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Canadians Moving to Mexico

Canadian Travel SuitecaseCanadians Moving to Mexico - BEWARE!

CANADIANS:  

If you are living in Mexico and spend more than 6 months a year outside of Canada, one day out of the blue, you might receive a letter from the Canadian Government Tax department advising you that they have made the decision that you are a Non-resident of Canada for tax purposes, as of a prior date that they have determined.

Included in the letter will be a bill for taxes based on their assessment. As of the date they determined you ‘left Canada’, they will deem all your assets to have been sold and taxes payable to the Canadian Government accordingly. How would you like to receive the surprise Barry got recently in this regard (read note below)?

Barry (Canadian living full time in Mexico)
 

Hi Marie: 

Just wondered if you could put me in touch with an expert in Canadian taxes. I do have a couple of small British pensions which have been taxed both in GB and in Canada.   I was told quite correctly that if GB could have proof that I was a resident of Canada, the Brits would refund all back taxes and stop taking current taxes.- 

I had to write and get Canada to prove that. Instead they have made the decision that I am a non-resident of Canada and what is more, a non-resident since the day I left Canada in 2010. This means that my tax rate goes up 10% and I have to repay all refunds I have had since then. I cannot claim my wife, cannot claim medical expenses etc and I have to repay all. I just wanted to know if there is anything I could do about it. 

 

How Can You Protect Yourself?

When moving to a different country and culture, like Canadians moving to Mexico, there is a lot you need to know and understand to make a smooth transition in your move. We highly recommend taking the new Focus Fast-Track-to-Learning program to attend Seminars on ALL topics about moving to Mexico.

For Canadians, one of those topics is ‘Non-residency for Canadians’. This Seminar explains about the TWO tax systems in Canada and in particular, if you live outside Canada for more than 6 months a year, and remove yourself from your Primary ties, you may be eligible to ‘choose’ to go into the Non-resident tax system. Once a Non-resident for tax purposes, you no longer file a Canadian Tax return. Instead a 15% withholding tax is applied on your dividends, pensions, RRSPs, etc. and no taxes on capital gains (except real estate). There is a number of Primary and Secondary ties you need to learn about as well as how to set up your finances in a way to benefit you by further reducing your tax withholding (this topic is yet another topic covered by a similar Seminar).

Most Canadians moving to Mexico (even if not full time), would benefit greatly by taking the Focus Fast Track program just for these Seminars alone. We outline the issues and the process to keep you on the right side of the law. Let’s look at an example to see how Non-residency could make a difference to your financial benefit, or not.

Residency vs Non-residency

Below are a couple basic examples to demonstrate at what income it would be beneficial financially to become a Non-resident, and below what income, it doesn’t have any benefit at all.

In this simple first example below it shows a Canadian resident (who is a Snowbird but still resident of Canada), who has a total income of $100,000. They will pay approximately 30% taxes.

Income Source 

As Canadian Resident Snowbird 

Tax Rate 

CPP

$10,000

 

OAS

nil

 

Pension/RRIF

$40,000

 

Non Registered Investments

$50,000 

 

Total

$100,000

 

Less Tax (approx)

$30,000 

Tax Rate

Net After Tax

$70,000 

30% 

Net per Month

 $5,833

 

 

Taking the example above, and comparing to the tax rate if that same Canadian, becomes a Non-resident of Canada, shows that instead of 30% taxes, the tax rate will be only 7.5%, or to look at the net per month, the Non-resident will have an additional (almost $2000) per month (7708 - $5833). That is an extra $24,000 a year to put in their pocket or live a more enhanced lifestyle. Notice, that as a Non-resident they are no longer taxed on the Non Registered investments (no capital gains tax).

Income Source 

As Cdn Resident Snowbird 

 

As Non-Resident  

Tax Rate 

CPP

  $10,000

 

  $10,000

15%

OAS

      nil

 

        nil

 

Pension/RRIF

  $40,000

 

  $40,000

15%

Non Registered Investments

  $50,000 

 

  $50,000 

0%

Total

$100,000

 

$100,000

 

Less Tax (approx)

   $30,000 

Tax Rate

     $7,500 

Tax Rate

Net After Tax

   $70,000 

30% 

   $92,500 

7.5% 

Net per Month

      $5,833

 

     $7,708

 

 

In this simple example below, you will see that for an individual who makes a total of around $40,000 a year, it is not really beneficial financially for them to become a Non-resident of Canada for tax purposes. They can still become a resident of Mexico, but their primarily residency would be Canada, whether in a house owned or rented, and they would continue to file income tax each year.

Income Source 

LOWER INCOME  

As Cdn Taxable Resident or Snowbird 

 

As Non-Resident -Canadian sourced income  

Tax Rate 

CPP

  $11,220

 

  $11,220

15%

OAS

       5,220

 

       5,220

15%

Pension/RRIF

     24,000

 

  $24,000

15%

Non Registered Investments

          0.00 

 

         0.00 

0%

Total

$   40.440

 

$   40,440

 

Less Tax (approx)

        5,266 

Average                        Tax Rate

        6,066 

Average                        Tax Rate

Net After Tax

   $35,174 

13% 

   $34,374 

15% 

Net per Month

      $2,931

 

     $2,865

 


 

What if the Canadian Government Declares You Non-Resident

But what if you do not wish to become a Non-resident of Canada? If you do nothing but move to Mexico, and continue to file and pay your taxes each year, it should be clear that you are intending to stay in the regular tax system as a Canadian resident. RIGHT?    Maybe not…  There are Primary and Secondary ties to consider as well as length of time each year out of Canada.

So, almost even more important than learning how to become a Non-resident of Canada by choice, is if your desire is to stay a Resident of Canada, to make sure you keep sufficient ties so that the government does not make the decision ‘for you’ that you are a Non-resident, without any communication or consultation with you in advance; just a bill in the mail. Once they have made that decision for you, it becomes quite a complication to try and undo the damage. It has only been in the last few years that these incidents of the government deciding for you have become an issue, at least to Canadians moving to Mexico.

So now, during our talk on Non-Residency, we also alert you how to set yourself up if you DO NOT wish to become a Non-resident of Canada. It is easy when you know how and Focus shows you the way.

By attending the new Focus Fast-Track-to-Learning program you will be armed with all the knowledge and understanding on how to make the move smoothly and stay out of trouble, and have a lot of fun in the learning process. We invite you to join us.

 

 


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