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Canadian Sample Tax Calculation

Sample Calculation - Canadian Non-Resident Taxes 

The calculations shown below are for illustration purposes only.  Depending on your own personal situation, the calculation can be quite complex and you should seek professional assistance.


Example 1

John Doe has pension income of $3000/month, an RRSP of $500,000, a home valued at $400,000 and personal assets of $100,000 (cash, vehicles, etc).

John decides to retire and withdraw his RRSP (converted to a RRIF)at the rate of 10% per year.  John's income would be $86,000 (year one).  At 35% tax rate (after allowances) – his taxes would be $30,100, leaving a net income of $55,900.

OR

John moves to Mexico and declares non-residency.  Because his home and personal assets are non-taxable on departure and his income will be pensions and RRIF payments (taxed at 15%), his situation becomes:

Assets $500,000 (House $400,000 and Personal Assets of $100,000)

John’s income would be $86,000 less $12,900 (15% withholding tax RE: Canada/Mexico Tax Treaty) resulting in a net income of $73,100.

As you can see, by moving to Mexico and become non-resident, John can set up in Mexico using the proceeds from the sale of his home in Canada and his net income would be higher by $17,200 per year ($344,000 over 20 years).

If John’s overall cost of living in Mexico was less, financially he would gain significantly as a non-resident.

Note:  This illustration is done on a “straight line” basis and assumes gains in the RRIF account. Off-sets, withdrawals and pensions remain fixed.  In reality there would be other considerations (gains in RRIF vary, pensions are indexed, etc.) but it does provide a general idea of the difference between resident -vs- non-resident taxation impact.

Example 2

John has his home, valued at $400,000, and assets of $100,000 but has invested all his money in two apartment blocks that net him an income of $86,000 per year.  By moving to Mexico and becoming a non-resident of Canada, the calculation would be the same.

Because his apartments are taxable Canadian property (TCP) and would not be subject to departure tax (they would be taxed when sold) and the net revenue taxed at 15%, his net income would be the same.

Note:  John would need to have the apartments managed by a Canadian resident who would be responsible for the withholding tax.  Again, the calculation is simplified for illustration purposes.

A decision on non-residency is a personal decision and should not be taken without professional advice.


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