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Greetings all. My wife and I are seriously wishing to move to CR. We will be there this Jan to April to look for property and check out the different areas. One question we are having a problem with….we realize our pension from Canada is not taxed in CR, but is it taxed before it is sent to CR? If it is directly deposited into a CR account is it free from Canadian taxes? We spent many hours online and talking to Revenue Canada but cant seem to get a straight answer. So, is a Canadian teachers pension taxed in Canada if it is sent directly to our account in CR?
THANKS SO MUCH!!:DI am no expert at this..I usually just read the entries but felt that I could be of assistance in this case.
You have to pay taxes at the source so no matter where you spend your money, the tax must be paid in the country from which it comes. However, when (or if) you become legal residents of Costa Rica, you can apply to the Canadian Government to be taxed as a non-resident. Since you won’t be using the benefits ie. health insurance, old-age pension and suplements, the rate of tax is reduced accordingly. You will still be eligible for CPP as you have paid into it during your working life.
I doubt that the Teachers’ Pension plan will deposit into a Costa Rican bank, but your bank or credit union will forward the money, at a cost and with a delay.[quote=”anneliseped”]I am no expert at this..I usually just read the entries but felt that I could be of assistance in this case.
You have to pay taxes at the source so no matter where you spend your money, the tax must be paid in the country from which it comes. However, when (or if) you become legal residents of Costa Rica, you can apply to the Canadian Government to be taxed as a non-resident. Since you won’t be using the benefits ie. health insurance, old-age pension and suplements, the rate of tax is reduced accordingly. You will still be eligible for CPP as you have paid into it during your working life.
I doubt that the Teachers’ Pension plan will deposit into a Costa Rican bank, but your bank or credit union will forward the money, at a cost and with a delay.[/quote]Ok, so after we are settled in CR and can prove we are not using Canadian services we can apply for nonresident status and be taxed accordingly( hopefully less than the 25% we initially gets gouged) …sounds about right<: Thanks for the info.
Sorry for posting a question as our first post on this forum:?Please consider that Canada may require that you actually be granted legal residency status by Costa Rica before giving you this tax exemption. Mere physical presence here may not be enough. And it can take a year or longer for Costa Rican Immigration to formally grant you that legal residency.
[quote=”DavidCMurray”]Please consider that Canada may require that you actually be granted legal residency status by Costa Rica before giving you this tax exemption. Mere physical presence here may not be enough. And it can take a year or longer for Costa Rican Immigration to formally grant you that legal residency.[/quote]
I checked online and yes, Canada requires us to become lrgal residents of CR, then we will be considered Legally nonresident.
My other question is what is the tax rate once we become a nonresident? Initially we are taxed 25%. but what( if any) does it drop down to?
Thanks again for all the info, glad we found this site 😮i have a friend who is an ex-teacher from canada and she is currently trying to detax. it requires that you have no property in canada, no bank account, and no other financial ties including owing taxes to your gov’t. only by detaxing can she get out of the 25% tax that is currently being deducted from her pension. and yes, she is in the process of gaining residency here.
What you are speaking about here is your tax status with Revenue Canada.
As a Resident Canadian, you pay tax on your World income to Revenue Canada. A “Resident Canadian for Tax Purposes” as opposed to a “Non-Resident Canadian for Tax Purposes” has a legal meaning as defined in the Revenue Canada Tax Bulletins.
As a Resident Canadian, you will be taxed on all your income, including pensions, with the normal allowable deductions.
If you meet the requirements of being a “Non-Resident Canadian” (eg. absent from Canada for at least 183 days per year, and with limited continuing ties with Canada as defined in the Income Tax Bulletin IT221R3-CONSOLID), there will be a 25% withholding tax at source on your income earned in Canada (Teacher’s Pensions).
You would be able to file a Tax Return in the normal manner each year, to substantiate a lower tax rate on your Canadian income, but this comes with the requirement of disclosure of income earned in other jurisdictions, even though that additional income would not be taxed by Revenue Canada as a Non-Resident Canadian, under current Tax Laws.
You should note, that claiming “Non-Resident Tax Status” is something that must be claimed formally on your final Tax Return when leaving Canada to reside in another jurisdiction.
The final Tax Return should be prepared by a Canadian Accountant, with your having received proper legal advice from a Canadian Tax Lawyer regarding your particular circumstances.
Written by Canadian/Costa Rican Attorney Rick Philps:
Full Name: Lic. Rick Philps
Business Title: Attorney
Company Name: Petersen & Philps
Address: San Jose, Costa Rica
Website Address: http://www.plawcr.com
Email address: rphilps@plawcr.com
Telephone numbers: 506 2288-4381 Ext. 102[quote=”watchdog”]What you are speaking about here is your tax status with Revenue Canada.
As a Resident Canadian, you pay tax on your World income to Revenue Canada. A “Resident Canadian for Tax Purposes” as opposed to a “Non-Resident Canadian for Tax Purposes” has a legal meaning as defined in the Revenue Canada Tax Bulletins.
As a Resident Canadian, you will be taxed on all your income, including pensions, with the normal allowable deductions.
If you meet the requirements of being a “Non-Resident Canadian” (eg. absent from Canada for at least 183 days per year, and with limited continuing ties with Canada as defined in the Income Tax Bulletin IT221R3-CONSOLID), there will be a 25% withholding tax at source on your income earned in Canada (Teacher’s Pensions).
You would be able to file a Tax Return in the normal manner each year, to substantiate a lower tax rate on your Canadian income, but this comes with the requirement of disclosure of income earned in other jurisdictions, even though that additional income would not be taxed by Revenue Canada as a Non-Resident Canadian, under current Tax Laws.
You should note, that claiming “Non-Resident Tax Status” is something that must be claimed formally on your final Tax Return when leaving Canada to reside in another jurisdiction.
The final Tax Return should be prepared by a Canadian Accountant, with your having received proper legal advice from a Canadian Tax Lawyer regarding your particular circumstances.
Written by Canadian/Costa Rican Attorney Rick Philps:
Full Name: Lic. Rick Philps
Business Title: Attorney
Company Name: Petersen & Philps
Address: San Jose, Costa Rica
Website Address: http://www.plawcr.com
Email address: rphilps@plawcr.com
Telephone numbers: 506 2288-4381 Ext. 102
[/quote]Thanks everyone for all the info.
So in a nutshell……
We jump through the hoops and meet all requirements of Revenue Canada, we still get taxed 25% on my wife’s pension, but at years end we files our income tax and then we receive a lower rate on her pension?
It seems a rather bit complicated, but would be worth it at years end. The 25% tax is a substantial amount of income, so it would be worth it for us to follow that through. Once again, thanks for all the help and information.
We are in Playas del Coco on Jan 13th, hopefully by then we will have this figured out:shock:
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