Tired of shovelling snow, thousands of Canadians have decided to live in a warmer climate. We’re familiar with snowbirds, but there are many who are choosing to move permanently to somewhere nice and sunny – a place where the pace of life is slower and the quality of life higher.
There can be the temptation to retire to a county where your money stretches further, especially if you haven’t saved enough for retirement.
Visit your proposed new country several times, especially during the off-season. You need to look at the place differently when you’re planning to potentially live there. Instead of the obvious tourist attractions, check out possible residential areas, shopping, services and amenities.
Do you want to live in a predominantly ex-pat, English speaking area, or live among the locals? Take advantage of any opportunities to meet with people in the community of your choice.
Choosing a place to retire is more than finding an area with inexpensive living costs, low taxes, great weather and fun things to do. Think of how you want to live. Assess services and the livability of various areas.
Separate the romance from the realities.
A Permanent Retirement Overseas
Some popular retirement destinations
In the U.S. popular destinations are still Arizona – cheap real estate, sunny days, endless golf – and Florida. Canadians are the number one purchasers of real estate in some Florida communities.
Here are some spots where your retirement dollars will go far:
- Costa Rica – affordable health care; politically stable; well established ex-pat communities.
- Mexico – Canadians love Mexico so much they’ve taken over entire towns. Favorites include Puerto Vallarta and Cabo San Lucas.
- Panama – retirees easily qualify for residence status; top quality health care is affordable; and, bonus, everyone speaks English.
- Ecuador – affordable cost of living. According to Forbes magazine, a couple could easily get by on as little as $1,200 a month.
- Portugal – ex-pat communities where retirees can golf, roam the castles, or relax on the beach.
Giving up Canadian Residency
When moving permanently to another country, you must sever your ties with Canada in order to avoid being deemed a resident of Canada for tax purposes. The most important factor is whether or not you maintain residential ties with Canada.
Among other things, you must:
- Sell your principal residence.
- Take all valuable personal possessions out of Canada.
- Terminate Canadian bank accounts, investment accounts, credit cards and safe deposit boxes.
- Give up your provincial driver’s license and health care card.
- File a Canadian exit return and pay departure taxes. This includes deemed disposition of certain assets.
- Plan to not return to Canada for at least two years after leaving.
- Establish residential ties in the new country.
CPP/QPP benefits will continue to be paid without any residency requirements. People who are eligible to receive OAS benefits will continue to receive payments.
Depending on the tax treaty in effect, withholding tax may apply to these payments, as well as any employer pension or annuity payments. The normal rate is 25%.
Check local property laws. Not all countries allow expatriates to buy property, and some impose restrictions. Inheritance taxes might apply to real estate in a foreign country. Consult with a local real estate lawyer rather than relying on the assurances of real estate agents.
It may make more sense to rent than to own.
Some things to consider
When choosing a location, here are some factors to consider:
- Safety and political stability of the country and the overall culture.
- Being able to speak the local language may be important in dealing with local people.
- Is there a comprehensive health care plan and access to medical services that provide coverage after a certain waiting period? Are private health care facilities available, and at what cost? What about pre-existing medical conditions?
- Some countries are more tax friendly than others. Does the country have a tax treaty with Canada?
- Citizenship regulations. Some countries require immigrants to take out citizenship in order to live full-time and/or own property. While many people are prepared to give up Canadian residency status, few want to relinquish their Canadian citizenship
Leaving Canada permanently in retirement is a major decision not to be undertaken lightly. Whatever your reasons, detailed research and planning is required. You need to know the implications on your personal taxes, and your assets and investments.
You would do well to consult with an experienced advisor who specializes in permanent moves, not only to become familiar with the requirements, but also to develop investment, tax planning and estate strategies.