Living in Bermuda: Escaping Canada and Embracing Bermuda
While the majority of articles on Escape Artist are written from the American perspective, I thought I would write a few words for the readers of Escape Artist from the perspective of your quiet neighbours from the North. I have been reading Escape Artist for several years now, and believe it’s now time to give back a bit to the site that helped me come to the conclusion that leaving one’s country permanently can be a great thing to do.
Why leave Canada? While we have a great standard of living, it comes at the expense of sky-high taxes.
I personally prefer a less invasive and therefore less expensive form of government and, since I’m no politician, I’m not in any real position to change the system.
That leaves two choices – endure it and stay, or, wave good-bye to the country of my birth. When the opportunity came to leave Canada, I embraced it wholeheartedly. (And let’s not forget the snow. I’m not a winter kind of person). For the past year, I have had the pleasure of calling myself an expat. I’m not yet an expat retiree, but trust me, I’m working on it.
Last December, I, along with my wife and dog, packed it all up and moved from the Snowy North to Beautiful Bermuda. Why Bermuda? There were many reasons, but most importantly, that’s where the job offer was. I hope to write quite a few articles about expat life in Bermuda in the coming months, and welcome your feedback on the articles.
From the expat point-of-view, one of the best advantages of being a Canadian (as compared to being American) is that it is much easier to shed one’s residence, and therefore, tax obligation. While there are many “tests” which the government uses to decide whether or not they still have a right to tax you as a resident, the challenge of losing Canadian tax residency can be simply solved by following the following golden rule:
Sell everything, close all accounts, and act as if you’re never coming back.
You can change your mind later, but for all intents and purposes, you have to make like you’re never coming back. (After a year away, I can tell you, I don’t plan to return to Canada except to visit family and friends maybe once a year!).
The CCRA, formerly known as Revenue Canada, provides quite a bit of documentation online, and there are several factors that are used to determine whether you have successfully extricated yourself or not.
I’m not a lawyer! But, one of my coworkers talked to a tax lawyer before he too left Canada, and it was recommended that expats DO NOT submit the NR73 form.
The lawyer explained that if you give CCRA the opportunity to deny your non-resident status, they are much more likely to do so than if you simply leave, declare that you have left Canada on your last tax return, and file no further returns. You are not legally required to fill out the NR73, so I will leave it up to you.
The increased scrutiny of the tax department of any country is not something many of us would want.
This is the Canadian expat’s tax bible. In this 8 page document is everything you need to legally escape the Canadian tax system. My favourite line is in Paragraph 2: “The term “resident” is not defined in the Income Tax Act.” So, it’s all a matter of interpretation! However, there are several major and minor factors that CCRA will take into account when determining residency status:
The Ties that Bind: Major Residential Ties
1. A House
2. A Spouse
You don’t have to sell your house, but it makes things easier.
If you can rent out the house for enough to cover mortgage and taxes then it’s certainly worth keeping. You will likely owe capital gains taxes when you sell the house, as you’re showing CCRA that you’re non-resident. This one was a shocker to me.
If you keep the house, make sure you lease it out to a third party at the going market rate, or better yet, hire a property management company to keep it rented out. If you can terminate the lease without significant notice to the lessor, this could be contested by CCRA.
The Spouse And The Kids
Very simple – bring them with you! IT-221 says that CCRA will deem you to have acquired non-resident status on the latest of
The date you left Canada
The date your dependents left Canada
The date you acquire new residency
So if possible, bring your entire family with you to your new country. Sending back money to Canada to support a family is most certainly a “Significant Tie”.
The Minor Ties
There are ten Minor Ties as defined by CCRA for determining your ties to the System. Taken individually, they won’t be a problem, but they can add up to residency if you’re not careful:
When you’re leaving, have a garage sale! Sell everything you won’t be taking with you, or give it away. Don’t put things in a storage locker. Remember – you aren’t coming back.
Out with the golf club memberships, and change that lodge affiliation to the local chapter.
This is a wide category. Obviously you can’t keep your Canadian job, but CCRA also frowns upon keeping Canadian bank accounts and credit cards. Even keeping an RRSP puts a little tick mark beside your name.
But why would you want to keep your money in Canada? Apart from the increasing value of the Loonie compared to the greenback, there isn’t much reason to keep cash in Canada. You get a T5 if you get significant interest income which you have to claim, and the advantage of tax-free growth inside your RRSP is effectively the same as keeping your investments in a low- or no-tax jurisdiction. You will take a significant hit withdrawing your RRSP funds, but you would pay tax on withdrawals inside Canada anyway. Talking to a tax accountant is mandatory if you have all but the smallest RRSP.
As regards the declining value of the US dollar, remember, there are other strong currencies out there. Mutual funds are available that are denominated in the Euro and in Pounds. Once you leave Canada, your options are wide open.
Landed Immigrant Status Or Canadian Work Permits
Not an issue for Canadians by birth, but could be an issue for others. I’m afraid I know little about this.
Hospitalization And Medical Insurance
Every province in Canada has its own medical insurance system and being originally from Ontario, I know OHIP. It’s important to know that once you leave Canada and lose OHIP coverage, there is a 6 month waiting period should you return to Canada. This may be a significant issue for those with health issues.
I have mixed feelings on this one. I chose to keep my Ontario Drivers License because the Bermuda driver’s license is not a particularly advanced (and therefore secure) identity card. While visiting family last summer, I tried to use the Bermuda license as id for getting into the local casino. When the laughter died down, I was politely asked if I had any other ID. Luckily, I still had my Ontario Driver’s license.
If you move to a country with a stronger ID, this may not be an issue for you.
A Car Or Truck
You’re leaving, so why would you keep your car? Unless it’s a true collector’s item, sell it. Even if you do decide to move back to Canada, the car will be several years older by then. Sell your car.
Cottages can have more sentimental value than even your home. One of my closest friends back in Canada has a cottage that was passed down for several generations. I can understand why you wouldn’t want to part with a cottage. If this is your only minor tie to Canada, you should be fine. But to be safe, consider renting it out.
A Canadian Passport
I grumble about this one being on the list – I don’t plan on ever giving up my Canadian passport. No offence to Americans, but I believe Canadians get a warmer welcome in most places around the world than just about any other country. And in my case, I have a work permit here in Bermuda, upon which my residency depends. I will cover this in a future article, but getting Bermudian citizenship and therefore a Bermudian passport is all but impossible. So I’m keeping my passport.
Union Or Professional Memberships
Another tricky one. Many people will have pensions tied to memberships in unions or professional organizations. Again, this is a minor tie, so if you have to keep it for a good reason, you will not likely run into any problems.
There are also a few extras that CCRA throws into the IT221, such as maintaining a mailing address, a phone directory listing, even having Canadian magazine subscriptions. Obviously, the government needs to feed itself, and so CCRA will do its absolute best to keep you a resident in Canada. The bulletin also specifies things that CCRA expects to see if you return – such as establishing residential ties in your new home. For that reason, keep copies of bills, and assuming you’re renting, a copy of your lease. If you ever decide to return, having these documents will help to prove your residency in another country.
Escaping from Canada’s tax system can be quite painless as long as you follow the points outlined in this article. If you are able to follow the golden rule: Sell everything, close all accounts, and act as if you’re never coming back, you should have no problems. Talking to a tax accountant and/or lawyer is always recommended, as everybody’s situation is a little different.
The opportunities for living and working outside Canada are practically endless. This crazy little country has more than a few stories to tell, and there are excellent job opportunities for people in the insurance and IT fields. If you’re able to broaden your horizons by moving, by all means, do so!
Excerpted from “How I Escaped The Greedy Hands Of The Great White North: Escaping Canada” in Escape From America Magazine, Issue 65.
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