Every year, many people decide to pack up, and move their roots to other countries.  This process is called emigrating, and is done for many reasons.  We will look at what you need to do to ensure the emigration is done in a tax effective manner.

What Is Emigrating?

Emigrating for tax purposes is when you have left Canada to live in another country, and when you have severed your residential ties with Canada.

There is a list of factors that go into determining whether you or are not a resident of Canada, but some factors weigh more heavily than others.  The process is evaluated on a case-by-case basis, with the final decision resting with the Canada Revenue Agency.

It is possible for someone to be working abroad for a period of time (even more than a year) and still be deemed a resident of Canada, and therefore subject to Canadian income tax.  This would happen if you cannot show that you have severed residential ties to Canada (still have an address, bank accounts, health card, etc. in Canada).

Emigrating for tax purposes is different than your citizenship (which you keep when you leave Canada) and your health coverage (which you must be in your respective province for more than 183 days a year to maintain).


Problems that can arise

As mentioned above, if you are planning to work abroad for a period of time in excess of a year, many people expect that they will simply not be subject to Canadian tax, since they are not living in Canada at the time.  While this can be true, that answer is often not as straightforward as you might hope.

If you are deemed to be a resident of Canada by the CRA, you become responsible for the tax that would have been owing on your earnings worldwide for the time you were not in Canada.  These taxes are generally much higher than expected, as most other countries in the world have lower personal tax rates than Canada (or you may be working in a low/no tax country).

Concluding Thoughts

If you are planning to work abroad, it is certainly possible to structure your affairs to ensure you minimize your taxes.  As with all things, this takes careful planning and structuring as soon as possible.

Ian Edmonds is a CPA, CA and CPA (NC) working in Toronto with individuals and business owners in Canada, the US, and internationally to provide personalized, approachable tax and accounting advice and services.