Illustration by The Globe and Mail
Q: I have lived here for more than 40 years and I am a Canadian citizen. I have experienced a good life in Canada, but I want to live out my retirement years abroad where I was born. What does that involve? Do I continue to file taxes here and do I have to pay some sort of exit tax? Will my pensions be reduced? Does Canada have a deal or contract with other countries’ banks to transfer my pension? Do I lose my OHIP coverage? And most importantly, can I come back any time I want?
We asked Anna Golan-Reznick, a certified financial planner with Objective Financial Partners Inc., to answer this one.
“Retiring abroad after more than 40 years in Canada is certainly possible, but it involves much more than selecting a new home and boarding a plane,” Ms. Golan-Reznick said. A move abroad affects virtually every aspect of your financial life, including tax planning, investments, retirement income and estate planning, she added. Once your affairs span two countries, cross-border rules come into play, often requiring specialized advice.
According to Ms. Golan-Reznick, one area that catches many retirees by surprise is their investment accounts. “While you can usually keep your Canadian bank accounts, some financial institutions restrict services for non-residents,” she said. Depending on the institution and your country of residence, you may be able to keep existing investments, but new contributions, trades or even the account itself may be restricted.
Your Canadian tax obligations will depend largely on your residency status. “As long as you remain a Canadian tax resident, you generally continue to report and pay tax on your worldwide income,” she said. Once you become a non-resident, however, you are typically taxed only on Canadian-source income. The Canada Revenue Agency determines residency based on your personal circumstances and ties to Canada.
Retire Rich Newsletter
Your essential read on retirement planning, with Meera Raman's tips, tools and stories from real people across the country
Already have account?
There may also be a departure, or “exit” tax to consider. Ms. Golan-Reznick pointed out that when you cease Canadian tax residency, Canada may apply a deemed disposition on certain assets, treating them as though they were sold immediately before departure. “This can create a capital gains tax liability even if no actual sale occurs,” she said. “As a non-resident, Canadian-source income may also become subject to withholding taxes.”
As for pensions, moving abroad does not necessarily mean losing them. According to Ms. Golan-Reznick, Canada Pension Plan (CPP) benefits can generally be paid anywhere in the world. Old Age Security (OAS) can also be paid abroad if you have lived in Canada for at least 20 years after the age of 18. CPP and OAS payments can generally be deposited into a Canadian bank account or directly into a foreign bank account in many countries. The Guaranteed Income Supplement (GIS), however, is generally only available to Canadian residents.
Health care is another important consideration. “A permanent move abroad will generally result in the loss of provincial health coverage once you no longer meet your province’s residency requirements,” she said. Ms. Golan-Rezick advised that private health insurance and an emergency fund are essential. “And, while this is more of an immigration question than a financial-planning one, as a Canadian citizen you retain the right to return to Canada and live here whenever you choose.”
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.
