Generally, you are an emigrant for income tax purposes if you meet all the following conditions:
Severing your residential ties with Canada means that you do not keep your main ties with Canada. This could be your case if:
If you leave Canada and keep residential ties in Canada, you are usually considered a factual resident, and not an emigrant. However, if you are also considered to be a resident of another country with which Canada has a tax treaty, you may be considered a deemed non-resident. Deemed non-residents are subject to the same rules as emigrants.
For more information on residential ties and residency status, go to Determining your residency status.
When do you become a non-resident?
When you leave Canada to settle in another country, you usually become a non-resident for income tax purposes on the latest of:
If you lived in another country before living in Canada and you leave Canada to resettle in that country, you usually become a non-resident on the date you leave Canada. This applies even if your spouse or common-law partner temporarily stays in Canada to dispose of your home.
For more information about your tax obligations, go to Non-residents of Canada.
What you need to do when you become an emigrant
If you still have bank accounts in Canada or amounts being paid to you from Canada, you are required to notify any Canadian payers and your financial institutions that you are no longer a resident of Canada.
Do you have to file a tax return?
Complete and send a Canadian tax return to the Canada Revenue Agency (CRA) if:
For more information, go to Do you have to file a return?.
Notes
If you determine that you do not have to file a return, you should let the CRA know the date you left Canada as soon as possible.
If you owned properties or goods when you left Canada you may have to report a capital gain.
Which income tax package should you use?
For the tax year that you leave Canada, use the income tax package for the province or territory where you resided on the date you left Canada.
If you were a resident of Quebec before you left Canada and you want information on filing a Quebec tax return, visit Revenu Québec.
When and where to send your tax return
To find out when you have to file your return, go to Filing due dates.
To find out where to mail your return, go to Where to mail your documents.
Departure tax
When you leave Canada, you are considered to have sold certain types of property (even if you have not sold them) at their fair market value (FMV) and to have immediately reacquired them for the same amount. This is called a deemed disposition and you may have to report a capital gain (also known as departure tax).
Your property could include the following: shares, jewelry, paintings, or a collection.
For more information, go to Dispositions of property.
Note
If the FMV of all the property you owned when you left Canada was more than $25,000, complete Form T1161, List of Properties by an Emigrant of Canada.
How to complete your tax return
Date of departure from Canada
Enter your date of departure from Canada on page 1 of your return in the area “Information about your residence”.
Information about your spouse or common-law partner
Enter your spouse or common-law partner’s net world income for 2019. Net world income is the net income from all sources both inside and outside of Canada. Underneath, enter your spouse or common-law partner’s net world income for the period you were a resident of Canada. If applicable also enter the universal child care benefit (UCCB) lump-sum payment included on line 11700, and the amount of UCCB repayment included on line 21300 of their return.
What income do you have to report?
Part of the tax year that you WERE a resident of Canada
Report your world income (income from all sources, both inside and outside Canada) on your Canadian tax return.
Part of the tax year that you WERE NOT a resident of Canada
After you leave Canada, as a non-resident, you pay Canadian income tax only on your Canadian source income. However, only certain types of Canadian source income should be reported on your return while others are subject to non-resident withholding tax at source.
For more information on your tax obligations as a non-resident, go to Non-residents of Canada.
What deductions can you claim?
You can claim most deductions that apply to you. For more information, go to Deductions, credits, and expenses.
Moving expenses
Generally, you cannot deduct moving expenses for a move out of Canada.
However, you may be able to deduct your moving expenses if both items listed below apply:
For more information, go to Line 21900 – Moving expenses.
What credits can you claim?
Federal non‑refundable tax credits (step 5 of your return)
The federal non-refundable tax credits you can claim are limited to the total of the following amounts:
Provincial or territorial non‑refundable tax credits (Form 428)
The amount of certain provincial or territorial non‑refundable tax credits you can claim may also be limited.
Generally, the rules to calculate your provincial or territorial non‑refundable tax credits are the same as those used for the corresponding federal non‑refundable tax credits. However, the amounts used to calculate most provincial or territorial non‑refundable tax credits are different from the corresponding federal credits.
Overpayment of Canada Pension Plan (CPP) or Quebec Pension Plan (QPP)
If you were not living in Quebec before you left Canada, go to Line 44800 – CPP overpayment.
If you were living in Quebec, any overpayment of CPP or QPP contribution will be refunded or used to reduce your balance on your federal tax return. Claim on line 30800 of the return, in dollars and cents, the total of the CPP or QPP contributions shown in boxes 16 and 17 of your T4 slips, and the Canada Revenue Agency will calculate the overpayment for you.
You can also calculate your overpayment by using Form RC381, Inter-Provincial Calculation for CPP and QPP Contributions and Overpayments for 2019. As a Quebec emigrant, you claim the amount of your overpayment, if any, on your return by writing code 5552 above line 43700, and entering the amount of the overpayment to the right of this code. Add this amount to your total credits at line 48200.
Federal refundable tax credit (Page 7 of your return)
If you were an eligible educator, you can claim the eligible educator school supply tax credit as long as it applies to the part of the year that you were a resident of Canada.
In addition, you can claim this credits in full for eligible supplies expenses paid in 2019 that relate to the part of the year that you were not a resident of Canada if the Canadian source income you are reporting for the part of the year that you were not a resident of Canada represents 90% or more of your net world income for that part of the year.
However, the total amount you can claim cannot be more than the amount you could have claimed if you were a resident of Canada for the whole year.
Provincial or territorial tax credits (Form 479)
Generally, you are not entitled to these credits unless you were a resident of Canada on December 31.
Which forms to use to calculate your tax and credits
To calculate your tax and credits, complete the return and Form 428 for the province or territory where you resided on the date you left Canada.
If you were a resident of Quebec before you left Canada, visit Revenu Québec.
After you leave Canada
Electing under section 217 of the Income Tax Act
If you receive certain types of income from Canada after you leave, the Canadian payer has to withhold non‑resident tax on the income and send it to the Canada Revenue Agency. This tax withheld is usually your final tax obligation to Canada on the income. However, you could benefit from choosing to elect under section 217 to include this income on your return.
For more information, go to Electing under section 217.
Tax-Free Savings Account (TFSA), Home Buyers’ Plan (HBP), and Lifelong Learning Plan (LLP)
If you hold a TFSA when you leave Canada, you can keep it and continue to benefit from the exemption from Canadian tax on investment income and withdrawals. However, you cannot contribute to your TFSA while you are a non-resident of Canada, and your contribution room will not increase. For more information, go to Tax-Free Savings Account (TFSA).
If you participate in the HBP or the LLP and leave Canada, go to Home Buyers’ Plan (HBP) or to Lifelong Learning Plan (LLP), for the special rules that apply.
Receiving benefits and credits
It’s important that you tell the Canada Revenue Agency (CRA) the date you leave Canada. Generally, as a non-resident, you are not eligible to receive:
If you receive such credits or payments after you leave Canada, contact the CRA immediately.
Forms and publications
Related topics
It’s easy for Canadian small business owners to get caught up in payroll complexity. According to a recent government report, approximately 90,000
small businesses shut down every year in Canada — as a result, effectively managing payroll is critical to ensure long-term business success. We’ve put
together a guide the tells you all you need to know in order to effectively calculate payroll tax in Canada.
So let’s dive in: What are your specific obligations as an employer? What steps are required for calculating payroll tax Canada? Do you need a bookkeeper or
accountant to ensure payroll accuracy? Let’s start with a quick definition.
What is payroll?
Your payroll lists all employees, their wages and the deductions taken from those wages. Most small businesses now use in-house software or cloud-based
applications to streamline the process of paying staff and ensure deductions are correctly calculated.
Deductions cover everything your business is required to remit. This includes employment insurance (EI), Canada Pension Plan (CPP) contributions along
with federal and provincial income tax. For EI and CPP, deductions follow specific contribution frameworks, while taxes follow schedules set out by the
federal government and each individual province. Deduction amounts vary year-to-year and depending on your employees’ primary place of residence.
Your obligations to employees
As an employer, you have three payroll obligations to employees:
1) Paying Wages
Employees must be paid on a recurring schedule — typically, businesses opt for either monthly or bi-weekly payments.
Wondering how to pay employee salaries? Some SMBs still use physical checks, but this requires manual tracking and entry into payroll systems.
Many now opt for direct deposit, which sends wages directly to staff bank accounts. Setting up direct deposit requires you to create a business account
with the bank of your choice and then collect employee banking data to ensure funds are sent to the correct accounts. You can choose transfer these funds
manually each pay period from your online banking portal, use a payroll system that integrates this function or pay a third-party provider to complete
this task.
2) Remitting Deductions
The Canadian Revenue Agency (CRA) requires you to collect specific deductions from employee pay:
-Employment Insurance (EI)
-Canada Pension Plan (CPP)
-Federal and Provincial Income Tax
3) Ensuring Compliance
In addition to paying staff on a recurring schedule, the CRA typically requires small businesses to remit all “source deductions” — money taken from
employee wages — by the 15th of the month after staff are paid. You must also send T4 and T4A tax slips to employees by the last day of February of the
calendar year following the deduction period. For example, T4 slips for the 2019 calendar year must be sent out by February 29th, 2020.
When to get a payroll account
Do you need a payroll account with the CRA?
First, determine if you’re an employer. According to the CRA you’re considered an employer if you “pay salaries, wages (including advances),
bonuses, vacation pay, or tips to your employees”. You may also fall under the employer category if you provide specific taxable benefits to staff, such as
automobiles or spending allowances. Even if you have no employees or employ seasonal staff, you must still report a “nil remittance” once per
quarter.
Employers must register for a payroll program account with the CRA. To do so, you’ll need all employees’ Social Insurance Numbers (SIN) and have them
fill out form TD1 — which should be done within seven days of hiring.
Once you register for an account you’ll be provided with 15-digit payroll account number. The first nine digits are your unique “business number”. The
following two letters are the program code — RP for the payroll program — and the last four identify each payroll account your business has (0001, 0002,
etc.). Your payroll account number won’t change, and can be used to remit all deductions from employees.
Handling payroll deductions
The Canada Revenue Agency offers an online payroll deductions calculator to help small businesses confirm the amount of CPP, EI and income tax
deductions they are required to remit? The site makes it clear that any risks associated with using the calculator — such as supplying inaccurate
information — rest with small businesses.
The CRA also details when remittance amounts are due. According to its remittance threshold chart, if your average monthly withholding amount
(AMWA) is:
– Less than $25,000 —remittance is due on or before the 15th day of the month after you pay employees
– Less than $3000 — remittance is due on or before the 15th day following the end of each quarter
– Between $25,000 and $99,999.99 — for wages paid in the first 15 days of the month, remittance is due by the 25th day of the same month. For
wages paid after the 15th, remittance is due by the 10th day of the following month.
Calculating payroll tax Canada
How do you calculate payroll tax in Canada? Let’s start with EI and CPP
EI
Each year the government posts a list of maximum insurable earnings ($53,100 in 2019) and rates (1.62%). To calculate contributions, multiply
employee pay for the period by the EI rate — for example, $1000 x 0.0162 equals $16.20 deducted from employee wages. Employers are also responsible
to pay 1.4 times the contribution amount, meaning you’d need to supply $22.68 for a total of $38.88 per period. The list also includes employer and
employee maximum contribution amounts per year — if reached, you no longer need to collect and remit EI for that calendar year.
CPP
The CRA posts a similar list for CPP: In 2019, maximum insurable earnings are $57,400 less a $3500 basic exemption amount to give $53,900 in
maximum contributory earnings. Both employers and employees must contribute 5.10% up to a maximum of $2,748.90. Using our example above,
this means you need to multiply $1000 by 0.051, which equals $51 contributed from both employer and employee totaling $102 per pay period.
How to calculate payroll tax province by province
In addition to EI and CPP you must also deduct federal and provincial income tax from employee wages. According to 2019 federal tax rates, you must
deduct 15% on the first $47,630 of taxable income — in our example above this means $150 on $1000 in wages. No employer contribution is required.
In the same way employers have to worry about calculating sales tax differently in every Canadian province, a similar responsibility exists for
calculating payroll.
Each province also has its own tax rates, published as part of payroll deduction tables by the CRA. In Alberta, businesses must remit 10% in
provincial tax on annual taxable income from $0 to $131,220.00 — or $100 of $1000 in wages. If your business operates out of one province but you have
employees working in another, the CRA advises using the provincial tax bracket where employees typically live and work.
Getting help
Bookkeepers and certified professional accountants (CPAs) can help small businesses streamline payroll operations and reduce the risk of costly errors.
Best bet? Look for someone with small business payroll experience with the skills to create and manage payroll accounts, ensure accurate remittance and
stay up-to-date on any changes. It’s also a good idea to meet with your accountant regularly to ensure remittance is accurate and complete — even if
they’re the ones to make a mistake, your business is on the hook.
The bottom line
Success in small business means having a team you can rely on — and paying them on time, every time to earn their trust. But managing payroll for
Canadian SMBs can seem daunting, difficult and overwhelming. With our guide to calculating payroll tax in hand — and potentially some outside
assistance — you can meet payroll expectations, keep employees happy and ensure CRA compliance.
Copyright © 2022 Kads Consultancy. All Rights Reserved.
English
French
Spanish
Chinese (Simplified)