Every winter, thousands of Canadians leave the cold weather behind and head for warmer climes in the southern United States, Mexico or even Europe. Some make this an annual trip. Others, however, book a one-way flight and set up a permanent home in their own personal paradise.
Surprisingly, you don’t have to be wealthy to live outside Canada. Even those retiring on fixed incomes can find the perfect location and, after some thorough research, may be pleasantly surprised to find a retirement haven abroad that’s not only affordable, but downright beautiful. There are, however, many implications when moving to another country full-time and becoming an official non-resident of Canada. Permanently severing ties with Canada can be a difficult decision. You have to consider issues such as tax, financial planning, housing, healthcare and the cost of living.
What’s more, you need to look at citizenship, cultural, societal, government and language issues. There could also be considerable emotional, psychological and social adjustment considerations if you happen to be leaving family, relatives and friends behind.
Here are some key issues to investigate when deciding to le elsewhere:
One reason for relinquishing your Canadian citizenship could be because your newly-adopted country requires you to be a citizen to live full-time and/or own property and does not permit dual citizenship. Or, as countries tend to tax based on residency, there may be certain tax or pension benefits to giving up your Canadian citizenship.
Canadian law permits a Canadian to have more than one nationality. The Canadian government, however, encourages its citizens to use their Canadian passport when travelling abroad and to always present themselves as Canadian to foreign authorities. And consider this: Canadian officials abroad will always offer consular assistance to Canadian citizens wherever they can.
You cannot terminate your Canadian citizenship or residency simply
by living in another country. You must demonstrate your intention to
leave the country permanently. Revenue Canada determines
non-resident status on a case-by-case basis, so you should consult a tax
adviser about the necessary steps you should take.
Depending on your situation, your actual tax liability could be lower than
the non-resident withholding taxes imposed on your Canadian pensions
and investment income. The reason is that, if you are a non-resident, there
is a flat rate withholding tax that could be more than you otherwise would
need to pay.
In general, absence from Canada for two years or longer is considered
evidence of non-residence provided that you relinquish or terminate other
key connections, including: bank accounts, credit cards, driver’s licences,
Taxpayers who emigrate from Canada are generally deemed to have
disposed of their assets at fair market value on the date they leave. Capital
gains taxes, if any, are assessed at this time. Assets affected by this
provision include shares in Canadian corporations but not real estate.
Deemed disposition is triggered by your declaration that you have left the
country, which you make on your final income tax return, filed by April 30
of the year following your departure.
Canada imposes a withholding tax on “passive” income paid to
non-residents from Canadian sources, including annuity payments and
pension plans. As of January 1, 1996, this tax applies to CPP/QPP and
OAS benefits. You are eligible for OAS payments for your lifetime, as long
as you were resident in Canada for at least 20 years before you leave
You are eligible to CPP payments for your lifetime as well, without a
minimum residency requirement. The amount varies depending on the type
of income, but it is 25 per cent for pension payments. This tax may be
reduced or waived according to the terms of tax treaties between Canada
and other countries. For example, the withholding rate on pensions is
waived for residents of the U.S. and U.K.
Healthcare is a serious issue for Canadian expatriates because few
countries have systems that are as comprehensive or as inexpensive as
Canada’s. Some developed countries have comprehensive healthcare plans
that will cover you, after a waiting period, if you immigrate. But the
countries that are the major destinations for Canadian retirees generally do
not offer comparable programs.
Many developing countries provide free universal medical care to citizens
and permanent residents. But most Canadians living in these countries
seek private medical care, which many consider to be of a higher quality.
So, when you decide to leave Canada for good, there are many
complicated issues to consider. Your best bet is to seek professional tax
and legal advice in advance of any decision to ensure that you fully
understand the implications.