For example, do you need to save more and be more aggressive with your portfolio, or can a more conservative approach be taken? Education planning determines how much is required, at what point in time, and what you need to do to fund these future education liabilities.
It also provides a review of your education saving options in Canada and what to do with your education savings in the U. Risk management examines your current situation for risk exposures and determines the best course of action in addressing them. For example, illness, fire, theft, accident, disability, death, etc.
There are many differences in managing risk between the U. Estate planning helps you to arrange your affairs so you can 1 continue to control your property while alive, 2 provide for the needs of loved ones in the event of disability, and 3 give what you have, to whom you want, when you want, the way you want, at the lowest overall cost. The focus is on control first and on saving tax dollars, professional fees, and court costs second. Investment planning determines your investment objectives as derived from your financial plan and then designs an investment portfolio to achieve your required rate of return while managing your tax liability.
Ongoing monitoring, reporting, and rebalancing of your portfolio in both Canada and the U. The two items you must have thought out and in place before you even consider a transition to Canada are adequate health-care coverage and a legal means of residing in Canada valid immigration status. You may not be aware, but despite its socialized health-care acclaim, you may not automatically be eligible to join the health-care system in Canada immediately when you move there.
Further, your current U. The rules are different for each province, but you should have some form of U. This coverage is best secured just before you make the transition to Canada to minimize your liability and costs. There are several options to cover you and your family that are discussed in more detail, along with items such as life, auto, and homeowner insurance, in Chapter 2.
Despite popular opinion, you must have a legal means i. To work there requires the appropriate authorization as well. No matter what, you have to fit into one of the immigration categories outlined by Citizenship and Immigration Canada. Unfortunately, many Americans go to Canada to visit and mistakenly believe they can work there just like they can in any state. This misconception comes in part because Americans do not need a visa to cross the border into Canada you don't even need a passport, just a valid form of identification, such as a birth certificate.
Even though you don't need a visa to cross the border into Canada, some people believe they can stay or work as long as they want. In fact, if you are caught working in Canada without a valid work visa, you will be considered an illegal immigrant and could face deportation and banishment from Canada. There are numerous legal options you can use to enter Canada, and you can review them in Chapter 3, "O Canada! This is where most people spend the bulk of their time, to the jeopardy of most everything else.
No doubt the movement of your physical assets to Canada is time consuming. You have to make travel plans for yourself, your spouse, and your children whether you are going to fly or drive. There is also coordination of the visa applications for your spouse and children that can cause havoc at the border if not done correctly. Then there is packing your household goods, selecting a moving company, filling out all the requisite forms for Canada Border Services, and so on.
When you get down to your final destination, you have to coordinate the arrival of your moving truck with the closing on your house. Then there is unpacking and putting everything away. We offer some considerations in Chapter 4, "Moving Your Stuff. There is much work to be done in optimizing your tax situation before taking up tax residency in Canada.
If you choose not to do it, you can face unnecessary taxes and compliance issues that can be punishing. The Canada-U. Tax Treaty and the relevant provisions in the U.
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Internal Revenue Code and Canadian Income Tax Act are your protection from double and triple taxation in both countries. Obviously, a thorough understanding of these rules and their application to your situation is the key. This item is out of stock. People who viewed this item also viewed.
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Exit tax and what do I do with my US investment accounts
Ignore and log out. Related content. Tax returns and compliance When are tax returns due? That is, what is the tax return due date? What is the tax year-end? What are the compliance requirements for tax returns in Canada? Residents Individuals resident in Canada are subject to Canadian income tax on their worldwide income, regardless of where it is earned or where it is received, and they are eligible for a potential credit or deduction for foreign taxes paid on income derived from foreign sources. Tax rates What are the current income tax rates for residents and non-residents in Canada?
Residents Federal tax Federal tax is calculated by applying a progressive tax rate schedule to taxable income. Residence rules For the purposes of taxation, how is an individual defined as a resident of Canada? Married couples file tax returns as separate individuals.
Termination of residence Are there any tax compliance requirements when entering or leaving Canada? Departure tax Individuals are deemed by the Income Tax Act Canada to dispose of most property upon ceasing Canadian residency. What if the assignee comes back for a trip after residency has terminated? Communication between immigration and taxation authorities Do the immigration authorities in Canada provide information to the local taxation authorities regarding when a person enters or leaves Canada?
Not directly, but information may be shared between the two groups.
An assignee must file a Canadian tax return if: tax is owed a refund is to be claimed because too much tax was withheld or paid in the tax year. Economic employer approach Do the taxation authorities in Canada adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development OECD treaty? Types of taxable compensation What categories are subject to income tax in general situations?
Restricted Share Units, which are generally taxable on their vesting dates Restricted Stock Awards generally taxable on the date the employee has a legal right to the shares and enjoys all of the attributions of ownership i. Tax-exempt income Are there any areas of income that are exempt from taxation in Canada? The employee is required to be away from their principal residence and to be present at the special work site for at least 36 hours. Certain employer provided housing allowances cost of utilities The cost of utilities paid for employees is considered a taxable benefit.
Certain employer provided tax reimbursements The following are the usual methods of recognizing tax reimbursements paid by the employer: current-year gross-up current-year reimbursement 1-year rollover. Certain employer provided relocation reimbursements The reimbursement of most actual relocation expenses is generally not taxable. Home leave Home leave is considered a taxable benefit. Certain employer provided education costs The cost of education provided to an employee that is mainly for the benefit of the employer is not taxable to the employee.
Certain bonus payments A bonus in respect of non-Canadian employment is generally not subject to Canadian tax if paid before the individual becomes a resident of Canada, or after they cease to be resident in Canada. Certain interest subsidies If the employer provides a low-interest or interest-free loan to an individual, the individual is considered to have received a benefit from employment.
Certain auto allowances Reasonable automobile allowances calculated on a per kilometer basis that are paid to employees who use their personally owned motor vehicles for business purposes are not considered a taxable benefit to those employees if the allowances do not exceed the rates set for each year by CRA For , the rates are CAD58 cents per kilometer for the first 5, kilometers driven and CAD52 cents per kilometer driven after that. Expatriate concessions Are there any concessions made for expatriates in Canada?
Adjustment in tax cost basis An individual is deemed by the Income Tax Act Canada to have disposed of all of their assets other than Taxable Canadian Property and to have reacquired the same assets at their fair market value immediately before becoming a resident of Canada. Special work site exemption See also section titled Tax-Exempt Income section with respect to the special work site provision. Foreign Pension Plans Canada allows individuals who are temporarily working in Canada to continue to participate in qualifying foreign employer-sponsored pension plans or foreign Social Security Arrangements.
Salary earned from working abroad Is salary earned from working abroad taxed in Canada? If so, how? Taxation of investment income and capital gains Are investment income and capital gains taxed in Canada? Dividends, interest, and rental income Dividends and interest income are generally taxable in Canada as the income is received.
Gains from employee stock option exercises Stock option income is taxable in Canada if the individual is a resident when the options are exercised. The shares are qualifying shares generally common shares. The exercise price is not less than fair market value, at the time the options were granted, of the shares to be received on exercise. Foreign exchange gains and losses When non-Canadian property is sold or deemed to have been sold, generally the gain for Canadian tax purposes must be calculated by converting the net proceeds into Canadian Dollars on the closing date or the deemed closing date and by converting the cost into Canadian Dollars using the exchange rate as of the date the property was purchased or was deemed to have been purchased.
Principal residence gains and losses Capital gains arising on the disposition of a principal residence are generally not subject to tax with respect to the years it was owned and lived in by an individual, or by a spouse or child of that individual, while the individual was a resident of Canada. Capital losses Capital losses can be used to reduce capital gains incurred during the year to a balance of zero.
This term is defined in the Income Tax Act Canada and includes: real or immovable property located within Canada capital property, intangible property and inventory used in carrying on a business in Canada an interest in a private corporation, partnership or trust which derived more than 50 percent of its value directly or indirectly from real property or resource property or timber property located in Canada at any time during the 60 months period ending on the disposition or deemed disposition date of the interest.
Personal use items When a taxpayer disposes of personal-use property that has an adjusted cost base or proceeds of disposition of more than CAD1,, capital gains or losses may be recognized. Gifts There is no gift tax in Canada. Non-resident trusts Rules for non-resident trust expand the taxation of income earned by these trusts.
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Additional capital gains tax CGT issues and exceptions Are there capital gains tax exceptions in Canada? If so, please discuss. Deemed disposal and acquisition Where a taxpayer ceases to be resident in Canada at any particular time, the taxpayer is deemed by the Income Tax Act Canada to have disposed of certain capital properties owned immediately before departure for proceeds equal to their fair market value on the departure date.
A capital gains exemption of up to CAD, CAD1,, for the second and third categories listed below may be claimed against capital gains arising from the disposition, on or after 1 January of the following types of properties: qualified small business corporation shares qualified farm property qualified fishing property a reserve brought into income, from any of the above. General deductions from income What are the general deductions from income allowed in Canada?
Allowable deductions include the following. RRSP contributions that qualify under the Canadian Income Tax Act are deductible for any given year if they are contributed in that year or within 60 days after the end of that year and the total does not exceed the individual's contribution room for that year. Childcare expenses subject to certain limitations if they were incurred to allow the taxpayer and spouse to work, carry on business, attend school full-time or part-time, or to carry on grant-funded research.
In general, the lower net income including zero income spouse must claim the child care expense. Interest, carrying charges, and investment counsel fees related to the earning of taxable investment income.
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Non-reimbursed moving expenses to and from a qualifying relocation within Canada. Child support payments paid under a pre-1 May written agreement or court order. Periodic alimony payments made to a former spouse pursuant to a court order or written agreement. Tax reimbursement methods What are the tax reimbursement methods generally used by employers in Canada? The following are the usual methods of recognizing tax reimbursements paid by the employer: current-year gross-up current-year reimbursement 1-year rollover. There are three possible ways to calculate the instalment amounts: The first method is to have the total instalments, paid in four equal payments, equal the taxes that are estimated will be owing for the year on sources of income not subject to withholding tax at source that is, equal to the expected balance due amount at the end of the current year.
The Canadian in America: Real-Life Tax and Financial Insights Into Moving and Living in the U.S.
The third method is to have the March and June instalments equal to the total tax owing after source withholdings for the second prior year. The September and December instalments then have to make up the difference so that the total instalments paid for the year equal the amount determined in method two. General tax credits What are the general tax credits that may be claimed in Canada? Non-residents may only claim general tax credits for the following items, if relevant, unless 90 percent or more of their net income for the relevant calendar year is subject to Canadian income tax: Canada Pension Plan CPP or Quebec Pension Plan QPP contributions Employment Insurance premiums Donations made to a Canadian registered charity.
Sample tax calculation This calculation assumes a married taxpayer resident in Ontario, Canada with two minor children whose 3-year assignment begins 1 January and ends 31 December Other assumptions All earned income is attributable to local sources. Bonuses are paid at the end of each tax year, and accrue evenly throughout the year.
The company car is used for solely for private purposes and originally cost CAD25, The employee pays all of the operating expenses for the automobile The employee is a resident in Canada throughout the assignment. Tax treaties and totalization agreements are ignored for the purpose of this calculation.
Spouse has no income. Moving reimbursements are of the nature that they are considered non-taxable in Canada. Connect with us Find office locations kpmg. Want to do business with KPMG? Save, Curate and Share Save what resonates, curate a library of information, and share content with your network of contacts. Print friendly version.
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