You Could Pay MORE Tax If You Retire Abroad...
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- Опубліковано 8 вер 2024
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Thinking about retiring abroad? There's a lot more that goes into it than packing your bags and getting on a flight. There's a good chance that you will pay more tax as a non-resident of Canada than you would as a resident, so we'll go through that and more in this video.
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It's 15% income tax in Mexico for Canadians who are non-residents of Canada. I have spent hours on the phone with the foreign tax dept at CRA, Canadian and Mexican tax accountants who have many clients in this situation and I have spoken to expats that are only paying the 15% income tax and it is withheld at source on their pensions and RRSPs. File a 217 and NR5 once every 5 years. There is a calculator on CRA that shows 15% on amounts well over $100,000. I can't link the calculator here.
I retired to Mexico 16 years ago. I am registered with the GOC as a non-resident of Canada and I have a Telus pension, CP, and OAS as my income from Canada, and all of them withhold 15% due to the tax treaty between Mexico and Canada. If your income is low enough, even that may be refunded by the GOC when you do a tax return, but many non-residents no longer file returns as the obligation to do so is no longer there once you are officially a non-resident. They consider the 15% they withheld to be the end of your obligation to Canada on that income.
That's what I want to do is retire in Mexico and declare non-resident.
Don't you have to file taxes with the MX govmt, since you a MX financial resident now?
If you stay more than 6 months +1 day you're considered Canadian resident so you don't need to worry about this so I think what I'd do is to spend the dreadful QC winter somewhere else and come back for late spring, spend summer here and leave late fall/early winter - problem solved :)
So you would have to have a place to live in QC AND a place to live abroad? Plus maybe a car here and a car there? That sounds expensive!
The withholding tax is an automatic 25%. One should always send in an NR5 form listing one's Canadian income (and income in the country of residence, if applicable) because this will be taken into consideration and the 25% tax can be lowered, sometimes substantially.
Yes. I thought that if I moved to Mexico, and if all my income was Canadian, (CPP, OAS, RRSP or RIF and pension, I should file that nr5 and a tax return every year in canada. My tax would be reduced to the same as what I would pay living in Canada or 15%. Also my TFSA income would remain tax free and any w/d's would be tax free correct?
@@marieklyne2722 It's reduced to 15%. You only file it once every 5 years. It doesn't matter what you would pay in Canada. I think Adam has given wrong info here. Unless he can cite the section of the tax treaty that says 25%?
@@blackwatch7151 He's correct in saying the automatic withholding tax is 25%. Living in a country with a tax treaty is helpful. Many countries don't have tax treaties with Canada. But filing the nr5 can still get the tax down. I believe that one is eligible for a reduction as long as the global income is under $79,000 CAN. I live in a country without a tax treaty and still got it down a few percentage points.
Retiring abroad seems way too complicated. IMO, the best option is to live abroad part-time, like 6 months and enjoy the best of both worlds. Canada is expensive for a reason. It’s like real estate…location, location, location.
This is my dream, live in Thailand or S.E. Asia for 6 months a year during the winter. Enjoy Canada in the warmer weather. Of course that comes down to if I can afford to do it. 😆
For some people, living in Canada for 6 month is still a nightmare compared to living overseas.
@@mapleleafdavid Leaving Canada for Thailand in Oct, with no plans to come back.
@@mikebaker4190 any advice for someone looking to do the same?
@@Jeff_Louis plan a month long trip. One week Chang Mia/rai. One week on the mai Kong River. 1 week Pattaya/ Jomtien. One week Ao Nang/Krabi. If you just want be near the ocean, then then the latter two. I like snorkeling and diving, so it's Ao NAng for me.
Bonjour Adam, not sure you are totally correct in your statement that withholding tax cannot be claim back, none residents who elect section 217 of the ITA can receive overpayments for some source if Canadian incomes. Thanks for the video
Thanks! That was the my question asked in previous video. Amazing stuff and Content! keep going.
Quite recent times No one is happy regarding Immigration policy and keep on changing goal post and its quite harder to secure+renew PR due to IRCC bureaucracy and no one cares about it. Additionally, housing is joke in Canada whereas 100k gets you a Palace in my home country. If you do the math, 25% tax is better than "Affordability crisis" + GST taxes, constant immigration policy changes. Obviously, moving investments outside of Canada (say US) is better option.
Stay in Canada for 200 days and live overseas during the winter time.
This gives me a nice perspective
is there a magic reason it is 200 days? Does this vary province to province? I have been looking for some websites that define this. Do you have a link you can share?
In fact it’s not simple
Are you a deemed resident of Canada?
You are a deemed resident of Canada for income tax purposes if you are in one of the following situations:
You lived outside Canada during the tax year, you are not considered to be a factual resident of Canada because you did not have significant residential ties, and you are a government employee, a member of the Canadian Forces including their overseas school staff, or working under a Global Affairs Canada assistance program. This could also apply to the family members of an individual who is in one of these situations. For more information, see Government employees outside Canada
You stayed in Canada for 183 days or more (the 183-day rule) in the tax year, do not have significant residential ties with Canada, and are not considered a resident of another country under the terms of a tax treaty between Canada and that country
Basically, it’s much harder to NOT be deemed resident than to be deemed tax resident. If you have close ties, family , real estate.. canada wants you to be their tax resident. Now for health insurance it’s 6 or 7 months plus a day( depending on the province)
In this video they discuss cases where people se facto are not considered canada tax residents I believe.
I think you need another video with an expert on tax filing for expats. NR5 needs to be completed every 5 years. If you think you've overpaid in taxes, you can elect under schedule 217 for a tax refund, yearly. Also, CRA requires OASRI, if you're earning income in your new residential country, as clawback rules still apply. I have been looking for a tax course to take for expat tax returns. Meantime, I have read a lot on CRA, concerning this very topic.
Could you please do a video on how to file taxes after you sell your stocks?
What about early-retired, long term (years) travellers for residents vs. non-residents? People who have every intention of returning to Canada. I understand we could lose provincial health care coverage until we come back for a bit after being away over 6 months. However if our bank and investment accounts, storage units, credit cards, mail handling and family (brothers, sisters and parents) are all in Canada and we pay Canadian taxes every year? We rented and have no kids so don't have a residence or dependants waiting for us when we return.
I have yet to meet a Canadian long term traveller (not working) who indicated there is a massive gotcha with CRA as detailed in this video and we've met lots of them. I would like to assume we are still (factual?) residents from a CRA perspective but it sucks that it is not black and white and we can't determine it ourselves. Would love to hear if anyone has experience with this topic.
This is ludicrous. I'm planning on leaving because this place isn't sustainable anymore. Never mind on the joke that is called CPP.
Agreed!
Your clients need to fill out the NR5 and form 217 and the withholding tax will be only 15%. Is there withholding tax on TFSA withdrawals?
No withholding on TFSA.
How can you pay less tax staying in canada if your pensions are taxed like as if you have a job ???
Isn’t it just withholding tax and if your income is low you would get a refund?
Excellent video, as usual.
Adam, I have a difficult question to ask you
;-)
At what point (or at what amount) does the services of a financial planner becomes advantageous?
Hypothetically, if someone has 10k$ in saving paying say 1k$ for financial advices (10%) is a bigger cost than someone with 100k$ (1%) or 1M$ in savings. So, if the financial services cost is 10% of my savings it is likely not a good idea, if the service represent 0.1% of my savings the services are likely worth it.
What is that percentage? That "breaking point"?
Thx.
Alain, Based on our experience doing plans for people with no money (just pensions) to lots of money - there is a financial advantage for all. If you look at the cost of the service to the percentage of assets, you may never get a plan done. Look at the value added. For instance, we may be able to save you well into 6 figures of taxes on a 6 figure portfolio. Again, no real number here - more of the question 'do you feel ready and on track and are you making all the right decisions to put more money in your pocket vs CRA' If not, then time for a plan!
@@ParallelWealth "Look at the value added. "
Good point Adam. Thx.
And thanks for all the great videos. If/when we get a financial planner it will be you guys because of the videos and because the videos demonstrate you care and know what you are talking about.
If I'm from BC and I'm thinking about retiring to Calgary, have I retired abroad ...or just sold my soul? 😜
Based on the number of Pakistanis here , yes its just like living in a foreign country
Everything I’ve found including on the Canadian government site says the withholding tax for Canadians relocating to Mexico is 15%, not 25% as you mentioned… can you quote your source please
Real life clients in Mexico. My understanding is the difference would be ongoing income or lump sums. You will want to consult with a cross border tax accountant.
I'm confused, why would you not get some of the withholding tax back when filing canadian income tax end of the year, if you move abroad? I talked to an accountant and he said I would get any overpayment back
Good point. It is "witholding" tax, not the eventual amount of tax you will have to pay in the end. He failed to clarify that point.
Does the 25% tax apply to TFSA?
No, TFSA doesn’t have tax