Two countries means two sets of rules, and the expensive part is rarely the tax itself — it is the reporting nobody mentioned. Foreign property, a non-resident shareholder, income earned on both sides of the border, or a move in either direction all bring filing obligations that carry penalties of their own.
What this includes
- Working out where you are resident for tax, which is not the same as where you live
- Income earned in both countries, and how the treaty treats it
- Non-resident filings and withholding on Canadian income
- Foreign property reporting for Canadian residents
- Contractors and consultants working for clients across the border
- The year you arrive in Canada, and the year you leave
Leaving Canada
Emigrating triggers a deemed disposition of most capital property on the day you stop being resident — the so-called departure tax — and there is a return for the part-year. Planning the timing is worth more than arguing about it afterwards.
The reporting is the risk
Penalties for missed foreign reporting are not proportional to the tax; they can apply even where no tax is owing at all. If you hold property, accounts or shares outside Canada, the filing question is worth settling before a deadline passes.
Where we stop
We are a Canadian firm. We handle the Canadian side properly and work alongside a US preparer where a US return is required, rather than pretending the border is not there.
Questions we are asked about this
Do I pay tax twice if I earn income in both countries?
Generally no. The Canada-US treaty and the foreign tax credit rules are designed to prevent the same income being taxed twice, though they do not always produce the lowest of the two rates. Getting the filing order right matters.
What is departure tax?
When you stop being a resident of Canada, most capital property is treated as having been sold at fair market value on that date, and the gain is taxable. Some property is excluded, and in some cases the payment can be deferred by posting security.
I own property outside Canada. Do I have to report it?
Canadian residents generally have to report specified foreign property once its total cost exceeds the reporting threshold, whether or not it produced any income. The penalties for not reporting are significant and are unrelated to the amount of tax involved.
Worth reading
Where we work
We are based in Scarborough and act for clients across Toronto and the GTA in person — see accountant in Scarborough and small business accountant in Toronto — and everywhere else in Canada by email and video call.
Our other services
Corporate Tax Returns (T2) · Personal Tax Returns (T1) · Trust Returns (T3) · HST and GST Filing · Bookkeeping · Payroll · CRA Audits and Disputes · Financial Statements · Tax Planning · Incorporation and Business Setup · Estate and Succession Planning
Our office
ClearWealth Accounting Advisors
1457 McCowan Rd, Suite 202
Toronto, Ontario M1S 5K7
Get directions
Open Monday to Friday, 9 a.m. to 6 p.m.
Phone: (437) 290-5117
Email: info@clearwealth.tax
