Hi:
So what's the deal if you decide you do like living somewhere else? What do you do?
Also, what happens tax-wise if you earn all this money off-shore in another country? Are you liable for tax in Canada if you have not earned money in Canada and been out of the country for the whole year?
The short answer to the second question is yes, unless you have structured your tax situation properly.
If you decide you want to move elsewhere in the world for a variety of reasons, you still have obligations to the tax department in Canada.
Here are a few pointers.
1. Canada taxes on residency, not citizenship. This is an enormous plus in my opinion. The U.S. for example, taxes on citizenship and U.S. citizens who earn over $80K must pay tax to the U.S. for life. I guess it's OK for the vast majority of US citizens who live elsewhere and don't make the $80,000, but Canadians often want to move from here for two reasons: the weather and the tax.
2. Say you have found your place in the sun. The cost of living is low, the community friendly, and you have started making friends, and getting established.
Your next step is finding out what that country's rules are on residency.
Some countries are quite open, while others do not want retirees. They are concerned, and perhaps rightly so, that as you age you will become a burden on their health system.
3. The point is, to be a non-resident of Canada, you must be a resident of another country. Otherwise you are taxed the same as a Canadian citizen living in this country.
4. The government will withhold 15% of your Canada Pension Plan and Old Age Security cheques, which is reasonable in my opinion. Other income may have withholding taxes.
5. The bottom line is that if you can live well in another country and don't have much retirement income, moving offshore can be a good deal. If you have considerable assets in Canada, you will have to pay departure taxes. In both cases you need professional advice.
More on this tomorrow.
M.
retirement and expatriates
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