Mark Holthe 0:05
ANNOUNCER. This episode of the Canadian immigration podcast is sponsored by the Canadian immigration Institute, one of the best sources of video content on Canadian immigration to help you navigate your way through the Canadian immigration process. Head on over to the YouTube channel, where there's tons of video content, and you can join mark yes myself in a number of live video streams, Q and A's all designed to help you navigate your way through this crazy Canadian immigration process. When you're done there, like and subscribe and then head on over to the Canadian Immigration institute.com where you can find all those awesome DIY courses that I've been talking about. Thank you, Canadian immigration Institute. You are the sponsor of this amazing little podcast. You
Intro 1:05
i The Canadian immigration process can be complex and frustrating. With the Canadian Immigration Department making it virtually impossible to speak to an officer. There are few places to turn to for trusted information. The Canadian immigration podcast was created to fill this void by offering the latest on immigration law, policy and practice. Please welcome ex immigration officer and Canadian immigration lawyer Mark Holthe, as he is joined by industry leaders across Canada sharing insight to help you along your way.
Mark Holthe 1:52
Welcome back to another edition of the Canadian immigration podcast. This is episode 179 and it's a special edition. I have a new guest joining me, Sonia, how you doing today?
Sonia 2:03
I'm very good. Thank you. Thanks so much for having me. Mark. How are you?
Mark Holthe 2:07
You bet? Really good, really good. And it's Sonia dogina,
Sonia 2:12
correct.
Mark Holthe 2:12
Close. Okay, good,
Sonia 2:14
yeah. That was right. Bang on.
Mark Holthe 2:16
Awesome. I know when I ask people to pronounce my name, they usually say Holthe, and so Holthe is the pronunciation. But that's the fun part of doing these podcasts, especially when you control your own podcast. You know you can do whatever you want, and it's great. I'm really happy that you're here to join me, because this topic is something that I've been getting a lot of since, what I would call Trump 2.0 and with Trump two point 1.0 we had a lot of people that said they were intending on moving to Canada after the election, and never really did, but this time, as you are very much aware, which probably drove a lot of their decision making in terms of writing the book, right Here, your move to Canada, there's a lot of people that are thinking, hey, I'm going to make this happen. And from an immigration perspective, I'm seeing it all the time. In fact, the beginning of 2026 well, even 2025 things really took off. And I would say probably 30% of my overall consultations were with people resident in the US, most of them US citizens. But the question always came up for me and and I know it's it's perfectly within your wheelhouse is the tax implications of moving to Canada. And obviously, when people are interested in knowing and trying to judge and and factor in all of the the loose ends that they need to take into consideration with any move, moving and relocating from one country to another, whether that's temporarily or permanently, which is for many of my clients, they can't ignore the implications of what they're doing from a tax perspective. So Sonia, you've been you're working with Raymond James right now as a cross border tax consultant. Why don't you tell us a little bit about yourself and your background?
Sonia 4:08
Sure. So yeah, my name is Sonia dalgina. Actually interesting story. My family immigrated to Canada from Russia, and they, the Canadian government, spelled our name in English, and they added the you to make it, I guess, more Francophone. So that is that explains why my last name is spelled a little bit silly, but there's actually no you pronunciation. So yeah, a little immigration story. So yeah, I moved to Canada when I was really young. Decided to go into tax after graduating with my bachelor's of accounting, I started working at a big four tax firm, and I really just fell in love with the cross border space. I had some exposure to corporate tax matters working for large multinationals, but I just found it a lot more interesting working with individuals and helping people navigate all the. Complexities, mainly moving between Canada and the US and yeah, so I worked up until the manager level in the big four, and then moved over into the wealth management space as a cross border tax consultant. So now my job is just to help with tax planning, tax consulting for people moving in and out of Canada, including the US. And interestingly, you mentioned Trump 2.0 and how it maybe drove us to make the decision to write the book. But actually we started writing, we came up with the decision to write this book, my co author and I in summer of 2024 so before a current US president was elected. And then it just so happened that, you know what transpired, and now we have a ton of demand in terms of people moving from US to Canada. So you could say the book came out at a good time. So yes, I co authored the book, your move to Canada, all about the financial and tax implications of moving from the US to Canada.
Mark Holthe 6:00
Perfect. And, you know, as I think about some of the scenarios, some people that are listening are going to say, Well, is this useful for me? You know, what are the examples? I guess that you have most common examples of individuals that would really be seeking your advice and your assistance with this whole area,
Sonia 6:20
yeah. So a lot of what we're seeing recently is with the recent bill c3 that passed back in December. There's been a big influx of Americans who are now Canadian citizens by law due to the passage of this bill, which which removed generational limits when getting Canadian Citizenship by Descent. So we're sealing seeing a lot of that, a lot of US citizens. Maybe their spouse is not a Canadian citizen, but they're able to sponsor them to get PR and then they move, you know, their whole family over, so they're called Lost Canadians. And then we're seeing a lot of health care workers too, you know, especially here in BC, through the provincial nominee program, so a lot of registered nurses and physicians, so I'm seeing a lot of that. And then also a lot of Canadians who are returning home. Returning home, back to Canada, was always part of the long term plan. So they're coming over, and then maybe what you see with these folks are people who are now wanting to sponsor their spouse who is just an American citizen, and then they're moving back, you know, for retirement or to be closer to family, and it just aligns with where they want to be in life.
Mark Holthe 7:28
Yeah, yeah, absolutely. And, you know, within our practice, we see people across all the whole spectrum of life. So we have young, married kids who decide they're going to come and live in Canada. Maybe the Canadian went to school down there. So they come back and they're not really in this realm. They don't really have too much to worry about or stress about when you haven't even had a job yet. You don't have all of the retirement stuff in place, and so, you know. So that's relatively, relatively straightforward. My son being one, so he just finished marrying American and come back up. But I just had a meeting with someone else. Well, I could use another example. My brother, who just his soon to be wife, is from the States, and they're having these exact discussions. So that whole family relationship thing is one that drives it a lot, but you hit on the two that we see more often than any the effects of Bill c3. Obviously, people are like, whoa, wait a minute. I'm a Canadian. Yep, you are. So let's, let's apply for proof. Okay, well, how soon can I move? And then, inevitably, it's the tax, you know, implications. And how does it work, if my company transfers me, like, do I have to be hired there? And then what does that mean for, you know, for 1k and all the stuff in the US that they're trying to deal with. And just, it's interesting. Sonia, I had to see three related consults immediately before recording this with you, and one of them said, my, my taxes and my, my investment advisors told me that if I moved to the US, moved to Canada, that they they couldn't do like they couldn't continue on making investments for me in some in some realms. And I'm like, Well, okay, that's totally new for me. So all of this, and including the the Canadians that were down there and and decided when I'm going to come back and I'm going to bring my spouse with me. So maybe they had moved down there for whatever purpose, school or work, and stayed and found their spouse and and married an American, and now they're looking at coming back to Canada, and are just wondering how that's going to impact on their whole you know, their their retirement and their investments in particular, and obviously tax implications we have treated these with between Canada and the US, but boy, that they're the complexities of what happens. You have to really do it right and be very proactive, otherwise you're gonna get burned. And so it's Yeah, so it's really good. So I'm looking forward to Flushing all of this out with you a little bit with with you Sonia. And you know, when someone comes to you right at the beginning, like, what's the first step? Like, where do you start?
Sonia 9:58
I think the first thing. We want to nail down is tax residency, and because there's really a common misconception a lot of the time, people think that just because they're not permanent residents, yet, once they move to Canada, that they're not tax residents. And it's really important to know that tax residency and for Yeah, tax purposes and residency for your immigration purposes are generally completely separate. So people have this misconception that, oh, I'm moving to Canada on a work visa. I'm not. I don't have my PR so I don't have any Canadian tax implications. But that's not correct, because Canada will tax you based on worldwide income once you become a tax resident, and if you have foreign assets, foreign corporations, foreign trusts, there's all these disclosures that may be required, and then also you just have to report all of your worldwide income on a Canadian tax return, so not knowing that can expose you to a lot of taxes and penalties. So I talk to people about, okay, when do you actually plan to move to Canada, and let's try to nail down what this date will be. And, you know, make sure that you understand that you are a tax resident, even if you're moving on a work visa. And based on that, we can kind of move backwards to say, Okay, what's going to happen with your investments? Do you have any bonuses, or were you planning on cashing out your retirement account. Can we maybe do this before you become a Canadian tax resident? Otherwise, you're bringing things into Canada's tax net. Maybe you have some structures that are not very efficient for a Canadian tax perspective, like the US LLC or US revocable living trust. Does it make sense to maybe wind those structures down? So really, tax residency is the starting point, and just knowing that it is completely separate from your permanent residency. So who is a tax resident Canada? Will look at if you have established primary and secondary ties to Canada, generally primary ties, or do you have a home in Canada? And it doesn't have to be something that you own, it could be something leased or rented. Is your spouse here in Canada? Do you have dependent children? And then other secondary ties? You know, the big one is intention? Is your intention to move to Canada for the foreseeable future? Are you going to get provincial health care coverage, a driver's license, your personal belongings? Generally, if you know, you will establish those ties. Once you move to Canada, you'll, for the most part, become a tax resident as of the day you physically arrive here, irrespective of your immigration status.
Mark Holthe 12:27
And that's a good point. So within immigration, we deal with intention all the time. So just like for tax purposes, you know you're coming to live in Canada temporarily. Do you have an intention of returning home when your temporary status has expired? That's a big question they ask. So there's this element of subjective intent that's overlaid by objective intent. So you may say, and think in your head, yeah, I'm temporary, but you've sold your home in your home country. You have no employment there anymore. You've got a new job in Canada. Your spouse is Canadian, and you're saying, Yeah, I'm just here temporarily. Well, under immigration law, there's the concept of a dual intent, so you can have an intention to be temporary and permanent. But I'm curious how, from a tax perspective, you said, demonstrating intention. So what do they look at? You know, obviously there's the objective elements like you identified. But how do they get inside someone's head in terms of tax or do they even care?
Sonia 13:27
Yeah, I'd say that intention isn't necessarily the biggest driver. What I will say is, okay, let's say someone is moving to Canada temporarily. Do they have a position to say that they're a non resident of Canada? Well, potentially. But if you establish residential ties in Canada, you have a home here. How can you say you're a non resident to Canada? Well, at that point, you have to look at tax treaties. For example, we can use the example of someone moving from the US. So if Canada us have a tax treaty, you've established Canadian residency. You know, the primary ties, which are the stronger ones than intent, such as the home and the spouse, will generally make you a tax resident, full stops. And then you could look at, okay, do I have ties closer to the US than I do in Canada? And do I spend more time in Canada? If that's the case, if you still have your home remaining in the US, only then can you potentially use the Canada US tax treaty to say, Okay, I'm actually going to be a non resident of Canada for tax purposes, rather a resident of the US. So you have to go through a number of tests under the treaty. The first one is, where is your permanent home? If you have a home in both countries, you go to the next test, which is center of vital interests. So that is where we look at, okay, where are your professional memberships? Where do you? Where is your family, where are your economic ties, where is your job? And you really would have to demonstrate that that is way closer to the US. And if that that treaty tiebreaker test is in conclusion. So then you would go to the habitual abode. Where do you actually live? And where do you spend more time? So if people want to stay out of Canadian tax residency, they have to really prove that their ties are closer to the other country. And for the most part, people get the advice to stay under 183 days in Canada, because it's really hard to argue that your ties are closer to another country if you live here for the entire year, and, you know, more than half the year, so that is kind of the way that you can get out of tax residency. But let's say you're moving from a country that Canada doesn't have a tax treaty with, then it's then you can't really use the residency provision to tie break you out of Canadian tax residency.
Mark Holthe 15:45
Okay, that's interesting. Okay, I want to dig in just a little bit deeper, just for my own personal understanding. And I'm sure those that are listening have the same, you know, questions. There's this perception. I've never looked at it. I mean, I just, I'd make it an assumption that you're taxed higher in Canada than you are in the US. So for the same employable income, I know there's other provisions that probably can get it on the back end versus the front end, but for generally speaking, there's perception that, oh, no, I do not want to be taxed under you know the Canadian tax provisions, I'd rather be taxed under the US, because I'm not going to pay as much. Is that the case?
Sonia 16:21
Well, it's interesting, because if you strictly look at income tax rates, it could be the case. Because in Canada, we don't really have any tax haven provinces, necessarily. Maybe you know, some of the prairie provinces are a little bit less than, say, Quebec or the Atlantic provinces. So just from an income tax perspective, yes, it could be higher, especially since in the US, you have the ability to file jointly. And then there's also states that have no state income tax.
Mark Holthe 16:49
That's one that
Sonia 16:50
are
Sonia 16:50
always caution, yeah, I always caution people that we can't just look at the cost of taxes, because we have to look at what are these taxes paying for. In Canada, we have universal health care in the US. You only you know some very lucky folks, universally mediocre health care plan. Yeah, right, excellent health care plan. They don't have big co pays. They don't have big deductibles or out of pocket costs in that case, yeah, their costs may be cheaper in the US, but that's not the case for a lot of people. So and then also, property taxes are often higher in the US.
Sonia 17:22
So
Sonia 17:23
once you add it all together, like health care costs plus interest tax plus property tax, then it's not necessarily obvious that it's actually a lot more expensive in Canada.
Mark Holthe 17:33
Okay? So someone, one of these cohorts of people that we've been discussing, decides, Okay, I'm going to Canada. So when is the best time to start talking with you about this stuff?
Sonia 17:46
Great question. Generally, at least a year or two in advance of a move is ideal, just because you want to be able to do proper planning, you don't want to be rushed to do anything. For example, let's say that you had the example of your of one of your clients who was told by their US brokerage that they can't manage their investments anymore. A lot of assets can be moved in kind like stocks or ETFs, so you don't have to trigger capital gains. What if someone has a lot of mutual funds that they need to sell? You know that could trigger a big gain, or maybe it's just poor market timing to sell. So just not being rushed to make these decisions, by having that year and year year to headway is really helpful. And then, of course, yeah, just being able to make the connections with the right professionals, the right financial advisor, the right tax accountant, the right lawyer that can take time to establish those relationships. So, yeah, giving yourself as much time as possible to start having these planning discussions is ideal.
Mark Holthe 18:48
Interesting. So back on the topic of Canadian tax residents and the actual what they're being taxed, there's, seems like there's a little bit of a misconception as to, well, I'm earning rental income in the US. It's going into my US bank account. It's not entering Canada. I'm not bringing it with me. So I'm here, whether it's temporary or permanent residence. There's this misconception that maybe it's not so relevant for tax purposes. And we, I think generally, there's an understanding that the US taxes on citizenship and not necessarily residency. Now this is at a very elementary level of understanding. So no matter where you live, who cares, we're still going to tax you. Kind of is like this mentality, I think that people have. And so on the Canadian side, they're like, Well, you know, if Canada taxes on residency, well, I'm I'm not earning any income in Canada other than my employment income. So how do you explain that to people to help them understand?
Sonia 19:46
Yes, so it's really as simple as Canada will tax you on worldwide income. It doesn't matter whether it never hits a Canadian bank account worldwide income. So if you have a rental property and you're earning rent. Till income, if you have interest in a foreign bank account or dividends, if you don't get any Canadian tax slips, if you are a Canadian tax resident, you have to report everything. Now, does that mean you're subject to double taxation? Because the other country may tax that income too? No, not necessarily. You have the ability to claim foreign tax credits in Canada. So to the extent that you pay foreign taxes on that foreign income, you can get a credit for that in Canada for the most part. But because Canadian tax rates are often higher, it may result in you still have to pay the difference to the CRA so that is something that's really important to consider if a lot of people weren't aware of this, you know, they had no idea and they had foreign income abroad. I always tell people to look into the voluntary disclosure program that the CRA has if they're in this situation. Essentially, you don't want to be in the situation where the CRA tells you that they found out that you have foreign income, because what people also need to be aware of is Canada has reciprocal agreements to exchange financial implications with most countries in the world. So even if there isn't a tax treaty, there still might be an agreement to share financial information. So sure, you might not. You might get away with not reporting it for a year or two, but you just don't want to be in the position where many years down the line, you get a nasty letter from the CRA so you know, the voluntary disclosure program is a way that you can come forward and correct your filings, pay whatever taxes you missed, and then apply for penalty relief, because the penalties can be substantial if you haven't been reporting your income And there's underpayment of taxes. And then that brings me to this form called T 1135 which is very common for immigrants of Canada. It's a foreign asset disclosure form. So a lot of people ask, Oh, am I being taxed extra just because it's foreign income? Is there a wealth tax? So No, there's nothing like that, but you have a requirement to disclose your foreign assets if they exceed the cost basis of 100,000 Canadian dollars at any point in the year. Now, something to touch on. Another misconception is the Forum says it's foreign asset disclosure form for specified foreign property. So every single Canadian who files a tax return, they ask you a question, do you have more than $100,000 of specified foreign property? Foreign property? And people think foreign property? I don't have any foreign property, but property is not just real estate. Property also includes bank accounts interest in foreign life insurance or foreign trusts or stocks in non Canadian corporations.
Mark Holthe 22:39
Yeah, I was gonna ask about global investment funds and things like that.
Sonia 22:42
Yeah.
Sonia 22:43
So that all has to be disclosed. There are penalties of up to $2,500 per year if that form isn't filed or if it's filed late, but you get a first year exemption for people who are moving to Canada for the very first time in their life.
Mark Holthe 22:59
Okay, interesting. You know, when I think of the US and Canada from an immigration perspective, they share everything. And then that leads me, my kids are all grown now, but I remember a Robert Munch book called We share everything. And essentially, it was about some kids who traded everything all the way down to their clothes and you name it. And you know, from to a large extent, that's Canada and US. So there's no secrets. Like people who think that, you know, maybe it's not going to come to the attention, but for someone who knows that, they are likely going to be considered a Canadian tax resident, how do they notify CRA like, how do you start that process to let them know you're a tax resident?
Sonia 23:38
Yeah. So it's actually quite simple. It's just on your Canadian tax return for the year that you established residency. There is a section on everyone's tax return where you indicate the date you either moved to Canada and became a resident or ceased Canadian tax residency. So once you file that tax return, you're going to get your Social Insurance Number. You electronically file it. That is how the CRA will get that. But before you do that, and you know, I'm sure you advise people on this as well, get your Social Insurance Number. Once you get your work permit or citizenship, you can apply for that online, even before you move. And then that, that's like your equivalent of a social security number. And then that's needed for, you know, opening bank accounts and things like that.
Mark Holthe 24:20
Okay, but
Sonia 24:20
ultimately, you notify the CRA through the tax return. You don't have to make any other declaration before you file your tax return for the year
Mark Holthe 24:27
you move. I know we talked about this before, but like from a timing, once again, a tax timing perspective, so can you lay out some of the benefits of doing it in advance. And some of the scenarios where, if people think a little bit ahead and are a little bit more proactive, they can maybe save themselves a little bit, because that's really what we're talking about here, is, is not, you know, not being required to pay, you know, tax that you wouldn't otherwise need to pay if you plan properly.
Sonia 24:58
Yeah, exactly. So one big one is, you know, once you move to Canada, you have to report your worldwide income, even if it's, let's say we're talking about a bonus from your employer, even if that was related to work the outside of Canada, it's paid from a US employer. It goes to a US bank account, if you're a Canadian resident, when you get that bonus, it's taxable in Canada, and sure, you can get a foreign tax credit for the taxes you pay to the other country, but if Canada's rates are higher, you still might be out of pocket, which won't feel very nice when April 30 comes around and you have to send a check to the CRA so you know planning ahead of time, if you know you're going to get a bonus, if you could control when you move, maybe don't move until after you get that bonus, if it will result in you paying more taxes. Another example, again, going back to people, so you mentioned how you have a client who has to move their investments from US to Canada, and that's something that we do commonly see, because from a regulatory perspective, if the US brokerage isn't licensed to deal with Canadian residents, then they can't really help them anymore. So let's say you're dealing with someone who's in a high tax state like New Jersey or California, and let's say they're in a really high tax bracket, and they have to sell a bunch of investments. Well, if they sell them as residents of that state, they could be subject to, say, 10% state income tax on that capital gain, but if they wait until they completely sever state residency and state domicile and sell that investment after they move to Canada, then they could potentially avoid state taxes on that capital gain. And in Canada, you get something called a step up in your cost basis, which means your capital gain in Canada on assets that you sell, what that you already owned when you moved here. The capital gain in Canada is only going to be the difference between what you sell it for and what it was worth when you moved to Canada. So Canada does not have a right to tax any gains that accrued prior to you becoming a tax resident here. So those are a couple planning scenarios on one side of the on one side of the border, one where it makes sense to trigger tax or trigger an income event before you move. One where it makes sense to trigger an event after you move. So you can't just necessarily assume that it's always going to be better to do things before you come to Canada. It depends for employment, income, maybe for sales of investments, maybe it makes sense to do it after you move to Canada. So that's why proper planning definitely
Mark Holthe 27:24
makes sense. Makes sense to go to someone knows what they're doing. I agree. Yeah, all right. So another thing, like, I've got lots of friends, some came here as kids with their parents. You know, some of them are not even Canadian citizens. They're still permanent residents, but, but a lot are and, you know, and then they make, they don't realize, I don't know, maybe once they turn 18 or the age of whatever, that they have an obligation to file taxes as a US citizen and and a lot of them say, Well, I'm not really like, I'm not earning anything, or, who knows what it might be, but it's my understanding, and you can Correct me if I'm wrong, it's as much the filing and failing to file that can be as harmful to you as whatever tax you might have to pay. So a lot of them just don't realize, yeah, I'm filing in Canada. What's the big deal? Well, you do need to maintain and continue filing on the US side, don't you?
Sonia 28:18
Exactly? And these are sometimes coined accidental Americans, people who were born in the US or maybe even born in Canada, but they're still US citizens, because one of their parents were US citizens. So yes, they still have to file American US federal tax returns, even though they live in Canada and report their worldwide income. And we talk a ton about this in the book of all the things that US citizens are subject to, and you know, negative downsides of being a US citizen from a tax perspective. So yeah, even if your income is all in Canada, there are a lot of things that you need to keep in mind if you're US citizen. One is the f bar. So FinCEN 114, it's a foreign asset disclosure form. So we talked about the T 1135, in Canada. In the US, they have something similar, except the threshold is much lower. It's only $10,000 USD. So if you have accounts outside the US and cumulatively they exceeded 10,000 US dollars, you have to disclose that to the US authorities annually. Otherwise there could be significant penalties. So even if you don't only owe any tax to the IRS because, let's say your Canadian tax covers the US tax or the foreign tax credit, or you claim an foreign earned income exclusion, you still have to report foreign assets and then different things, like if you have a Canadian corporation, or if you have a TFSA, you know, there could be a lot of different additional forms. And you know, things that are not taxable in Canada, like TFSA income, but that are is taxable in the US. So yes, you definitely need to keep that in mind. I talked about the voluntary disclosure program in Canada, if you need to catch up, the US has something similar. Dollar called the streamline offshore procedure. So again, if you are an act one of these accidental Americans, and you realize, oh, shoot, I should have been filing US tax returns and F bars, you can work with an accountant. You can do up to if you don't have to file, let's say, like, 20 years of tax returns that you missed, but you just have to file a certain number of years of tax returns and F bars, and then you can come into compliance with the IRS. I know this kind of stuff keeps people up at night. So definitely, just if you need to do that, just go through the one of these offshore procedures if you qualify and come into compliance. And then if you want to not have to deal with this anymore, always look up, look into giving up US citizenship, which also isn't necessarily free. There is an exit tax you can apply. So lots to keep in mind.
Mark Holthe 30:50
And that was another thing that we see quite a bit, is people who decide that they want to give up their US citizenship. And you know, like I said, there's an immigration lawyer I know enough to be dangerous to know where the issues are and when to refer. And obviously, if you're doing so for the purposes of avoiding tax, that can trigger some problems on the US side. So I don't know how you advise people when they come to tell you, you know, I'm thinking about doing this, and I you know, it's tax related. Like, how do you how do you advise people when they're contemplating this, the actual relinquishment of because on the immigration side, I've got colleagues that do that, on US immigration side, but from from a tax perspective, trying to navigate the ramifications of doing that also has to be addressed right up front.
Sonia 31:38
Exactly. So what we what I look at is, are you considered a covered expatriate? So a covered expatriate, like not everyone who gives up their US citizenship is necessarily going to face any adverse US tax consequences. There are a couple exclusions available if you were born a dual citizen at birth and then you were and you're currently living in that other country that you're a citizen of. But for example, or sorry, we can look at whether you meet any of the three tests to say whether or not you'd be a covered expatriate. And only if you meet one of the three tests could you potentially have an exposure to us exit tax. The first test is if your net worth is over $2 million the other test is if your average income tax liability exceeded a certain threshold, which is about 200,000 US dollars. And the third one is if you can't certify that you're up to date with all your US filing obligations for the last five years. So that's an example of someone who I said, you know, oh, I didn't know I had to file US tax returns, and now I want to give up my US citizenship. Okay, well, you got to make sure you get up to date on your US filings, so that you could potentially not be considered a covered expatriate. Because if you are a covered expatriate, there is a deemed disposition of capital assets. Your retirement accounts may be deemed to be cashed out. So overall, sometimes I do this analysis for people, I say, Okay, you're going to be a covered expatriate. You're looking at a $1 million tax bill. I know it's really annoying to pay your cross border account in $2,000 a year, but you're actually much better off just staying a US citizen rather than giving up your citizenship, because the tax bill would be so substantial.
Mark Holthe 33:16
Yeah, yeah. This is why I don't touch and touch. Any of these, these questions, okay, not everybody. Yeah, exactly not, you know, not everybody may choose to stay in Canada. You know, some people come and they stay and then they move on. So if you have situations where people are moving elsewhere, what are things that they need to consider when they're, you know, then moving on after that, maybe they got a great opportunity in Italy and they're heading out, or maybe they're going back to the US. So,
Sonia 33:48
yeah, exactly. So you know, us, tax is based on citizenship. There's no exit tax simply up because you move out of the US. But Canada, if you cease Canadian tax residency, there can be substantial tax implications. Um, so Canada has something called a deemed disposition of assets, which means, and it's similar concept to what people may be familiar with, is when you pass away, you're deemed to have sold your capital assets of fair market value. Same thing applies. When you cease Canadian tax residency, you're deemed to have sold capital assets, and if they have increased in value above your adjusted cost basis, that could be a capital gain. And in Canada, 50% of capital gains are taxable, so it could be pretty substantial. There's a lot of assets that are excluded from the deemed disposition. Canadian real estate is excluded your Canadian registered accounts and your IRAs, like your US retirement accounts, for the most part, are excluded from this. Also, if you lived in Canada for less than 60 months out of the last 10 years before you leave the country, any assets that you originally had when you first came to Canada are also excluded. But for the most part, what we commonly see that is the trigger is a big. Departure tax bill are like investments in non registered accounts. Also, if someone has a Canadian corporation, like a holding company for their investments, that could also be subject to deemed disposition, that's a big one that could trigger a big tax bill. And then also foreign real estate, like, let's say I had my us, like I had a Florida condo and I lived in Canada for 10 years. If I ceased Canadian tax residency, I'm deemed to have sold it. So that could be a really negative outcome, because now I have to pay a tax bill on just the appreciation of real estate, but I don't actually have any cash to pay that tax bill. So there are ways that you could defer the departure tax bill until you actually sell the property, but people need to be very cautious with this, because if your tax bill is high enough, you actually have to post security with the CRA. They don't want to just, you know, they don't want someone to say, Oh, I'm deferring $100,000 tax bill. The CRA is not just going to let that slide. They they want security to make sure that if you, you know, don't respond to them, then they can take that security and cover the bill. So that's something you have to reach with the CRA ahead of the tax deadline. So those are that's the big one, the departure tax, the deemed disposition that people need to be aware of if they're going to be moving out of Canada.
Mark Holthe 36:14
Interesting. Well, Sonia, we've covered a lot here, and I know for most of us, it's way over our head. So this is, I'm assuming, part of the reason why, you know, you get questions all the time, why you why you wrote the book. And when I went through the book, one of the things I like most about it is that it's written in plain language. So it's written not for tax advisors, but it's for the average person who's just trying to understand what to expect. And you know, the sections that we have here. I'll just read some of these off for our listeners. So part one talks about before the move, key considerations for a life in Canada, which, you know, addresses some of the factors even that I deal with as an immigration lawyer. And then part two is navigating the cross border tax landscape, so understanding kind of how it works. And then part three is cross border tax realities as a new Canadian resident, so things that you have to just take into consideration, and Part four is building your life so cross border, investment, retirement planning and giving and giving strategies, which is this, this stuff is really, really complicated, but the way you've described it, at least gives me a solid understanding to then ask the right questions, or at least share the right information that I might that I might need to share with my tax advisor and and then, of course, the issue many people are dealing with right now, which is legacy planning and transitioning, and all those kinds of things, estate planning. And so, yeah, but the book is, I definitely would recommend it, and it's a good overview, and I'm going to direct my clients to pick up a copy of it, because at the end of the day, sometimes you don't even know the questions to ask. You don't know when to actually fork over the money. And nobody likes to spend money on anything. Let's be honest, they don't like spending on money on me, but I hope that by using my services, I can save them, you know, and for me, it's the success or failure can really determine whether or not they can come to Canada at all. But when you're talking about people who may be even, even moderate to high net worth, individuals not asking the right questions early in advance, can be very, very costly to the point where this new move to Canada that you're so excited about just becomes just the worst nightmare of your life. And so it's super important that people think about these things proactively. And when we release this, this episode will in the description, we'll have a link where you can connect and and get access to the book and things like that. But why don't you just let people know who are listening? How can they get a copy of it? And ultimately, what's the mechanism that they go through to access you and and your firm?
Sonia 38:48
Yeah, absolutely. So, yeah, you could go to your move to canada.com and that will have links to Amazon US and Amazon Canada. So the paperback is currently just sold through Amazon, and then if you want the ebook, it is also sold. Thank you. It is also sold through Kobo and Apple books. Yeah. So if you want to pick up a physical copy, happy to have a chat with you, if you have cross border tax questions. And again, we work, I work in the wealth management field. We deal with a lot of folks who are moving from US to Canada, who have retirement accounts, you know, on both sides of the border, investments and whatnot. And if you want to get in touch with me, happy to chat. My email is your move to Canada [email protected] All one word
Mark Holthe 39:31
awesome. Well, thank you so much. I've been here. We've had it as our special guest today, Sonia dolgaina, who's a cross border tax consultant with with Raymond James, excuse me, and she's given us a little bit of an overview here on the issues that people need to be aware of when it comes to moving to Canada from a tax perspective. So yeah, get a copy of her book, and thanks so much Sonny for joining me today. You.
Sonia 40:00
Thank you so much for having me on
Mark Holthe 40:01
You bet. I wish you all the best. Take care.
Sonia 40:04
Thank you. Bye.
Outro 40:08
Thank you for listening to the Canadian immigration podcast, your trusted source for information on Canadian immigration law, policy and practice. If you would like to book a legal consultation, please visit www.holthelaw.com you can also find lots more helpful information on our Canadian immigration Institute YouTube channel, where you can join mark on one of his many Canadian immigration live Q and A's. See you soon, and all the best as you navigate this crazy world we call Canadian immigration. I.
Transcribed by https://otter.ai
