Canadian Residency: Tax Implications

To start with, the Canada Revenue Agency (CRA) has a very strict definition of what it means to be a Canadian taxpayer or not. Basically, a Canadian resident has to pay Canadian taxes on income made both in Canada and worldwide. People who are not residents of Canada, have to pay taxes on income earned in Canada.

What makes you a Canadian resident?

The two primary indicators are:

1) If you have a home to live in in Canada
2) If you have a spouse or children in Canada

If these 2 factors alone are not decisive enough, there are a number of other secondary factors to look at:

  • Where your bank accounts and brokerage accounts are
  • Your driver’s license
  • Your medicare card
  • Membership in clubs
  • Own personal property in Canada
  • Permanent employment in Canada

The majority of these factors will indicated the residency status of a person.
Upon moving to another country there is something called a deemed disposition at fair market value which occurs. That means that many assets (excluding some such as RRSPs and Canadian real estate) must be paid capital gains taxes upon moving if they went up in value since they were bought. This would include for example any unregistered investments.
So when you move, have a list of all your assets in order to ensure that you know what needs to be paid taxes on. Moving may be a headache, but you can avoid further headaches by knowing the taxes that need to be paid and complying with them.

By Daniel Zunenshine

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