Considering Retiring Abroad?

With the prospect of retirement on the horizon, you may be starting to think about where in the world you want to retire. Residing abroad – either permanently or temporarily, may appeal to you as an exciting opportunity for a variety of reasons. You may simply want to start anew, you may want to explore a new country and its’ culture, or you may want to escape from another harsh Canadian winter. Whatever the reason, proper research, planning and preparation helps to ensure that moving abroad is an appropriate and financially viable plan for you. Below, I have outlined basic information and provided some helpful links about tax implications, pensions, public benefits, medical care and some additional things to consider when contemplating retiring overseas.


Where do I want to retire? When choosing your new home, make sure that you do thorough research on the political, historical, and sociocultural aspects of the new country. If possible, go visit and explore the country prior to making the decision to move there. Eat the food, meet local people, and familiarize yourself with the cultural norms to ensure that you can not only survive, but thrive, within the new cultural context.

The requirements for a retirement visa will vary depending on the country that you are applying for. Typically, proof of Canadian citizenship, proof of pension, and proof of no criminal past, are needed to apply for a retirement visa. Some countries may require additional information, such as proof of private health care, or proof of financial viability. The Canada Revenue Agency (CRA) has a great deal of detailed information regarding the specific requirements for each country.


How do taxes work abroad? Depending on the amount of time you remain outside of Canada, how often and for how long you return back to Canada, and your residential ties with both Canada and your new country, you will fall into different categories of residency status. Residential ties can be significant ties (i.e. you own a house in Canada, or your spouse/dependents reside in Canada) or secondary ties (you have other personal property in Canada, or you have economic ties with Canadian banks). The four main residency statuses include: factual residents, deemed residents, non-residents, or deemed non-residents. Your residency status will determine the amount of income tax that you must pay. To determine which residency status you would assume, please refer to this website. Additionally, if you decide to continue working into your retirement (and dependent on the conditions of your employment), you may also be eligible for an Overseas Employment Tax Credit or Foreign Tax Credit, which can provide a significant reduction in federal tax payable for qualifying individuals on your personal income tax return.


What about my public pension benefits? Retiring outside of Canada my change the amount and way you receive your Old Age Security (OAS) and Canada Pension Plan (CPP) disbursements. OAS is monthly payments available to those over 65 years of age that have spent at least 20 years in Canada after the age of 18. CPP is also a monthly payment plan that is available to individuals who have been contributing to it over the course of their working years in Canada. When living abroad, both OAS and CPP may be subject to “non-resident tax” – an income tax that is usually taxed at a 25% rate, unless Canada has a tax treaty with the new country. To determine the non-resident tax rate that applies to your country of residence and any applicable exemptions, please refer to this table.  Furthermore, if your annual income is greater than the net world threshold ($75, 910 in 2019), you may be subject to an OAS recovery tax, as well. The OAS recovery tax is dependent on the difference between your income and the net world threshold, and will determine if you’re required to repay only a portion or the entirety of your OAS payments.


Will I still have Canadian medical coverage? Many countries will require you to provide proof of private health care coverage when applying for a retirement visa. This is typically required so that foreigners, especially foreign retirees that have higher health expenses, are not using their health care system without paying taxes. Additionally, being outside of Canada for a long period of time can also affect how you are covered by your provincial health care plan. While each province has different regulations surrounding this, most provinces will still grant you Canadian health care coverage if you are out of the country for less than 183 days. In Ontario, however, you are still eligible for health care coverage if you are out of the country for up to 212 days. When beginning your research and preparing your overseas retirement plan, check with your provincial health department to ensure that you fully understand the implications your stay outside of Canada has on your health care coverage.


Other things to consider. When thinking about retirement to a new country, there are additional factors that must be taken into consideration. By uprooting your life and moving abroad – either temporarily or permanently, your social network and personal relationships can be greatly disrupted. For physical, mental and emotional purposes, it is important to establish a support network of friends and acquaintances in your new country. This will not only make it easier to acclimatize to your new environment, but more importantly, it will make your experience abroad more enjoyable!

The main takeaway is simple – do your research. Check out the links listed above to determine your residency status and what your status means for your finances in retirement. Please do not hesitate to contact any of our knowledgeable team members here at the Bongard Wealth Advisory Group to learn more.