Canadian Expats

Canadian Expats

Expat Tax Canada: Tips For Canadian Expats

As Canadians are taxed on worldwide income, it’s important to plan ahead to avoid paying more than you should. Determining what the tax consequences are of moving to the U.S., either permanently or temporarily, requires some foresight. Here you will find specific information on what you need to consider before moving or while living either permanently or as a guest in the United States.

CRA Today
Canada Revenue Agency is upholding tighter parameters and rulings, and expatriate Canadians are expected to remain on the radar for quite some time. The international investment environment has become exceptionally dynamic with intensified compliance and regulatory standards, including: New strict regulation – tax implications, Tighter parameters and rulings, Dynamic international investment environment, and Stringent compliance standards.

Worldwide Income Tax?
Since Canadian residents are taxed on worldwide income; maintaining residency in Canada will require you to file a Canadian tax return on an annual basis, including in that tax return income from all sources, both Canadian and foreign. You may also be required to file a tax return in the country you are going to live in (ie U.S.). If you sever your Canadian residency for tax purposes, a final “departure tax return” should be filed in Canada.

U.S. Tax Residents: How to Navigate PFIC Investment Rules

U.S. taxpayers living in Canada or the U.S. can unknowingly employ investment strategies in their portfolios that have unfavorable U.S. tax implications. Learn which investment securities should be considered and avoided within your investment accounts.

Manage Your Canada-US
Cross-Border Lifestyle

Whether you are transitioning residency between Canada and the U.S. or you have already made the move, it is important to understand the benefits of a cross-border financial plan. Learn how Cardinal Point can help when holding investment assets or financial interests in the U.S. or Canada.

Recent developments have made taxation and investing for Canadian expatriates even more difficult. Here’s why.

Residency Status
Determining your residency status should be done with a fionancial advisor prior to engagement with Canada Revenue Agency, including the submission of tax returns and NR73. It is very important that you seek a professional review of all your financial and personal assets when leaving Canada for an extended period of time.
Things that impact your residency status:
  • Registered investments and open investments
  • Your address and name on correspondence addressed to you
  • All personal assets held in Canada (this includes house, car, corporation, etc.)
 There are many different tax classifications that might apply to you which include; deemed resident, deemed non-resident, resident, non-resident, factual resident. Your tax obligations are not limited to filling returns but also include reporting on assets held in Canada.

Earned Income Exclusion & Treaty Benefits
You may be able to exclude up to $85,700 from income for US tax purposes by completing Form 2555 and attaching it to your return. To claim this exclusion on taxation for expatriates, you must be a bona fide Canadian resident or have been living in Canada for at least 330 days in the last year. Also, if you receive Social Security benefits from the US, they are only taxable in Canada. You may claim a 15% deduction for your expatriate taxes on Line 256 of your Canadian tax return.
Foreign Tax Credit or Expatriate Income Taxes Deduction
Avoid paying double taxation for expatriates is by claiming a foreign tax credit on your US return for taxes you are required to pay to Canada. To claim the expatriate taxes credit, you must complete Form 1116 and attach it to your US return. Alternatively, you can claim the Canadian taxes you paid as an itemized deduction. Both the deduction and credit are limited to foreign income that is subject to US tax, so neither can be claimed for income excluded on Form 2555.

Ways to reduce tax in Canada

  1. Keep a travel log: Document and record days inside and outside of Canada during the year of your move.
  2. File a return for partial years if possible: You must file a return to receive partial credits and payments from CRA. Some countries with tax treaties will not leave you with tax obligations to Canada; and you might be eligible for credits or payments.
  3. Stay compliant with Canadian tax filing requirements that must be filed for foreign reporting and special filings. Be aware that there are potentially large penalties for not being compliant with foreign reporting requirements.

Departure tax return
Carefully consider your final departure tax return in Canada as there are many tax implications that arise. This return should be submitted at the appropriate tax deadline in the corresponding calendar year that you leave Canada.
The first step is to consider carefully what your departure date will be. Once you have defined the departure date it will be easier to understand your expatriation process and the next steps. In your final departure return you may sever your assets formally in a process called deemed disposition and decisions need to be made about what requires reporting under Part XIII (25% on subject amounts for non-residents).
Special filing regulations exist for all types of properties including but not limited to, rental, residential and land. Problems may occur the following year from T3 slips (Canadian capital gains, interest and dividends). There are many issues that need to be considered on departure from Canada and professional advice from a Cardinal Point specialist on your final tax return is recommended.

Wealth Planning
Although tax planning is initially considered the most important issue when working or moving overseas, there are other points of equal importance. In each category of wealth planning there are areas that an expatriate or repatriating Canadian should consider.
Obtaining competent tax and financial planning advice (with full disclosure of the job opportunity and future plans) is critical. If this is overlooked, expats may find themselves paying taxes on offshore earnings several years after they assumed that ties had been severed. Remember, that as every case is different, avoid generic advice by former well-meaning expats. Tax laws change continuously.

We provide expatriate tax consulting to Canadians living in the USA.

Cardinal Point provides Canadians living in America with comprehensive tax, financial and estate planning, wealth management and investment advice for expats with $2.5 million in assets. We strive to help our clients build a better financial future. Though you have untilJune 15th to file, the IRS will begin assessing interest on any unpaid balances on April 15th.
This provides time for you to complete your Canadian return and determine your expatriate taxes liability in case you have to claim the foreign tax credit on your US return. Remember that refunds on expatriate income taxes can only be received for three open tax years. Foreign tax credits can be created 10 years back and brought forward to offset balances for open years under certain conditions. Contact us today to find out how our tax consulting services can make your life easier.

Americans Living in Canada

As an American residing in Canada, it’s important to make sure your financial affairs are structured properly to avoid double taxation issues and ensure compliance with the laws of both countries.

Canadians Living in the U.S.

Whether you are transitioning residency between Canada and U.S. or you have already made the move but continue to hold investment assets or financial interests in both Canada and the United States, proper cross-border financial planning can integrate and coordinate the asset management of your investments, reduce taxes and maximize your estate.

Expatriates Living Abroad

For those Canadians and Americans moving or living abroad, careful cross-border financial planning considerations must be given to ensure tax and regulatory compliance in both your home and adopted countries.