Are you planning to leave Canada and cease your tax residency? This guide will help you navigate the process step-by-step, ensuring you meet all legal requirements and obligations.
Determine Your Residency Status
Before you can cease your tax residency, you must confirm your current residency status. This involves understanding the criteria set by the Canada Revenue Agency (CRA) for tax residency, such as significant residential ties (e.g., a home, spouse, or dependents in Canada) and secondary ties (e.g., personal property, social ties).
Sever Significant Ties
You must sever your significant residential ties to Canada to cease your tax residency. This includes selling your home, moving your family, and transferring your personal property out of Canada. Ensure you have evidence of these actions, as the CRA may require proof.
File a Departure Tax Return
The CRA requires you to file a final tax return for the year you leave Canada. This is known as the departure tax return. Report your income up to the date of departure, and declare any deemed dispositions of property. Be sure to calculate any departure tax owed.
Notify Financial Institutions and Government Agencies
Inform Canadian financial institutions, government agencies, and any other relevant organizations of your change in residency status. This includes banks, investment firms, the CRA, and provincial health insurance plans.
Settle Outstanding Tax Debts
Ensure you have settled all outstanding tax debts with the CRA. This includes any taxes owed up to your departure date and any departure tax calculated on your final return. Failure to pay these can result in penalties and interest.
Obtain Tax Residency Status in Your New Country
Establish your tax residency in your new country of residence. This may involve registering with local tax authorities and providing them with necessary documentation to confirm your new status.
Legal References
- Income Tax Act, RSC 1985, c 1 (5th Supp)
- Canada Revenue Agency Guidance on Residency Status
Useful Links
- Canada Revenue Agency - Residency status
- Government of Canada - Determining your residency status
- Canada Revenue Agency - International and non-resident taxes
