Saturday, 3 August 2013

Are you Emigrating Out of Canada? You Maybe Subject to a Departure Tax

If  you leave Canada and take up residency outside Canada you will no longer be subject to Canadian taxation. But, you should be mindful of two things.  One that Canada Revenue Agency (CRA) is on the same page as you concerning your non-residency. You may wish to check the following link to gain some comfort as to whether your non-residency is acceptable from CRA's point of view. DETERMINATION OF RESIDENCY STATUS .  Two all your assets are deemed to have been disposed of (considered sold) at their fair market value at the time of departure.  Any gain resulting will be subject to tax.  The following assets are of importance.

1) Principal Residence - Not subject to tax.
2) Other Canadian Real Estate - Not subject to tax.
3) Investment assets, including share of private corporation-  Considered sold at fair market value.
Form T1243E must be completed and attached to your last tax return.  Also check the attached link as you may need to file form T1161. With certain exceptions if your assets market value is $25,000 and over you are required to file this form.

Should you return back to Canada and become a Canadian resident for tax purposes you my be able to unwind those gains which were subject to tax and have the tax paid refunded.  For this reason you may wish to postpone the payment of tax on your departure.  This can be achieved by providing CRA with acceptable security, such as bank guarantees or letters of credit.  CRA may accept the shares of corporations as acceptable security.  In order to do this you must make, what CRA refers to, an election by completing formT1244 E.  Security is only required if the tax owing on the deemed disposition is in excess of $14,500.

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