Becoming a Non-Resident of Canada

A Comprehensive Guide

Considering a move abroad for work, retirement, or other reasons? Here’s what you need to know about transitioning to a non-resident status in Canada, including the tax implications and the importance of primary and secondary ties. 

Primary and Secondary Ties: 

To qualify as a non-resident of Canada, you must sever all primary ties and the majority of your secondary ties to the country. 

• Primary ties encompass: 
• A personal residence in Canada (rented or owned). 
• A spouse or common-law partner residing in Canada. 
• Dependents living in Canada. 
• Retaining any primary tie makes you a factual resident. 

• Secondary ties include: 
• Driver’s license. 
• Health card. 
• Bank accounts. 
• Credit cards. 
• Furniture and clothing. 
• Club memberships. 
• Pension plans, RRSPs, and TFSAs. 
• Vehicles. 
• Pets in Canada. 

• Other personal possessions. 
• The more secondary ties you maintain, the more likely you’ll be considered a factual resident. 

Form NR73: Pros and Cons 

When leaving Canada, you can choose to fill out the Determination of Residency Status form (Form NR73) with the CRA. 

• Pros: This form allows the CRA to determine your residency status, reducing uncertainty. 
• Cons: Filing this form might prompt the CRA to closely examine your situation. They often adopt a conservative stance, which could result in you being taxed as a Canadian resident. 

Tax Implications of Becoming a Non-Resident: 

• Canada Child Benefit: This ceases upon becoming a non-resident. Inform the CRA to stop payments. 
• GST/HST Credits: These stop once you become a non-resident. 
• Repay Home Buyers Plan and Life Long Learning Plan: Repay any outstanding amounts within 60 days of leaving Canada. 
• TFSA (Tax-Free Savings Account): Funds can remain, but contributions as a non-resident incur a 1% monthly penalty. 
• RRSP (Registered Retirement Savings Plan): It’s advisable to stop contributions after leaving Canada. 
• Inform Financial Institutions: Notify your bank, financial advisor, and pension administrator about your residency change. 
• Disclose All Canadian Assets: Declare all properties worth $25,000 or more on your final tax return. 
• Deemed Disposition of Property: You’re considered to have sold all your property at its market value, incurring a departure tax on any unrealized gains. 
• Selling Your Home After Leaving Canada: A 25% tax applies to the gross selling price, but there are ways to reduce this. 
• File Final Canadian Personal Tax Return: This is mandatory for the year you leave Canada. 
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Conclusion: 

To become a non-resident, it’s crucial to understand the significance of primary and secondary ties. It’s often more beneficial to file a departure tax return instead of Form NR73. Remember to settle all tax-related matters, including informing relevant institutions and filing the necessary forms, before moving abroad.