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The basics of Canadian taxes

One of the many benefits of working offshore, aside from the lifestyle, is that many of these locations have very little to no income tax which can obviously have a huge impact on your bottom line.

For instance, in the Cayman Islands, there is no personal income tax at all.

In Bermuda, there is a payroll tax with an Employer and Employee portion. Employers have the option to deduct the full employee portion of payroll tax from employee’s pay (though some employers do choose to cover some or all of the employees portion).
The Employee portion is calculated using a marginal or progressive structure with rates as below (as of April 1, 2023):
$0 – $48,000 – 0.50%
$48,0001 – $96,000 – 9.25%
$96,001 – $200,000 – 10.00%
$200,001 – $500,000 – 11.50%

Canadian Taxes

We are often asked about tax implications for a Canadian living and working in Bermuda or the Cayman Islands. While this is certainly not intended to be a substitute for the professional advice that a specialized Accountant can offer, here’s a high level overview of some of the relevant issues to be aware of.

Non Residency

Canadians are taxed based on their residency status. In order to avoid being taxed by Canada on income earned in another country one generally needs to be able to qualify as a non-resident of Canada for tax purposes.

Primary or Significant Residential Ties

The Canada Customs and Revenue Agency (the CRA) looks at each case individually but in general, to be considered non-resident, an individual must cut what the CRA refers to as “significant residential ties” with Canada. These include maintaining a home in Canada for your own use and having a spouse or dependents in Canada.

You are generally able to maintain ownership of a residential property in Canada as long as it is not available for your own use. Some choose to maintain ownership and rent the property out to a third party. Rental income will be subject to taxes, so if you choose to keep your property it may be advisable to rent it out using a property management firm that can handle the day to day operations of the property, collect rental fees and make the proper tax remittances to the CRA on your behalf.

A legal spouse or common-law partner that remains in Canada would be considered a significant residential tie, as would those who may be considered dependants – which would effectively mean that any income earned abroad would be taxable here in Canada.

Secondary Residential Ties

The primary, significant ties above are the most important to address initially. Provided you are able to deal effectively with them, it’s time to move on to reducing the number of secondary ties. Examples are listed on the CRA website but include things like bank accounts, personal property and memberships. Secondary ties are looked at collectively so no one tie would likely cause someone to be viewed as a resident (as it would with the primary ties) but effort should be made to cut as many as possible.

For more information, please refer to the relevant section on the CRA website – determining your residency status

We’ve worked with hundreds of Canadians (and many from other parts of the world as well!) moving to these low tax environments and would be happy to answer questions and/or refer you to a tax specialist Accountant for professional advice.

Author: Jason Squires

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