Understanding Canada’s Tax Residency Rules
In order to lower your taxes as a Canadian, it’s crucial to understand the country’s tax residency rules. Canada taxes its residents based on their worldwide income, and it’s essential to determine if you are a tax resident or not. The residential ties with Canada that can impact your tax residency status include:
- A home in Canada
- A spouse or common-law partner in Canada
- Dependents in Canada
Severing Residential Ties with Canada
To stop being a tax resident of Canada, you need to sever your residential ties with the country. This involves:
- Giving up your home in Canada, either by selling or renting it out
- Moving your spouse and children with you to your new country of residence
- Disposing of personal property in Canada, such as cars, furniture, and bank accounts
- Breaking social ties, such as memberships in recreational or religious organizations
Determining Your Residency Status
To become a non-resident for income tax purposes, you need to establish a permanent home in another country and sever your residential ties with Canada. You are considered an emigrant when you leave Canada to live in another country and establish a permanent home there.
Acquiring Tax Residence in a New Country
It’s essential to acquire tax residence in the country you’re moving to. Many countries offer quick tax residence programs, such as Georgia, Antigua and Barbuda, and Cyprus. Additionally, check if the country you’re moving to has a tax treaty with Canada to avoid double taxation.
Filing the NR73 Form to Determine Residency Status
To formally become a tax non-resident, you must file the NR73 form, ideally with the help of a Canadian tax accountant or tax lawyer. This form will officially determine your residency status upon leaving Canada.
Departure Tax and Deemed Disposition
When you leave Canada, you may be subject to a departure tax, also known as deemed disposition. This tax applies to certain types of property, such as shares, jewelry, paintings, collections, and cryptocurrencies. You’ll need to report the deemed disposition and pay the applicable capital gains tax.
Preparing for a Possible Future Citizenship Tax
Although Canada currently does not tax based on citizenship, it’s essential to be prepared for the possibility of a future citizenship tax or wealth tax. As tax laws continue to evolve, leaving Canada sooner rather than later may be beneficial for those looking to minimize their tax burden.
Relocating to a More Tax-Friendly Country
To escape the Canadian tax system, consider relocating to a more tax-friendly country, such as Dubai, UAE, or Portugal. By severing your residential ties with Canada and establishing tax residence in a new country, you can significantly lower your taxes and enjoy a better quality of life.
In conclusion, if you’re a Canadian citizen or resident looking to minimize your tax burden, it’s essential to understand the country’s tax residency rules, sever your residential ties with Canada, and establish tax residence in a new country. By following these steps, you can escape the Canadian tax system and enjoy the benefits of living in a more tax-friendly country.