CANADIAN EXPAT TAX US- THE BASICS

Canadian residents are taxed on worldwide income. It is therefore important for Canadians moving to the US to plan ahead, to avoid paying more than necessary.  Maintaining your residency in Canada will require you to file a Canadian tax return on an annual basis. If you are self-employed, have investments or earn over the set threshold you will also be required to file a tax return in the US.

An option that is chosen by many Canadians moving to the US is to sever their Canadian residency. By severing your Canadian residency ties you will no longer be required to file a tax return. In order to sever your Canadian residency you must file a ‘Departure Tax Return’.

When severing your Canadian residency you must consider whether it is practical. You must ask yourself if you plan to return to Canada in the ‘foreseeable’ future. If you do not plan to return to Canada then severing your residency is a definite option.  

There is no specific time period after which you will be seen as a non-resident of Canada. It is therefore important that the steps that you take to prove your intention to be a non-resident are followed carefully.

 

WHAT ARE RESIDENTIAL TIES WITH CANADA?

Residential ties with Canada are categorised as either primary or secondary. It’s important to sever all primary ties when ceasing your residency. Maintaining any significant ties can lead the Canada Revenue Agency (CRA) to maintain your residency.

Common examples of primary residency:

·      Maintaining Canadian bank accounts

·      Canadian credit cards

·      Professional or club membership to Canadian organisations

 

If your residency is questioned by the CRA, you are likely to be asked to submit a form NR73- Determination of Residency Status (Leaving Canada).

 

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