Whether you’re operating a seasonal surf shack in Costa Rica, spending your summer bartending in Dublin, volunteering at a monkey sanctuary in Kenya, or enjoying retirement as a ‘snowbird’ in Florida, living abroad is rich with new experiences and possibilities. But no matter how far you go, you can’t escape the tax man.
Here’s everything you need to know about how being abroad for an extended period affects your tax situation and how you file as a Canadian.
- Your tax obligations depend on your residency status, which the CRA determines on a case-by-case basis every tax year.
- Any income you earn while on a work visa must be claimed on your Canadian tax return.
- The Canadian government has tax treaties with different countries so you won’t get taxed twice on your earnings.
How does leaving Canada temporarily affect your tax obligations?
From being an international student or volunteer to a retiree who winters abroad, there are many scenarios where you can spend part of the year outside the country and still maintain your status as a resident.
In this situation, the CRA expects you to file your taxes just as you would if you’d never left the country.
TIP: If you’re living outside Canada temporarily, consider filing your return electronically using NETFILE or an online tax preparation service like TurboTax. It’s typically faster and more convenient than using paper forms and snail mail.
What if you work abroad temporarily?
Every year, thousands of Canadians decide to relocate to a foreign country to work and acquire new skills. If you want to join them, you’ll need a temporary work visa.
If you’re someone who dreams of seeing the world without having a huge gap on your resumé, a working holiday visa may be just the ticket. Thanks to Canada’s reciprocal agreements with several countries, Canadians between the ages 18 to 35 can work and live abroad for up to 1 to 2 years.
No matter the visa, the CRA still considers you a Canadian resident and taxes you as though you never left. So file as you normally would, being sure to report all sources of income, no matter where in the world you earned it.
Will you have to pay taxes twice?
It depends. Canada has tax treaties with almost 100 countries to ensure you aren’t “double-taxed” on income earned outside of Canada. In addition to claiming credits and deductions as you normally would, you may even be able to claim a credit for foreign taxes you paid abroad.
TIP: When you have both Canadian and foreign income, it’s best to find out in advance what your tax situation will be and how you can maximize your tax savings. Contact the CRA directly at 1-800-959-8281 to confirm your tax obligations based on your situation. This helps prevent conflict with tax agencies and possible penalties.
What if you decide to move abroad permanently?
Whether for work, family, health or lifestyle, if you move to another country full-time, the CRA considers you a non-resident – but you’ll have to file one last return before you go.
From here on in, your business with the CRA is done UNLESS you still receive income from Canadian sources like pensions, investments, business interests, or the sale of a (Canadian) property. As long as this is the case, the CRA expects you to keep filing no matter where in the world you land.
What factors determine how you’re taxed?
How you’re taxed depends on your residency status. For tax purposes, the CRA places you in one of the following five categories and taxes you accordingly.
RESIDENCY STATUS | CRITERIA | TAX IMPLICATIONS |
You live or travel extensively outside Canada but still have significant residential ties (i.e. property, family, bank account) to Canada. | You’re taxed as though you never left Canada. Report your Canadian income AND any income earned in the other country, claiming all credits and deductions. | |
Deemed Resident | You live outside Canada during the tax year, don’t have significant residential ties, but are a government employee. OR You stayed in Canada for at least 183 days of the tax year, don’t have significant residential ties, but aren’t considered a resident of the other country due to the terms of the tax treaty between Canada and that country. | Deemed residents are subject to federal tax only whereas factual residents are subject to both federal and provincial, and can claim provincial credits/deductions. |
You’re considered a resident of more than one country at the same time. | You may be required to fill out tax returns for both countries. A tax treaty can help you avoid double taxation. | |
You normally or routinely live in another country, and you don’t have significant residential ties to Canada. | You no longer have to file unless you have ongoing income and/or capital gains and losses from Canadian income sources. | |
Deemed Non-Resident | You meet the CRA’s criteria to be a factual resident, but the country you live in also considers you a resident and, due to terms in the tax treaty, requires Canada to deem you a non-resident. | Same filing requirements as a non-resident. |
Big life changes? No problem
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