Have You Considered A Permanent Retirement Overseas? Read This:

Tired of shoveling 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.

Why move?

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.

Related: How this couple spends their retirement travelling

For valuable information, check out ex-pat websites and blogs such as The Real Costa Rica and Blogs from Expats in Guatemala.

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.

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.

Government benefits

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%.

Buying property

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.

Related: 16 habits that helped me retire wealthy

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

Final thoughts

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.


45 Responses to Have You Considered A Permanent Retirement Overseas? Read This:

  1. Maybe I am patriotic but I don’t think I could ever leave Canada permanently. Ideally I would like to have the ability to travel to other countries (especially during the winter months!) but then come back home during the warmer months. The biggest factor (aside from the fact that all of our family lives in Canada) we would also be concerned about the healthcare situation in a foreign country. We could have a significantly higher income but if there isn’t adequate healthcare then I definitely wouldn’t be interested. As we get older we will need more healthcare so it becomes more and more important

    • @Dan: I agree with you Dan. During the long Canadian winters it’s fun to think of relaxing on a warm, sunny beach. But you also have to think about the relationships and quality of life you would be leaving behind.

      A tropical vacation when it’s 25 below would be a nice break – and all I would really want.

  2. Most of the ex-pat countries listed are Latin American. I love that region and have been to Ecuador many times, which has wonderful people, is very inexpensive, and no end of beautiful things to see.

    However, before divesting myself from Canada I’d want to see a long period of political stability , which is rare in these countries. If one day I just cannot afford Canada then Ecuador here I come!

    • @Robert: Most popular countries for ex-pats are in Latin America. They are starting to build up their economies and, for now, they are cheap, cheap, cheap. That’s the appeal for many who want to live there, but, as you say, there are lots of other factors to consider.

  3. Interesting food for thought. It would be helpful if you would state what the tax treaty is for each of the countries mentioned. It’s not easy for us readers to find out this information. Thank you.

  4. Tax Treaty info. can be seen at the Department of Finance website: http://www.fin.gc.ca

    I have a home in NE Thailand about 25km outside of Udon Thani which eventually will be my permanent residence (built about three years ago).

    The resident vs. non-resident designation appears to be an extremely “gray” area when it comes to taxation. At least that’s my perspective from perusing the internet. For now, I will maintain residential ties with Canada.

    Healthcare is excellent in the Land of Smiles; but of course you are subject to political and currency risk; and the visa process can be quite onerous.

    • @David Tucker: Thanks for the link, David.

      Cutting all ties with Canada is not a decision to be taken lightly. I think most people would prefer taking the part-time route and keep their resident status.

  5. I know that Uruguay is becoming quite a popular destination for Canadian retirees. They have public healthcare and all sorts of things like that. I don’t know the ins and outs of the tax regulations and such though, there is so much to figure out if that’s the route you’re going to take.

  6. We spend winters in Puerto Vallarta since 2007. Recently BC allows us to be absent for 212 days and still maintain our BC Medical Plan coverage. So we rent out our BC home for the winter and have the best of both worlds. Our annual budget has declined by 25% since we have been spending the winter here.

    Here are some reference sites to aid in your evaluation:
    http://www.expatforum.com/expats/mexico-expat-forum-expats-living-mexico/
    and this same site works for any country.

    Here is a site that compares the cost-of-living in any 2 countries or cities:
    http://www.expatistan.com/cost-of-living/comparison/puerto-vallarta/vancouver
    recognizing that living is often different than vacationing. We spend little time on the beach, but love the weather and the social activity.

    Here is another costing site:
    http://www.numbeo.com/cost-of-living/city_result.jsp?country=Mexico&city=Puerto+Vallarta

    We picked PV because we could maintain our Canadian connection (there are plenty of both here) and we get Canadian satellite TV so even watch the Vancouver local news and the CBC.

    We considered Uruguay but the flight times were a major obstacle. Although the health care was better.

  7. Just got back from a vacation in Aruba this weekend and all I could think while there was the idea of retiring in a warm climate and not having to deal with the harsh winters.

    This blog post is very timely!

    cheers

  8. This is a poorly researched article, with significant inaccuracies.

    To become a Canadian NR (non-resident), you do NOT have to sell your principal residence (renting it in an arms-length arrangement is fine); you do NOT have to close all Cdn bank accounts, credit cards etc. (keeping 1 or 2 is fine, as long as you do not use them for the majority of your banking), you do NOT have leave for 2 years without coming back (what matters is how long you are in Canada, and where your primary residential ties are), and keeping your driver’s license is usually ok too (not your health card though).

    I went to this website due to link in Globe & Mail; the inaccuracies are disappointing…

    • I agree with your comments. My accountant stated clearly that a non-resident Canadian can own personal real estate in Canada. Big White Ski resort is full of condos owned by Canadians who live in other countries. I would be interested in seeing any links you have to verify your other statements because they are interesting.

      Poorly researched is right!

      • @Manado @canadaMan

        I refer you to http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html which states in part, “If you left Canada to establish a PERMANENT HOME in another country and SEVERED you residential ties (which includes a home in Canada) …

        Yes, non-residents can own property in Canada, but that’s not a permanent residence. I concede that your primary residence can be rented out.

        Non-residency rules for Canadian tax purposes are complex and can be misunderstood. An accountant or lawyer experience in this topic is a must.

      • I believe the main issue with being non resident is the severance of Provincial Health Care that just be notified . The second is your residence that must be rented clearly at arms length. Third is your car that if you store it it cannot be used so rent a car when you return. Forth All investments are deemed to be sold and all tax paid on gains and loses must be paid but you can still hold the assets in the same account that is now a non resident account to for tax purposes. Income earned on Canada is taxed in a non resident tax filing. In the year to move you will have 2 tax returns to file using your departure date. When you return you have to reverse the process and have a waiting time for your provincial health care to restart.

    • I spent 7.5 years working overseas and was CRA approved as a non-resident of Canada for income tax purposes. My primary residence was managed at 100% arms length, I gave up the health card, maintained one AMEX and one bank credit card, one bank account, maintained the Canadian driver’s license. As a family we returned to Canada every year for vacation. Upon resuming residency all returned to normal immediately and we began to pay Canadian income tax.

      It is wise to get the advice of a lawyer if your situation is complex but most people can manage this with good research and asking a lot of questions to Canadian authorities.

      • I have also successfully been a Non-resident (NR). Mr. Miller is completely right.

        Establishment of NR status depends on a combination of your “primary” and “secondary” ties to Canada.

        Primary:
        You must not have a house to which you can return (which means renting at fair market value to a non family member is fine), your spouse and any dependent children must also accompany you overseas.

        Secondary:
        More complex, with fair bit of grey. CRA considers the totality of secondary factors, but generally you are fine to keep 1 or 2 bank accounts (and registered accounts are perfectly fine), credit card (but should use it much less than a credit card from your new country of residence), driver’s license etc. Provincial health card is a definite no-no. You should not keep too many other secondary ties e.g. health club memberships, social club ties etc.

        The only caveat I would offer to Mr.Miller’s comments/ advice is that it is fine to contact CRA for general NR advice, but never to inform them formally about your individual intention.

        I have contacted several Chartered Accountant NR specialists (do a quick Google/YouTube search and/ or ask the people at expat.ca for a referral) and they all say “complete the CRA form, but never submit it voluntarily to CRA”…

        The CRA form:
        http://www.cra-arc.gc.ca/E/pbg/tf/nr73/README.html

        Consulting a NR tax specialist is generally a good idea, though I agree with Mr.Miller, not 100% necessary. In the case of the author of this website it does appear necessary, as much of the info presented is unfortunately just plain wrong (sorry, no other way to put it).

      • Brian: I was away in the Midfle East for 12 years. While you were a non- resident for CRA purposes, your property may have been your primary residence, but was not your Principal Residence as defined by the CRA. One knows that since, if you sell, you lose your Capital Gains exemption and are liable for all of the Capital gain on the sale.

    • Interesting how a response to this comment seems to not be forthcoming. Accountability is at an all time low in this country it seems.

    • I recently became a non-resident of Canada and a permanent resident of Florida. I happen to have dual citizenship, but that was not a factor. I definitely needed the help of the tax accountant that does my US tax returns for the paperwork.
      I have my house in Canada up for sale. I had to file a paper stating its value when I left Canada. (to avoid capital gains if it sells) I am allowed to keep it as a cottage, so it doesn’t matter if it doesn’t sell. I stay here in FL for 6 1/2 months (renting) and go to my cottage in ON for the other 5 1/2 months.
      The day I “exited Canada”, I imported my car at the border (lots of legal stuff and paperwork required – do a search online) and registered and licenced it in Florida at the driver’s licence office. I had to give them my Ontario ownership card and got theirs in return. I got a Florida driver’s licence on the spot by giving them my Ontario one and 2 pieces of govt. or bank mail to prove my FL address. If I had wanted to keep mine, I would have had to take all of their tests. There’s no point since I can’t drive an American car using a Canadian driver’s licence. It is insured in FL.
      I had to give up my Ontario Health Insurance. I pay almost $700./mo. for Florida Blue, for a silver plan. There is an awful deductible of over $6500./yr. that must be paid before any insurance kicks in. To get OHIP back, you have to return to Ontario and live there full time for 3 months and become a resident again.
      Because we have a tax treaty between Canada and the US, pension plans withhold only 15% for taxes. Living in other countries require 25% to be withheld. Florida has no state income tax. The 15% withheld counts as foreign tax credits, so even though I file US tax returns, I don’t owe any additional tax in the US.
      A person who wants to be a non-resident cannot leave behind close family members.
      There is a long list of do’s and don’ts in Robert Keats book, The Border Guide: A Canadian’s Guide to Living, Working & Investing Across the Border. This takes a lot of research and paperwork. You have to decide if the taxes you save and the climate are worth the cost of health care. Also, I don’t know if you have to be an American citizen to buy health care in FL. I already have citizenship, so it wasn’t a concern.
      I sent a form to Canada Revenue requesting that 15% instead of 25% be withheld (a form a US tax preparer has that is due Oct. 31 for the following year). Then Canada Revenue sent me a form to fill out that showed my ties to each country. They made a decision on my resident status about a month later and sent me a written notice.

      • Chris

        That’s quite a list. What financial benefits do you find with having US residency instead of Canadian? Since you spend nearly equal time in both countries. Is paying the $700 for health insurance in FL worth the tax benefits if any in FL?

  9. My wife and i plan to retire in southern Spain where the cost of living is half of what it is here (already bought our retirement home while the Euro was dirt cheap during the banking crisis). We both hold Euro passports therefore the move will be quite simple.

    The tax treaty with Spain cuts the standard 25% tax rate down to 15%.

    I dont think the author is correct about OAS eligibility for non-residents. I understand that non-residents can collect OAS for a very limited time once you turn 65 (i believe only 6 months worth).

    • @Ron – Provided that you have lived in Canada for at least 20 years after reaching 18 years of age, OAS payments will continue even if you leave Canada.

      However, if you are receiving OAS benefits and do not meet this 20-year residency requirement and then subsequently leave Canada, payment for any period after six consecutive months, exclusive of the month you left Canada, may be suspended. Payment will resume in the month you return to Canada.

      Here is a link to the OAS eligibility requirements from Service Canada – http://www.servicecanada.gc.ca/eng/services/pensions/oas/pension/index.shtml

      If you are living in Canada, you must:

      -be 65 years old or older
      -be a Canadian citizen or a legal resident at the time we approve your Old Age Security pension application, and
      -have resided in Canada for at least 10 years after turning 18.

      If you are living outside Canada, you must:

      -be 65 years old or older
      -have been a Canadian citizen or a legal resident of Canada on the day before you left Canada, and
      -have resided in Canada for at least 20 years after turning 18.

  10. If only cheap is your motto you better know what you’re doing by parking yourself for retirement in Latin America. I come from the region (live in Canada now) and the number of young people/families leaving the region (or trying to) due to all sorts of instabilities, corruption, guerrillas, maras, etc is large. Why would you want to move there at the time of your life when your are the most vulnerable?
    I suppose when one comes from a relatively functional and rational country like Canada, financial freedom is all you may think you need in retirement. Well, think twice when choosing Latin America for retirement purposes.

    • “Latin America” is such a poor way to describe completely different countries with different situations. “North American” doesn’t describe someone who is living in a very French part of Quebec, someone in Louisiana, and someone in BC. Different people, cultures, history etc. Costa Rica is not the same as Mexico even though they both speak Spanish. Costa Rica is a safer place to live than where I live in BC. There is far more violent crime here than there. Just read the news.

      • Read the news, really, which news? Cause I regularly follow those from the south coming from Mx, Col, Ven, Bol, Pan, etc. (Spanish is my first language remember? Was born and lived there for more than 25yrs, hello?) I have friends from all those places and the story repeats itself. Of course I speak in general terms (no space/time for more). All I said is that on average Canada is far better/more stable than any of those places. Additionally CR has so many americans there than cheap is certainly not a term that applies to it any longer (on average again). If you live in some ditch hole in BC well that’s too bad for you. Just wanted to offer readers some free advice to make them think and research better before moving there. You think you know better? Then write your facts and go and try looking clever somewhere else.

        • Thanks CCC, I am sure you are right. We spent a couple of weeks in Costa Rica last year and really liked it although I think the weather would be too hot and humid for me even in January.

          The local grocery store in Manuel Antonio had an armed guard at the door in the evening, that is all I needed to know about the situation there.

          I believe it is relatively safe, but not as safe as most of Canada and the prices of most products other than local produce and beer are fairly high. Imported products are especially expensive.

          I would like to go back as it is incredibly beautiful, but I would not go expecting to save any money.

          • you’re welcome. Latin America has wonderful people and places but it also has ugly corners and all I am trying to raise is awareness about that. enterprises look first for local advise when investing abroad. why would an individual not do the same when it comes to retirement? I make no $ by doing this so I may not have all the facts but my advice is as transparent/honest as it can get.

  11. @echo,if you don’t have the full 40 years for full OAS benefits and you move to a tax treaty country, they will grant you a proportion. In our case, we got 16/40 and 14/40 of the OAS and we had left before 20 years in Canada after age 18. Similar calcs for CPP, which, of course, is based on your earnings, from 1966 when CPP started and our departure to Texas.

    We own a condo in Canada for summers and have to be diligent in not spending more than six months in Canada in any year.

  12. As far as I know you do not have to give up your Canadian citizenship to become a citizen of another country. There are many dual-nationality Canadians, myself included. Although the country to which you are going might prohibit dual nationalities, I think this is uncommon.

  13. “Panama – retirees easily qualify for residence status; top quality health care is affordable; and, bonus, everyone speaks English.”

    I’ve lived in Panama since 2006.
    -Everyone does NOT speak English, please quit repeating this lie. It is not the case. In Panama City, yes, more people speak English – mainly professionals etc. But English is certainly not widespread.
    -Healthcare is not cheap. Sure, you can see a doctor for $20, but REAL healthcare, hospitalization, for example is not cheap if done at a decent hospital.

    -The Pensionado visa is relatively easy to get, if you qualify. However, if you have a private pension (not from a government agency, they will require the issuer of the pension to confirm/prove his ability to provide the pension indefinitely. This may require you to get a “certification” from the issuer’s accounting firm/actuary. – So, not self-evident.

    -I have seen many Canadians come down here, totally unprepared for the shock of living in a country where third world services, infrastructure and attitudes are the norm. They end up leaving after six months, disillusioned and much poorer. Your article helps fuel phenomenon by repeating optimistic “rose coloured glasses” ideas of living in the developing world. My advice to anyone considering living in Panama/Mexico/Costa Rica/Ecuador:
    -spend time on the expat forums, research, and read the posts. Many, many questions have been asked and answered before.
    -think long and hard about this move.
    -before selling anything in Canada, come down for three months with a couple of suitcases. Rent a house (Craigslist, Encuentra24.com, Yahoo Groups etc…) and live here awhile. You can always hit the “undo” button pretty easily and head back to Winnipeg if things aren’t to your tastes.
    -watch out for the myriad of hucksters, scammers, “friends” etc…the worst ones are American/Canadians.
    -If moving to Latin America, LEARN Spanish. Some say you can get by on English-only, but that is extremely limiting, and makes you vulnerable as you need to depend on others to get anything done.

  14. A lot of great info here, especially in the discussion. It’s true: retiring abroad involves a number of financial, bureaucratic and cultural adjustments. But that said, a lot of people do it and end up happy. If you want to see some first-hand accounts, check out this post at travellingboomer.com: http://wp.me/p3TW9s-eu

  15. I was visiting a priest from New Hampshire who has lived in San Pancho MX for 18 years. He said where would you let an 8 year-old kid go to the grocery store alone at 10pm at night. Well they do here. No hay problema.

    PS Does Latin America include Cuba and Puerto Rico? Because North America does.

    • Of course there are many safe places in Latin America. However, keep in mind that when you retire to a poorer country the average local people will see you as a rich person (no matter if you were a blue collar worker your whole life). Your dollar goes much further than their local “peso”. That of course is not the case of your priest friend who I assume is pretty low in cash reserves.

      PS: I am originally from Cuba and certainly would not call myself north-american. Doubt the average puerto rican will do despite being counted officially as another US state (estado libre asociado?).

      • Never let the facts get in the way of a lively discussion!

        “http://en.wikipedia.org/wiki/List_of_North_American_countries_by_population”

        Of course living in a society, one must try to fit in rather than flaunt your wealth. Let the Mexican middle class handle that!

        • Yes, a wikipedia article with no references. Funny how a bunch of the same countries appear also listed only as Caribbean countries here
          “http://en.wikipedia.org/wiki/List_of_Caribbean_island_countries_by_population”

          The definition you blindly accepted is with respect to the ecuatorial line (above north below south). But more conventional (established) geography would tell you that the division including Caribbean and Central America is much more widely accepted. But I don’t have time to teach you geography or how to judge the quality/reliability of a wikipedia entry.

          PS: I know quite well mexican people, their culture, history and social challenges. Do you?

          • CCC
            You seem to be combative or defensive. I am not sure which. You refute my wiki with another wiki!

            Which “continent” contains those Caribbean Island?

            (I have read extensively about Mexican history, but my direct knowledge is limited to those Mexicans who live in PV and Gualajara. Not that it is relevant.)

  16. Great discussion…..very informative. I am a CDN citizen, CDN passport etc and I sold my residence to live abroad some 12 years ago. I return to Canada approx 20 days a year to visit siblings and YES, to file and pay my taxes for a personal return and for my investment holding company return.
    I have considered often the benefits to me of seeking non-resident status for tax purposes as I have been gone so long and I have nothing physical in Canada for many years. But since I have substantial assets in my CDN brokerage investment accounts it would seem to me that you must be prepared to move all of your assets out of Canada in order to achieve any advantage by becoming a non-resident.
    And my decision thus far has been to simply pay the tax due on my CDN investment income and consider it the price I must pay to enjoy the safety of the CDN financial system. Because Canada will still tax income earned in Canada (or RRIF withdrawals) even if you are now deemed to be a non-resident.
    With what I have seen in other countries financial systems that cause me concern together with the fact that our selection of investment products, accounts etc in Canada is actually pretty good and getting better all the time, it has been my decision to just stay put.
    Am I missing something?
    Thanks!

  17. The question of residency is really a question about taxes. If you move your money offshore for investing, then it is unlikely you will have to pay any taxes on the income it generates if you are not a legal resident of Canada.

    Personally I am not convinced that Canada can maintain the same level of services in health care and infrastructure with the baby boom starting to retire. Demographics will lead to a shrinking tax base. Plus, there is a housing bubble in parts of Canada. As we saw in the US, when the value of houses declines, the local government tax revenue falls. This leads to cuts. I am worried that in Canada we will see increased taxes on the “rich” and retired people. The defence is to move to a country that will not tax income generated outside the country.

    The problem is trying to keep one foot in Canada with a summer home. It might require a bit of dancing around the Canada Revenue Agency, but might be worth the effort if you have high enough income.

    A withdrawal of RRSPs when you reside legally in a country that has no tax treaty with Canada will trigger a 25% tax hit. That might be lower than the tax you have to pay down the road, and the money will then be out and free from government hands.

    Thoughts?

  18. I would say one thing; make sure you can handle the local language. Speaking the language is very important to enjoy your retirement overseas. Otherwise, you may feel more and more foreigner everyday and start missing home. Great article considering the topic from all angles.

  19. Providing you spend less than 6 months in Canada you can retain your non resident status: if you wish to spend that time with children and grandchildren it is reasonable that you have(own) a property to live in; whilst still predominantly a resident else where.

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