportable assets .................................................................................................................. 5
Departure tax and length of residence .................................................................................. 6
Payment of departure tax ...................................................................................................... 6
Post emigration dispositions .................................................................................................. 6
Part 3: Selling your Canadian home ............................................................................................ 7
Selling your home while a non-resident ................................................................................. 7
Part 4: Renting out your Canadian home .................................................................................... 8
Tax consequences of earning rental income while non-resident .......................................... 8
Option to claim rental expenses ............................................................................................ 8
Electing to have tax withheld on net rental income ............................................................... 9
Duties of the payer or agent .................................................................................................. 9
Deemed disposition on change-of-use ................................................................................ 10
Election to avoid the deemed dispositions .......................................................................... 10
Why elect to avoid the deemed dispositions? ..................................................................... 10
Part 5: Registered Retirement Saving Plans ............................................................................. 11
Contributions to Registered Retirement Savings Plans ...................................................... 11
Withdrawals from RRSPs .................................................................................................... 11
Part 6: Canadian Pension Plan ................................................................................................... 12
Part 7: Miscellaneous items ........................................................................................................ 13
Registered Education Savings Plans .................................................................................. 13
Funds already in the RESP ................................................................................................. 13
Canada Education Savings Grants ..................................................................................... 13
How the country you are moving to will treat the RESP ...................................................... 14
Home Buyer’s Plan/Lifelong Learning Plan ......................................................................... 14
Canada Child Benefit ........................................................................................................... 14
Québec Child Assistance Payment ..................................................................................... 14
Tax-Free Savings Accounts................................................................................................. 14
Trusts, Partnerships, and Corporations ............................................................................... 14
Part 8: Tax equalization ............................................................................................................... 15
Part 9: Special issues for assignments to the United States .................................................. 16
U.S. basis for taxation .......................................................................................................... 16
Taxation of federal income .................................................................................................. 16
Taxation of income – at state or city level ........................................................................... 16
Social security payments/receipts 16
Specific U.S. tax issues for Canadians in the U.S. .............................................................. 17
Paying off a Canadian dollar mortgage ........................................................................ 17
Canadian Registered Retirement Savings Plans/ Registered Pension Plans ............. 17
Canadian Registered Education Savings Plans/Tax-Free Savings Accounts ............. 17
Canadian Mutual Funds ............................................................................................... 17
Canadian Corporation .................................................................................................. 17
Canadian Partnerships, Trusts..................................................................................... 18
Canadian Supplementary Pension Plans (SERPs) ..................................................... 18
Information reporting requirements .............................................................................. 18
Appendices
Appendix A: List of Personal Assets
Appendix B: Summary of Filing Deadlines
Appendix C: Online Resources
Appendix D: Sample Letter to Advise Banks of Non-Resident Status
© 2019 PricewaterhouseCoopers LLP. All rights reserved.
“PricewaterhouseCoopers” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership, or, as the context requires, the PricewaterhouseCoopers global network or other member firms of
the network, each of which is a separate and independent legal entity.
Introduction
In this guide. we explain, in broad terms:
•
how to determine whether Canadian authorities will consider you
resident or non-resident
•
departure tax and reporting requirements when you leave
Canada
•
consequences of selling your Canadian home
•
consequences of renting out a Canadian property (including your
home)
•
non-resident RRSP contribution
•
contributions to the Canada/Québec Pension Plan while a non-resident
•
tax incentives impacted by your departure
•
tax equalization
•
special issues for U.S. assignments
This guide was written with
you in mind – a Canadian
working as an employee
outside of Canada
This guide is not meant to provide a thorough review of the Canadian income tax rules that apply to persons leaving
Canada. Instead, it provides information we think you need to know to:
•
ensure you understand enough to know when to ask a question or get additional information
•
help you provide us with sufficient information to help ensure your compliance with the filing requirements you face as
a result of your leaving Canada
Because every situation is unique, the information provided in the guide is general in nature. Your
PricewaterhouseCoopers (PwC) representative can answer questions about your personal position and how the
information discussed in this guide may impact you.
For more up-to-date information on tax rates, allowances and specific provisions which may have changed since
publication of this guide, please visit the PwC websites listed in Appendix C.
PwC
1
Confidential and Proprietary
Part 1: Canadian residency
Canada imposes tax on individuals based on their status as either a resident or non-resident. So, it is important to
determine whether you have ceased being a Canadian, and if so, the date which you ceased your residential ties with
Canada.
Unfortunately, there is no simple, clear-cut rule for determining when an individual ceases residency. The Canada
Revenue Agency ("CRA") considers the following factors when determining whether an individual remains a resident of
Canada even though they have gone abroad:
•
evidence of intention to permanently sever residential ties
•
residential ties to Canada versus residential ties elsewhere
•
regularity and length of visits to Canada
We'll look at each of these factors in a bit more detail.
Evidence of intention to permanently sever residential ties
To be considered a non-resident there must be a degree of permanence to your stay abroad. In determining the degree of
permanence, CRA will frequently look at the terms and conditions of your assignment. If there is documentation
suggesting you will be returning to Canada on completion of your assignment, CRA may argue you have not actually
severed your Canadian residential ties.
Residential ties to Canada versus residential ties elsewhere
The following indicates you have severed your ties to Canada:
1. your spouse or common law partner also leaves Canada
2. your dependents also leave Canada
3. selling your house or renting to a non-related party on a long-term basis
4. establishing residency in a foreign country
5. moving your personal property out of Canada
6. notifying your Canadian bankers of your non-residence status
7. cancelling your Canadian credit cards
8. discontinuing your coverage under a provincial hospitalization insurance plan
9. obtaining non-resident membership for professional organizations
To be considered a non-resident of Canada it's not necessary to meet all the above criteria, but generally you must at
least comply with items 1-4 with the intention of permanently severing residential ties with Canada.
Regularity and length of visits to Canada
If, after leaving Canada, your visits back are more than occasional, CRA may consider the visits, along with other ties you
might have maintained with Canada, to determine whether your overall residential ties are significant enough to conclude
you continue to be a resident here. Your non-resident status generally is not affected by occasional trips to Canada
- whether for business or pleasure.
PwC
2
Confidential and Proprietary
Residency determined by tax treaty
CRA’s confirmation of your
residence status – There may be
situations where you need to
complete Form NR73,
Determination of Residence Status
(Leaving Canada). Your PwC
representative will advise you
whether you should file this form.
Canada has entered into tax treaties with many
countries. To resolve situations where both Canada and
a foreign country determine you are a resident in their
country for tax purposes, the treaties contain "tiebreaker" rules. In effect, these rules override each
country's domestic laws to ensure you're not subject to
taxation as a resident by more than one country.
The tie-breaker rules generally determine residence by
reference to the location of your permanent home,
personal and economic relations, habitual abode and
citizenship. Your PwC representative will determine
when using a treaty what is relevant for your situation.
Date residency ends
Under the administrative policies of CRA (and for Québec residents, the Ministry of Revenue of Québec or MRQ), if you
cease being a Canadian resident, the date your residency ends generally is the latest of:
•
the date you leave Canada
•
the date you established residence in the foreign country
•
the date your family leaves Canada
The actual date your residency ends is significant for a number of reasons. For example, certain amounts, such as
various personal credits, may be prorated based on the number of days you were resident in Canada.
Keeping track of your days
Keeping track of your days in Canada and outside the country in myMobility is easy; and doing so will help with:
•
determining your residency
•
ensuring you receive all foreign tax credit you are entitled to
•
proper pro-rating of income between Canada and another country
•
proper pro-rating of Canadian tax credits you are entitled to (such as the basic personal amount, tuition credits, etc.)
Provincial or territorial taxes
When you cease Canadian residency, you will also cease to be a resident of the relevant province. If you cease Canadian
residency during the year you will have to pay provincial or territorial tax based on where you lived up to the date of
departure.
Part-year residents
If you cease Canadian residency, your departure year return will cover two periods:
•
a resident period
•
a non-resident period
PwC
3
Confidential and Proprietary
Period resident in Canada
You are subject to Canadian tax on all of your worldwide income up to the date you cease to be a Canadian
resident. To the extent this includes income from foreign sources, you may be entitled to claim foreign tax credits.
Also, you can claim deductions, such as Canada/Québec Pension Plan and Employment Insurance/Québec Parental
Insurance premiums, medical expenses (if they apply to the resident period) and charitable donations in full.
It is important that you keep accurate record of your days in Canada and in any foreign location. You may be
entitled to non-refundable credits prorated according to the number of days you are a Canada resident.
Non-resident period
Non-residents of Canada are subject to tax in Canada only on income earned in Canada. For the part of the year you are
considered non-resident, you will be subject to Canadian tax on:
•
Income earned while “employed in Canada”, which applies if you perform employment duties while physically present
in Canada. (As a non-resident employed in Canada you will have to allocate your total income amongst all countries
in which you carried out employment duties. To ensure an accurate allocation between various countries it is
important that you keep track of your workdays and days physically present in all countries.)
•
Employment income you receive while a non-resident that relates to services performed in Canada (for example, a
bonus from a prior year).
•
Income if you carry on a business in Canada.
•
A portion of the income arising when you exercise stock options. You may be able to claim a stock option deduction
(equal to 50% of the stock option benefit or 25% for Québec purposes) on your non-resident return.
Withholding taxes while a non-resident
Certain types of income paid or credited to non-residents are subject to withholding tax at 25%; however, the
withholding rate is reduced under many treaties. Your PwC representative can tell you what withholding rate might apply
in your case.
The most common types of income subject to withholding tax are:
•
dividends
•
rental income
•
pension and retirement income
•
payments out of Registered Retirement Savings Plans
You should notify banks, brokers, insurance companies and other potential lenders of your non-resident status. We
recommend you notify them by letter and that you specifically request that non-resident tax be withheld from payments to
you, where applicable.
Most interest income is not subject to withholding tax.
You may also be subject to withholding tax if you sell Canadian real estate while a non-resident.
See Part 3 “Selling your home while a non-resident” for further details.
Continuing Canadian residents
If you are maintaining your Canadian residency during your foreign assignment, you will continue to be subject
to Canadian tax on your worldwide income (including income derived from sources outside of Canada). To the extent
any portion of this income is from foreign sources, you may be entitled to claim foreign tax credits. In addition, you will
continue to be eligible to claim any deductions or tax credits that can be claimed by Canadian residents working in
Canada. Regardless of your Canadian residency, you may still be subject to tax in your foreign location. Your PwC
representative in the foreign location can provide you with further details.
PwC
4
Confidential and Proprietary
Part 2: Departure tax and reporting
requirements when you leave
Canada levies "departure tax" on residents when they leave Canada. You are deemed to dispose of your assets (with
some exceptions) at their fair market value on the date you cease Canadian residency. Half of any net gains resulting
from the disposition transactions are included in income and taxed at normal marginal rates.
The departure tax does not apply on certain types of assets including:
•
Canadian real estate
•
Canadian business property and inventory
•
stock options (they remain taxable in Canada when exercised)
•
assets held within RRSPs, RRIFs, RESPs, TFSAs, company pension plans and certain other pension rights
•
assets held within a trust
While you were a Canadian resident, if you had exercised stock options and elected to defer tax until such time as the
option shares are disposed of, you must also include the deferred option income in your return that year.
Along with your tax return for the year of departure, you must file Form T1243, "Deemed Disposition of Property by an
Emigrant of Canada." listing the following information:
•
the year of acquisition
•
the fair market value of the property on the date of your departure
•
the adjusted cost base
•
any gain or loss resulting on the deemed disposition
The adjusted cost base is generally the original purchase price of the asset plus acquisition expenses, the cost of
additions, improvements and reinvestments.
For marketable securities, such as stocks, bonds and mutual funds, your broker can provide assistance in determining the
fair market value and the adjusted cost base. An appraisal may be required for other property.
Reportable assets
If the total value of all property you owned at the time of departure is more than $25,000, you must file Form T1161, "List
of Properties by an Emigrant of Canada "listing all the properties you owned at the time. This form must be filed
regardless of whether you must otherwise file a tax return for your departure year.
Assets that must be listed on this form are essentially capital assets on which departure tax will be due when they are
actually disposed of and include:
•
Canadian real property
•
unexercised stock options
•
bonds
•
shares in public and private companies
•
jewellery, etc.
PwC
5
Confidential and Proprietary
Retirement, profit sharing, and other employee benefit plans generally are not considered reportable assets. As well, there
is an exemption for personal-use property (such a clothing, household goods, cars, etc.) with a total value of less than
$10,000.
Departure tax and length of residence
If you were only temporarily resident in Canada, meaning you have lived here for less than 60 months during the 10 years
leading up to your departure, the departure tax does not apply to property you:
•
owned prior to establishing Canadian residence, or
•
inherited while living here
In other words, if you were a short-term resident, departure tax will only apply on property you acquired while here.
Otherwise, all assets will be subject to departure tax whether acquired as a Canadian resident or not. Assets acquired
prior to establishing Canadian residency will have a cost basis equal to the fair market value on the date Canadian
residency began.
Payment of departure tax
Departure tax is due by April 30th of the year after you leave unless you file an election to defer it until you actually
dispose of the assets. If you wish to make the election you must do so by the normal filing deadline. You may need to
provide security for the tax. CRA (and MRQ) will accept various items as security, including the assets themselves;
however, a letter of credit from a Canadian bank is generally preferred. Please discuss with your PwC representative if
you expect to have departure tax.
Post emigration dispositions
Where departure tax was previously deferred, and the assets are actually disposed of in a subsequent year, the deferred
tax must be paid to CRA (and MRQ) by April 30th of the year after the year of the disposition. If the capital gain upon the
actual disposition is also subject to tax in your assignment country, you may be able to claim a foreign tax credit for the
foreign capital gains tax.
PwC
6
Confidential and Proprietary
Part 3: Selling your Canadian home
Many people moving to take an international assignment have homes in Canada. If you sell your home while a resident of
Canada, any capital gain arising from the sale of it is exempt from capital gains tax so long as three conditions
are met:
•
you have been a Canadian resident for the entire period you owned the home, and
•
the home was always your principal residence
•
you designate the home as your principal residence on your tax return
Selling your home while a non-resident
If you sell the home after ceasing residence in Canada, a portion of the gain could be subject to tax. The following formula
is used to determine the exempt portion of the gain:
1+ # of years you were a resident of Canada and the property was your
principal residence
# of years you owned the home
Therefore, if you cease Canadian residency at any time in year X, in order for the entire gain to be exempt you must sell it
no later than year X+1. For the purposes of this formula, a part year will count as a year.
For dispositions occurring after October 3, 2016, the "one-plus" factor applies only where the taxpayer is resident in
Canada during the year in which they acquire the property.
Special rules apply to ensure a family designates only one principal residence for tax purposes at any given time.
As noted earlier, the certification and withholding procedures would apply. Under the certification procedure the purchaser
of the property must withhold 25% of the gross proceeds and remit it to CRA. If the property is located in the province of
Quebec, the purchaser must also withhold 12.875% of the gross proceeds and remit it to the MRQ.
Under an alternative certification and withholding method you can apply to CRA to have the withholding tax
reduced to 25% of the taxable gain. (The same rules apply for properties located in the province of Québec to have the
withholding tax reduced to 12.875% of the taxable gain.) If you would like to take advantage of this method it is a good
idea to contact your lawyer as soon as you accept an offer on the property (if not sooner), so that you can obtain the
necessary clearance certificate in time for the closing. If your lawyer is unable to complete this application, please contact
your PwC representative for assistance.
If you obtain a clearance certificate from CRA and MRQ, you will be required to file a non-resident tax return to report the
disposition.
PwC
7
Confidential and Proprietary
Part 4: Renting out your Canadian home
In this section we look at two different issues related to renting out your home, namely:
•
the tax consequences of earning Canadian rental income while a non-resident
•
the capital gains issues that arise when your principal residence is converted to rental use
Tax consequences of earning rental income while non-resident
The penalties and interest that CRA charges for failing to satisfy all the compliance and filing requirements related to
earning Canadian rental income can add up quickly.
The gross rental income you receive from rental property located in Canada (whether it's a home you lived in or some
other property) is normally subject to withholding tax at a rate of 25%. The tenant or an agent acting on your behalf must
withhold and remit the tax to CRA by the 15th of the month following the month in which the rent was paid. If tax is not
withheld and remitted, CRA will charge compound daily interest and may also charge a penalty.
Your tenant or agent must provide you and any other owner with an information slip (NR4 "Statement of Amounts Paid or
Credited to Non-residents of Canada") showing the gross amount of rental income paid or credited to you during the year
and the amount of tax withheld. Your tenant or Canadian agent must also file an NR4 return with CRA by March 31st of
the year after the rental income was received.
If the appropriate withholding tax on the gross rental income is remitted, there is no need for you to file a Canadian tax
return to report the rental activity.
Option to claim rental expenses
You can elect to pay tax on your net Canadian-source
rental income instead of on the gross amount by filing a
"Section 216 return". Net rental income is determined by
taking gross rental income less expenses incurred to
earn the income, such as property tax, capital cost
allowance (CCA, or tax depreciation), mortgage interest,
the cost of repairs, etc. The tax due on the net rental
income is calculated based on normal personal tax rates.
Form T776, “Statement of Real
Estate Rentals” must be filed with a
Section 216 return and lists the
expenses which may be deductible.
On a Section 216 return you cannot claim the standard personal deductions, credits or loss carryovers, but you can claim
an RRSP deduction, to the extent you have contribution room and you have not claimed the RRSP deduction on another
Canadian tax return. As well, in certain circumstances you can claim a deduction for support payments you made in the
year.
Section 216 returns must be filed within two years from the end of the year the rents were paid or credited to you. If the
tax withheld by your Canadian agent was more than the amount of tax payable as calculated on your Section 216 return,
CRA will refund the difference to you.
PwC
8
Confidential and Proprietary
Electing to have tax withheld on net rental income
You can elect to have your Canadian agent withhold and remit tax based on the net rental income (instead of gross
income). To make this election you and your agent must file Form NR6 indicating that you are making the election.
The initial NR6 must be filed on or before the first day the rental payment is due. After that, the NR6 must be filed annually
on or before the first day of each tax year. You complete the form and give it to your Canadian agent, who must also
complete a portion of it before submitting it to CRA.
Until CRA sends a written approval of the NR6 to both you and your agent, withholding tax must be paid on the gross
amount. Your agent must still remit the taxes withheld by the 15th day of the month following the month the income is paid
or credited to you.
If your agent does not withhold and remit the tax, CRA will charge compound daily interest on the amount not remitted
and may also charge a penalty.
After CRA accepts the NR6, you must file a Section 216 return for the year no later than June 30th of the year following
the end of the year for which the NR6 election was made. If your return is not filed or not filed on time, your election will be
invalid and CRA will assess non-resident tax on your gross rental income. Remember, you must file the Section 216
return even if you:
•
have no tax payable
•
are not expecting a refund, or
•
have a net rental loss
If insufficient tax was withheld, the balance must be paid by April 30th of that year. Late payments of tax owing will be
subject to interest.
Duties of the payer or agent
As noted, your agent must withhold and remit tax on the rental income (either on the gross income or net income). The
withholding tax must be remitted to CRA by the 15th day of the month following the month in which the rent is
paid. When your agent remits this tax for the first time, your agent should provide the following information to CRA:
•
the agent’s name and address
•
the type of payment (“Non-resident Part XIII Tax Withholding for Rental Payments”)
•
the month for which the tax was withheld
CRA will then set-up a non-resident remittance account and mail a Form PD7AR-NR receipt and statement to your agent
each month for use in making all subsequent payments. Your agent must annually file forms NR4 Summary and
Supplementary. These forms, which account for the rents paid and the tax withheld, must be filed before March 30th of
the year following the taxation year in which the rental income was received.
If you elect to file a Section 216 return and you want your agent to withhold and remit based on the net rent, your agent
must sign the NR6. In signing it, your agent agrees to take responsibility for the full applicable withholding tax (calculated
on the gross amount) plus any applicable penalty and interest, if you fail to file a Section 216 return or fail to pay any tax
that may be owed.
There is no tax withholding or tax filing obligations related to rental income earned as a non-resident at the Quebec level.
If you rent a property located in Quebec during your non-resident period, you only need to comply with the tax withholding
and filing obligations as described above.
PwC
9
Confidential and Proprietary
Deemed disposition on change-of-use
Generally, when you convert your principal residence to a rental there is a deemed disposition at fair market value on the
date of conversion. The gain resulting from the deemed disposition may be entirely or partially exempt under the principal
residence exemption described earlier. Also, as it is merely a deemed disposition (as opposed to an actual one), you are
deemed to have acquired a rental property at the same value on the same date.
Election to avoid the deemed dispositions
You can elect to have no change-in-use of your principal residence. This election avoids the deemed dispositions on both
the conversion to a rental property and on the subsequent conversion back to a personal-use property; however, you will
be unable to claim CCA (“capital cost allowance”, a type of depreciation deduction for tax purposes) on the property. You
elect by attaching a letter to your tax return describing the property and stating you are making a “subsection 45(2)
election”. (If you file a Québec income tax return, a similar election can be made by attaching a letter to your Québec tax
return stating that you are making a “section 284 election”.)
You can make the election in your tax return for the year you begin renting the property. If you fail to make the election
that year you may apply for permission to make a late election. CRA and MRQ have discretion regarding whether to allow
a late election, however even if the election is allowed, penalties may still be applied for late filing. CRA and MRQ will
generally not allow a late election where CCA has been claimed.
Why elect to avoid the deemed dispositions?
If your property appreciates in value while it is a rental property, you may have to recognize a capital gain resulting from
the deemed disposition when you reoccupy the home, even though you have not actually sold the home. If you make the
election, no capital gain is recognized due to the change-in-use, but on the eventual sale, a portion of the gain may be
taxable.
Determining whether to make the election can be difficult. Typically, it is not advantageous if the value of the property
decreases during the rental period. To keep your options open, you may wish to avoid claiming capital cost allowance and
make your decision when you return to Canada.
We would be happy to discuss whether you should make this election, but we will require the following information:
•
the adjusted cost base of your home and the year of acquisition
•
a valuation of your home around the date you convert it to a rental property
•
a valuation of your home upon your return to Canada
•
a percentage allocation of the building versus land on each of the above dates
If you cannot give us the exact percentage allocation, an estimate will suffice. We strongly suggest the first two items be
forwarded to us immediately upon your departure, since it may be difficult to obtain this information later.
PwC
10
Confidential and Proprietary
Part 5: Registered Retirement Saving
Plans
Contributions to Registered Retirement Savings Plans
To encourage people to save for their retirement, Canada allows individuals to deduct contributions to registered
retirement plans. The most common type of plan is a Registered Retirement Savings Plan (RRSP). Amounts contributed
to RRSPs must be invested in qualifying investments (typically debt and equity securities). Earnings on assets held within
an RRSP are not subject to tax until you withdraw them from the plan. Contributions to your RRSP must be made no later
than 60 days after the end of the year. Taxpayers who file tax returns are generally notified by CRA regarding how much
they can contribute to an RRSP.
The amount you can contribute to an RRSP in a year is based on your “contribution room”, which relates to the income
you earned in Canada the prior year. Your non-resident income may not qualify as “earned income” for RRSP purposes
and so your contribution room related to years you are non-resident is likely limited.
The maximum contribution to an RRSP is 18% of your prior year’s earned income minus your prior year’s pension
adjustment up to a maximum of the annual limit (the annual limits will be indexed thereafter).
As long as you have contribution room, you can contribute to your RRSP regardless of your residency status.
While a non-resident however, you may not have Canadian income, so the RRSP deduction may not provide an optimal
tax benefit, though undeducted contributions can be carried forward indefinitely and deducted on a future Canadian
return. There are situations when, as a non-resident, you may have Canadian income, for example if you have Canadiansource employment income from the exercise of stock options. RRSP deductions can be claimed on such tax returns to
the extent you have contribution room. If you make a contribution to your RRSP, you will need to file a tax return to report
the contribution and carry it forward.
RRSP contributions can be deducted against the income reported on a part-year tax return. If you have a part-year return
your PwC representative can advise you on whether it is beneficial for you to claim an RRSP deduction.
There may be restrictions on how your money can be invested while you are a non-resident. Please speak to your
financial advisor or your financial institution for clarification regarding where you can invest your funds.
You should consider how the foreign country may treat a RRSP before deciding to maintain or to contribute to the plan
while on outside of Canada. Your PwC representative can advise you further if you choose to maintain or contribute to
your RRSP.
Withdrawals from RRSPs
You can withdraw amounts at any time from an RRSP, but when you do, the amounts are subject to tax. The rate of tax
applicable to the withdrawal depends on your residency at the time of the withdrawal:
•
If the withdrawal is made while you are resident in Canada, the withdrawals will have tax withheld at statutory fixed
rates, but are ultimately taxed at normal marginal rates.
•
If the withdrawal is made while you are a non-resident, the withdrawal is subject to a 25% withholding tax. This rate
may be reduced to 15% by treaty if the withdrawal is in the form of an annuity. This withholding tax may be a final tax
or, where beneficial, an election can be made to file a Canadian income tax return to report the RRSP income and
pay the tax based on the regular tax rates.
If you are taxed on the withdrawal from your RRSP in your country of residence at the time, you may be entitled to a
foreign tax credit for Canadian withholding tax paid.
PwC
11
Confidential and Proprietary
Part 6: Canadian Pension Plan
If your assignment outside of Canada is temporary, or less than five years you may be able to apply to continue your
coverage under the Canada or Québec Pension Plan.
Because social security taxes, like CPP and QPP contributions, are generally levied in the country where one works,
when working overseas you could be subject to such social security contributions in the foreign country. Canada
and Quebec have negotiated social-security agreements with various countries under the terms of these treaties’
contributions can continue to be made on the person’s behalf in the home country instead of the foreign country. To apply
for continued coverage your employer must complete and file a specific form and submit it to CRA or MRQ.
If you have any questions or require assistance regarding your CPP or QPP coverage or social security taxes in a foreign
country, contact your PwC representative.
PwC
12
Confidential and Proprietary
Part 7: Miscellaneous items
Canada has a number of tax incentive programs, some of which are intended to benefit residents. In this section we
discuss the following programs:
•
Registered Education Savings Plans
•
Home Buyer’s Plan/Lifelong Learning Plan
•
Canada Child Benefit
•
Quebec Child Assistance Program
•
Tax-Free Savings Accounts
Registered Education Savings Plans
To encourage people to save for their children’s post-secondary education, Canada has created Registered Education
Saving Plans (RESPs). Contributions to RESPs are not deductible, but income earned in the RESP is not taxed until paid
out for education-related expenses to a beneficiary of the plan, typically the child or grandchild of the person making the
contributions. There is a lifetime limit of $50,000 on contributions allowed per beneficiary and numerous other
rules. A comprehensive discussion of RESPs is beyond the scope of this Guide, but there are some details that are worth
noting here.
Contributions to an RESP are allowed only for beneficiaries who are residents in Canada on December 31 and who have
Social Insurance Numbers. If you cease to be a Canadian resident, your dependents will likely cease to be
Canadian residents as well. If your children are beneficiaries of RESPs and they accompany you when you leave
Canada, you can no longer contribute to RESPs on their behalf once they become non-resident. If the RESP beneficiary
remains a resident of Canada, the normal contribution and federal education grant rules will continue to apply, even
though you have become a non-resident of Canada.
Funds already in the RESP
Even if the beneficiary becomes non-resident, tax will continue being deferred as long as the funds remain in the RESP.
If, however, funds are distributed out of the RESP to a non-resident beneficiary, a flat tax of 25% will apply.
Another option is available for funds accumulated in RESPs that were created after 1998. In such cases the funds can be
transferred (on a tax-deferred basis) to another RESP.
Canada Education Savings Grants
In addition to RESPs, Canada has established the Canada Education Savings Grant (CESG). The annual CESG is equal
to 20% of the RESPs contributed up to a maximum of $500 (with some additional incentives for lower-income families).
The grant room accumulates until the end of the year when the child turns 17, so “catch-up” contributions can be made.
The lifetime maximum CESG is $7,200.
The CESG grant room will only accrue in years the child is a Canadian resident on December 31. If you cease to be a
Canadian resident, your dependents will likely cease to be Canadian residents as well, and will not generate any CESG
grant room.
PwC
13
Confidential and Proprietary
How the country you are moving to will treat the RESP
You should consider how the country you are moving to may treat the RESP. Consult your PwC representative for more
information on your particular jurisdiction.
Home Buyer’s Plan/Lifelong Learning Plan
Amounts “borrowed” from your RRSP under the Home Buyer’s Plan (HBP) or Lifelong Learning Plan (LLP) must be repaid
in full when you become a non-resident. The repayment must be made within 60 days of the date you cease to be a
Canadian resident.
If your income for the period before you became a non-resident is fairly low, paying tax on the amounts borrowed under
the HBP or LLP may be a better choice than repaying the withdrawal within 60 days of departure.
Canada Child Benefit
The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help them with the cost of
raising children under 18 years of age. The CCB might include the child disability benefit and any related provincial and
territorial programs.
The Canada Revenue Agency (CRA) uses information from your income tax and benefit return to calculate how much
your CCB payments will be. To get the CCB, you have to file your return every year, even if you did not have income in
the year. If you have a spouse or common-law partner, they also have to file a return every year.
Benefits are paid over a 12-month period from July of one year to June of the next year. Your benefit payments will be
recalculated every July based on information from your income tax and benefit return from the previous year.
Generally, as a non-resident of Canada, you are not eligible to receive CCB payments.
Québec Child Assistance Payment
The child assistance payment is a non-taxable financial assistance paid to families with one or more dependent children
under 18. In order to be eligible, you must be a Québec resident for tax purposes. Payments stop as of the month
following the month in which the family or the child leaves Québec to settle elsewhere.
Tax-Free Savings Accounts
The Tax-Free Savings Account (TFSA) is a registered savings account that allows taxpayers to earn investment income
tax-free inside the account. Contributions to the account are not deductible for tax purposes, and withdrawals of
contributions and earnings from the account are not taxable. Each year Canadian resident 18 years or older will be
allowed to contribute a specified sum of money (based on annual limit) to a TFSA. CRA would determine TFSA
contribution room for each eligible individual who files an annual Canadian income tax return, so it may be advantageous
to file an income tax return even if you do not have any tax payable.
Similar to RRSPs, unused contribution room can be carried forward to future years, and excess contributions would be
subject to tax of one per cent per month for each month that the excess remains in the plan.
If you become a non-resident, you would be allowed to maintain your TFSA, and you would not be taxed by Canada on
any earnings in the account or on withdrawals. You would not be permitted to make any contributions to a TFSA and you
would not accrue any contribution room for a year where you were a non-resident for the entire year. In your year of
departure from Canada, you may wish to make a contribution to your TFSA prior to leaving Canada.
You should consider how the country you are moving to may treat the TFSA. Consult your PwC representative to
determine the consequences of your situation.
Trusts, Partnerships, and Corporations
There are complex rules surrounding the Canadian tax implications of trusts, partnerships, and corporations. If you
involved in these, please contact your PwC representative.
PwC
14
Confidential and Proprietary
Part 8: Tax equalization
In some situations, your employer may send you on a tax equalized assignment. The general purpose of tax equalization
is to ensure you do not pay more or less tax than you would have paid had you not gone on foreign assignment.
The tax equalization calculation determines the approximate amount of tax you would have incurred as an employee
resident in Canada (“the hypothetical tax”), and then compares this amount to the taxes you actually incurred in your
assignment country and in Canada.
The tax equalization calculation is based on policies developed by your employer. Before starting your assignment, it is
important to learn from your employer whether you are being tax equalized or not.
PwC
15
Confidential and Proprietary
Part 9: Special issues for assignments to
the United States
For a more detailed discussion of assignments to the United States, refer to the IAS folio - U.S. Assignment. Included
below are some specific issues that are relevant for Canadian citizens in the U.S. Consult your PwC representative for
more information:
U.S. basis for taxation
U.S. tax rules are similar to Canadian tax rules that residents of the U.S. are subject to U.S. tax on their worldwide
income. Non-residents of the U.S. are subject to U.S. tax on their U.S. source income only.
The U.S. rules with respect to establishing residency are based on a series of tests related to the number of days you are
physically present in the U.S. in the current year and the preceding two years. In order to determine the most
advantageous filing position for your transfer year, we will need details of your days in Canada and the U.S. Using
myMobility is an easy way of keeping track of this information.
Taxation of federal income
Similar to Canada, the U.S. requires that part-year, or "dual-status", residents of the U.S. report on their tax returns
worldwide income received while resident in the U.S., as well as U.S.-source employment income received while a nonresident of the U.S.
Your taxable income will be determined by reducing your gross income by itemized or standard deductions.
Itemized deductions include mortgage interest and property taxes. Once taxable income is determined, tax is calculated
applying graduated rates based on your filing status (usually single, married filing joint or married filing separate). We will
determine your filing status when we prepare your tax returns.
Taxation of income – at state or city level
Depending on the state in which you live or work, you may be required to file one or more state tax returns. Therefore, it is
essential that you track the states you visit for employment purposes. Some municipalities will also impose income tax.
Please consult your PwC representative to discuss whether your state of residence will allow you to claim foreign tax
credits and/or treaty benefits.
Social security payments/receipts
In addition to federal income taxes, social security taxes are imposed on wages earned in the U.S. These taxes are
similar to Canada/Québec Pension Plan contributions, but are at higher rates and have higher earnings "ceilings". Both
you and your employer may be exempt from U.S. social security contributions if your employer applies for a CPP/QPP
"certificate of coverage" under the Canada/Québec -U.S. Social Security Agreement.
Under the Canada-U.S. Tax Convention, benefits you receive from either social security system are taxable only in the
country in which you are resident at the time you receive them.
PwC
16
Confidential and Proprietary
Specific U.S. tax issues for Canadians in the U.S.
Paying off a Canadian dollar mortgage
If you pay off or refinance a Canadian dollar mortgage while you are a resident of the U.S., there may be U.S. tax
consequences. In particular, the U.S. Internal Revenue Service (IRS) has ruled that if the U.S. dollar equivalent of a
mortgage denominated in a foreign currency at the date the mortgage is paid off or refinanced is less than it was at the
date the mortgage was last renewed, the resulting foreign exchange gain is taxable. This will occur if the value of the
Canadian dollar has fallen with respect to the U.S. dollar during the period from mortgage renewal to settlement. Foreign
exchange losses are not deductible.
If this is the case, to ensure your tax return is accurately prepared, your PwC representative will need to know the
following:
•
your outstanding mortgage on the date it is paid off or refinanced
•
the date of the original mortgage or date last renewed
•
whether the mortgage was assumed by the buyer
Canadian Registered Retirement Savings Plans/ Registered Pension Plans
Under the Canada-U.S. Tax Treaty, your contributions to a RPP or an employer-sponsored group RRSP can be deducted
from your employment income on your U.S. income tax return. However, a deduction for contributions made to a personal
RRSP is not allowed.
U.S. persons who are owners or beneficiaries of Canadian registered plans, including, in certain circumstances, RRSPs,
must comply with special annual U.S. reporting requirements. These reporting requirements also apply if there are
distributions from such a plan.
If you are a resident of a state that does not recognize tax treaties, you will need to report the income earned within the
RRSP/RPP and you will not be permitted to claim a deduction for your contributions made to the RRSP/RPP on your state
income tax return.
Canadian Registered Education Savings Plans/Tax-Free Savings Accounts
The Internal Revenue Code does not recognize Canadian RESPs and TFSAs, so any income earned within the plans will
be taxable in the U.S. in the current year. As this may lead to double taxation and depending on the amounts involved, it
may be beneficial to collapse the plans or, in the case of RESPs, transfer them to another person such as a relative who
is a Canadian resident, before leaving for the US. Your PwC representative will be able to discuss the best option for you.
U.S. persons, who are owners of TFSAs and owners and/or beneficiaries of RESPs, must comply with annual U.S.
reporting requirements for foreign trusts. These reporting requirements also apply if there are distributions from such a
plan.
You should keep your RESP/TFSA annual statements readily available as they will be required at the time of filing your
income tax returns.
Canadian Mutual Funds
For U.S. tax purposes, Canadian mutual funds may be considered to be a Passive Foreign Investment Company (PFIC).
A PFIC is generally a non-U.S. corporation that earns passive income such as dividends, interest, rent, royalties and
capital gains. If you own a PFIC, directly or indirectly (e.g. in your RRSP), any distributions from the fund or any gain on
the sale of the fund could be subject to additional U.S. tax and interest. You may be eligible to file certain elections to
minimize the impact of these rules. Your PwC representative will be able to discuss the best option for you.
Canadian Corporation
Essentially if you have more than 10% ownership, there are further tax filing obligations in the US. Your PwC
representative will be able to provide you with more details.
PwC
17
Confidential and Proprietary
Canadian Partnerships, Trusts
There are complex rules surrounding the US tax implications of partnerships and trusts. If you involved in these, please
contact your PwC representative.
Canadian Supplementary Pension Plans (SERPs)
There may be significant U.S. tax consequences if you participate in your Canadian employer's supplementary pension
plan if you are a U.S. Citizen or Green Card Holder or if you remain a U.S. resident. Your PwC representative will be able
to provide you with more details.
Information reporting requirements
If you are a U.S. individual and you own foreign bank accounts or foreign financial assets, you may be required to file
special U.S. information reporting forms.
1. Report of Foreign Bank and Financial Accounts, Form FinCEN 114
This form applies to any U.S. person who has a financial interest in or signature authority or other authority over any
financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during
the calendar year. If you meet the filing requirement threshold, you must disclose the maximum value during the year
for each foreign account you own. The form must be filed separately from the U.S. tax return and must be received by
the Department of Treasury before April 15. The most common Canadian accounts that need to be reported on form
FinCEN 114 are regular bank accounts (e.g., checking or savings accounts), non-registered investment accounts,
RRSP, RESP and TFSA accounts.
2. Statement of Specified Foreign Financial Assets, Form 8938
This form is used to report all foreign financial accounts and assets held by a U.S. taxpayer if the aggregate value of
all foreign accounts and assets exceeds $50,000 (or a higher amount in some circumstances). If you meet the filing
requirement threshold, you must disclose the maximum value during the year of each specified foreign financial asset
as well as other information specific to each type of asset. This form must be filed every year with the US tax return.
The most common Canadian accounts that need to be reported on form 8938 are regular bank accounts (e.g.
checking or savings accounts), non-registered investment accounts, RRSP, RESP and TFSA accounts.
Similar information will therefore be reported on both forms FinCEN 114 and 8938. For further information regarding these
reporting rules, please contact your PwC representative.
PwC
18
Confidential and Proprietary
Appendices
PwC
1
Confidential and Proprietary
Appendix A
List of Personal Assets
Please provide the following information to your PwC representative:
Assets
Private Company Shares
Public Company
Bonds
Mutual Funds
Partnership Interests
Rental Property
Other Real Estate
PwC
Year of
Acquisition
Currency
Original Cost
(including
acquisition
expenses)
Fair Market Value
No. of
of Asset per
Units/Shares at Unit/Share at Date
Date of Departure of Departure from
from Canada
Canada
Assets
Jewellery, Art, Coins, and
Other Capital Properties
PwC
Year of
Acquisition
Currency
Original Cost
(including
acquisition
expenses)
Fair Market Value
No. of
of Asset per
Units/Shares at Unit/Share at Date
Date of Departure of Departure from
from Canada
Canada
Appendix B
Summary of Filing Deadlines
Canadian Filing Deadlines
Deadline for filing returns
April 30
Deadline for paying tax due to avoid interest and late-filing penalties
April 30
Deadline for filing Form T1135 Foreign Property Information Return
April 30
Due date for first quarterly installment (if required)
March 15
Deadline for filing T1 return for self-employed individuals
June 15
Deadline for filing Section 216 non-resident rental tax return
June 30
Summary of U.S. Filing Deadlines
Deadline for filing return or extension if residing in the U.S. on April 15
April 15
Deadline for filing return or extension if residing outside the U.S. on April 15
June 15
Deadline for paying tax due (to avoid interest)
April 15
Deadline for filing Report of Foreign Bank and Financial Accounts (FinCEN 114)
April 15
Due date for filing return if first extension filed on time
Due date for first quarterly installment payment (if required)
PwC
October 15
April 15
Appendix C
Online Resources
PwC Global Mobility Services Information
Your links to a wide variety of up-to-date tax and global mobility information from around the world.
•
Global Mobility Country Guides – https://www.pwc.com/gx/en/services/people-organisation/global-employeemobility/global-mobility-country-guides.html
The PwC International Assignment Services folios contain information on the taxation of international assignees in
various countries. We continually add new folios, so visit this site often. To read one of the titles online, select the
country of your choice.
•
Worldwide Tax Summaries – https://www.pwc.com/gx/en/services/tax/worldwide-tax-summaries.html
The Worldwide tax summaries provide an up-to-date overview of the corporate and individual tax rules in operation in
over 100 countries.
•
Global Mobility Insights – https://www.pwc.com/gx/en/services/people-organisation/global-employee-mobility/globalmobility-insights.html Information on global legislative developments.
Forms referred to in your Canadian Departure Guide
You may access the forms and publications referred to in this guide at the applicable tax authority website:
Canada Revenue Agency website – www.canada.ca
•
Emigrants and Income Tax 2011
•
Canadian Residents Going Down South
•
Form NR73, Determination of Residency Status (Leaving Canada)
•
Form T776, Statement of Real Estate Rentals
Revenue of Québec website – www.revenuquebec.ca
•
IMP.22-3/R1, Determination of the Residence of an Individual Who Leaves Québec and Canada
Internal Revenue Service website – www.irs.gov
•
Form FinCEN 114, Report of Foreign Bank and Financial Accounts
•
Form 8938, Statement of Specified Foreign Financial Assets
PwC
Appendix D
Sample Letter to Advise Banks of Non-Resident Status
Mr./Ms. Y
(insert foreign address)
(insert foreign phone number)
(date)
(address)
Dear Sirs
(insert any relevant account numbers/references)
This is to inform you that I ceased to be a resident of Canada on or about (date) and am now a resident of (assignment
country). Accordingly, I request that you withhold Canadian income tax, if applicable, at appropriate rates on any
payments made or credited to me (until further notice).
My new address and telephone number are printed above. Please contact me if you have any questions.
Yours very truly,
PwC