Moving abroad doesn’t mean the CRA forgets about you. Canada is one of the few countries that taxes based on residency ties, not just physical presence. If you don’t handle your tax situation properly before you leave, you could end up paying taxes to both Canada and your new country. Here’s how it works.
Disclaimer: This article is for general information only and does not constitute tax or legal advice. Tax situations vary — consult a cross-border tax professional before making decisions about your tax residency.
How Canadian tax residency works
Unlike the US (which taxes citizens worldwide regardless of where they live), Canada taxes based on residency. The CRA determines your residency status based on your “significant ties” to Canada:
Primary ties (strongest indicators)
- A home in Canada: Owning or renting a home available for your use
- A spouse or common-law partner in Canada
- Dependants in Canada
Secondary ties (supporting indicators)
- Canadian driver’s licence
- Canadian bank accounts
- Canadian credit cards
- Provincial health card (OHIP, MSP, etc.)
- Canadian passport (everyone has this — it alone doesn’t determine residency)
- Memberships in Canadian organizations
- Social ties (family, friends — weaker indicator)
If you maintain significant ties, the CRA considers you a factual resident even if you live abroad. You’d report your worldwide income to Canada and claim a foreign tax credit for taxes paid to your new country.
Your three options
Option 1: Stay a Canadian tax resident (simplest)
How: Change nothing. Keep your Canadian address, bank accounts, driver’s licence, health card. File Canadian taxes on worldwide income as usual.
Pros:
- Simplest — no paperwork beyond normal tax filing
- Keep OHIP/MSP (if you return within the required timeframe)
- Keep contributing to CPP and RRSP
- TFSA contributions continue
Cons:
- Pay Canadian tax rates on all income (which are high compared to Thailand/Mexico/Portugal)
- May end up paying taxes in both countries (mitigated by tax treaties and foreign tax credits)
- May lose health coverage anyway if you exceed your province’s absence limit
Best for: Snowbirds who split time, people who plan to return within 1–2 years, people with significant Canadian income (rental properties, investments).
Option 2: Become a non-resident (most common for long-term expats)
How: File a departure return (T1 tax return for your departure year), cut significant ties (give up your home, cancel health card, reduce secondary ties).
Pros:
- Only pay Canadian tax on Canadian-source income (rental income from Canadian properties, Canadian dividends, etc.)
- Foreign employment/business income not taxed by Canada
- May pay significantly less total tax depending on your new country
Cons:
- Departure tax: deemed disposition of certain assets (you’re taxed as if you sold investments on the day you left)
- Can no longer contribute to RRSP or TFSA
- TFSA becomes taxable in some countries (e.g., the US, potentially others)
- Lose provincial health coverage
- CPP contributions stop (unless you have Canadian employment)
- More complex tax filing
Best for: Long-term expats (3+ years), people with primarily foreign income, people moving to lower-tax jurisdictions.
Option 3: Deemed non-resident (treaty tie-breaker)
How: If you’re a tax resident in both Canada and another country (that has a tax treaty with Canada), the treaty’s “tie-breaker” rules determine which country gets to tax you. You’d file as a “deemed non-resident” in Canada.
Canada has tax treaties with Thailand, Mexico, and Portugal — so this option is available for all three of our target countries.
Best for: Complex situations. Definitely need a tax professional for this one.
What about RRSP, TFSA, and CPP?
| Account | If you stay a resident | If you become non-resident |
|---|---|---|
| RRSP | Continue contributing normally | Cannot contribute. Can keep existing RRSP. Withdrawals subject to 25% withholding (or treaty rate). |
| TFSA | Continue contributing normally | Cannot contribute. Growth remains tax-free in Canada. May be taxable in your new country. |
| CPP | Continue accruing benefits | Stop accruing. Can still collect when eligible. Payments subject to 25% withholding (or treaty rate). |
| OAS | Continue accruing | Must have 20+ years of Canadian residency after age 18 to receive OAS abroad. Subject to withholding. |
Tax situation in each country
Thailand
Thailand taxes residents on income remitted to Thailand (brought into the country) in the same calendar year it’s earned. Income earned abroad and not remitted to Thailand in the same year is generally not taxed. Tax rates range from 0% to 35%. There’s a Canada-Thailand tax treaty to prevent double taxation.
Important note: Thailand’s tax rules on foreign income have been evolving. As of 2024-2025, there’s a push to tax foreign income regardless of when it’s remitted. Check current rules before making decisions.
Mexico
Mexico taxes residents on worldwide income. Tax rates range from 1.92% to 35%. If you become a Mexican tax resident (generally by spending 183+ days per year or having your “centre of vital interests” in Mexico), you’ll file Mexican taxes. The Canada-Mexico tax treaty prevents double taxation.
Note: Tourists on an FMM (180-day permit) are generally not considered tax residents, but this is a grey area if you’re working remotely.
Portugal
Portugal taxes residents on worldwide income. Standard rates range from 14.5% to 48%. However, the Non-Habitual Resident (NHR) program (now modified) offered favourable tax treatment for new residents. The D7 visa holders may benefit from special tax arrangements. The Canada-Portugal tax treaty prevents double taxation.
Finding a cross-border tax professional
This is one area where you should NOT try to figure it out yourself. A cross-border tax professional costs $300–1,000 CAD for a consultation and can save you thousands in taxes and penalties.
What to look for:
- CPA designation (Canadian or US)
- Experience with Canadian expats specifically (not just general international tax)
- Knowledge of the specific country you’re moving to
- Clear fee structure — avoid anyone who won’t quote a price upfront
Questions to ask in your first meeting:
- Should I formally depart Canada for tax purposes, or stay a factual resident?
- What are the tax implications for my RRSP, TFSA, and RESP?
- How does the tax treaty between Canada and [country] work for my specific income types?
- What departure tax would I owe on my investments?
- How should I handle my Canadian rental income / pension / business income from abroad?
- What’s the optimal timing for my departure?
The bottom line
Taxes are the least exciting part of moving abroad, but getting them wrong is expensive. The single best investment you can make before leaving Canada is a 1-hour consultation with a cross-border tax professional. It typically costs $300–500 CAD and can save you $5,000–20,000+ over the course of your time abroad.
Don’t let fear of taxes stop you from moving — the math almost always works in your favour. You just need to set it up correctly from the start.
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