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  • Joshua Sung Min Kim

Navigating Tax Implications: Transitioning from a Canadian Resident to a Non-Resident

Making the decision to leave Canada and become a non-resident? It's crucial to understand the multitude of tax implications associated with this decision, particularly as it pertains to severing residential ties with Canada. Let's dive deeper.

Deemed Disposition Explained:

Upon leaving Canada, most types of properties are seen as "deemed disposed of" at their current market value, potentially leading to capital gains tax. However, exceptions apply, like for Canadian real estate and certain pensions.

The Importance of Filing a Departure Tax Return:

This is your final tax statement in Canada. It's essential to report your global income from January 1 up to the day you depart.

Tax Obligations as a Non-Resident:

Now, your tax duties shift to focus on specific types of Canadian-source income, such as rents, employment income earned in Canada, and any capital gains arising from Canadian real property.

The Weight of Residential Ties to Canada:

The nature and number of ties you maintain with Canada can greatly influence your tax status. Here's a more detailed breakdown:

  • Primary Ties: These include a dwelling in Canada and the residence of your immediate family. If they remain in Canada, especially without plans to join you, it can significantly affect your residency status.

  • Secondary Ties: Items like personal property in Canada, memberships in Canadian recreational clubs, frequent visits back to Canada, and retaining Canadian IDs play a role here.

  • Social / Economic Ties: Retaining provincial health insurance, participation in Canadian social activities, employment in Canada, active Canadian bank accounts, and ownership of investment properties in Canada are just a few factors that can indicate a substantial connection.

To successfully transition to a non-resident status, these ties often need to be reduced or severed. Actions like selling property in Canada, relocating your family, and closing bank accounts can be instrumental.

The Utility of Form NR73:

CRA’s Form NR73 helps in determining your residency status upon departing Canada. It’s a non-compulsory form but can offer clarity on your tax situation.

Transitioning from a resident to a non-resident isn't simply about packing bags; it demands meticulous tax planning and comprehension. Please note that every individual's situation might differ, so it's essential to consult with a tax professional. Should you need more detailed guidance or have further inquiries, please don't hesitate to reach out!

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