Income tax - Retired Canadian becoming CR resident - Costa Rica forum

Blackwatch · 2022-07-31T19:26:03+02:00

Explore the tax implications for Canadians retiring in Costa Rica, including residency status, pension taxation, and shared experiences from fellow retirees.

Income tax - Retired Canadian becoming CR resident

Blackwatch Active member

Member since 23 November 2021

BlackwatchActive member31 July 2022 17:26:03

I have been looking into the tax implications of moving to Costa Rica in retirement from Canada and giving up my Canadian residency for tax purposes. I'm looking for any info from other Canadians that have moved to CR and aren't considered a Canadian tax resident by CRA.

My understanding is Costa Rica does not have a tax treaty with Canada. Therefore, any income earned in Canada ie: Canadian pensions or RRSPs are taxed 25% at source in Canada. Also, Costa Rica does not apply income taxes to income earned outside of CR.

Has anyone had experience with this? Suggestions...

TerrynViv Serial expat

Member since 21 October 2011

TerrynVivSerial expat31 July 2022 21:18:22

650

We severed residency with Canada eight years ago.聽 All our monetary assets remain in Canada (bank accounts, LIF's, RRSP's, OAS, etc.).聽 We do not perform work in Costa Rica, so are not subject to Costa Rican taxes.聽 Our RRSP's, LIF's, CPP, and OAS are subject to a 25% withholding tax.聽 You can apply to have this reduced if you have the appropriate documentation.聽 We let them withhold the 25% and then just get reimbursed at filing time with revenue Canada.聽 We normally get $3,000 to $4,000 back at income tax time.聽 Due to some extraordinary out of pocket medical expenses this year we had $15,000 returned.聽 We hired a company called Compass Tax out of Calgary, Alberta to do our taxes in 2014, the year we became non-residents.聽 I have used Turbo Tax for years so after Compass Tax filed our non-resident claim in 2014, I simply entered the mirrored information from Compass Tax into Turbo Tax and saved the file.聽 I have successfully used Turbo Tax every year since.聽

Blackwatch Active member

Member since 23 November 2021

BlackwatchActive member31 July 2022 22:32:36

Thanks for the reply. I didn't think you could dip below the 25% withholding tax and pay less if you lived in a non tax treaty country?聽 Does CRA charge you on what you would just owe to the federal govt and not what you would pay for provincial income tax?

My pension and annual RRSP withdrawal will be in the low $80,000 range per year. In Nova Scotia that is about 26.5% income tax. In BC it would be 20% income tax overall.聽 The federal portion is more like 15%.

TerrynViv Serial expat

Member since 21 October 2011

TerrynVivSerial expat01 August 2022 12:05:09

650

You could very well be correct on changing the withholding tax.聽 I just read about having it lowered and my wife and I discussed it and decided it was not worth the effort.聽 Like the good ol' days we just reap a bonus at tax time albeit a couple of months later.聽 Yes, we only pay federal tax and no provincial tax.聽 My recollection is that the federal tax seemed to be a bit more, percentage wise, than what we paid when living in Canada.

kohlerias ViP

Member since 05 September 2013

kohleriasViP02 August 2022 15:20:28

1572

We, too, severed our ties with residency in Canada. I always make a point of posting the information regarding this subject,聽 on forums on the 'net explaining what one 'must be prepared to give up' when becoming a

We also lowered the withholding tax.

Of course, when I returned to Canada, I had to contact a notary and acknowledge that I had done so.

Blackwatch Active member

Member since 23 November 2021

BlackwatchActive member07 August 2022 17:11:23

I spent some time on the phone with a tax treaty expert from CRA. You can file a 217 return and possibly get back some of the 25% withholding tax.

Just a quick calculation based on one person earning $85,000. Taxes paid living in NS would be $23,088. Taxes living in Ontario would be $17,889. Taxes @ the 25% withholding rate would be $21,250 and if you file form 217 (return) the taxes would be $18,692. I did a simple return each time with these numbers not calculating the age benefit at 65+ or the $2000 pension deduction.

There are a couple of provinces where it is a little more beneficial to remain a tax resident of Canada ie: Ontario and BC, rather than declare as a non-resident.