Understanding the rules for acquiring an OA and leaving Canada is essential if you are a Canadian citizen seeking to relocate. In addition, if you are unsure about your situation, it is a good idea to consult a lawyer before making the final decision. Consider asking questions such as whether you can combine your pensions from both countries, how withholding taxes work, and the residency requirements in your new country.
Residency requirements
If you plan to live outside Canada for an extended period, you may be interested in learning about the residency requirements for receiving an OAS pension. These requirements are similar to those for living in Canada.
First, you’ll need to be a Canadian citizen. That means that you were a resident of Canada when you were 18 or younger.
You’ll also need to have lived in Canada for a minimum of ten years, and you must have been an adult for at least two of those years. The rest of your time in Canada can be determined by your social security agreement with Canada.
If you have lived in Canada for a significant amount of time, you might qualify for a partial or complete OAS pension. However, it’s essential to keep in mind that you must be 65 or older to receive an OAS pension.
Withholding tax
When you receive a pension from the Old Age Security (OAS) system or Canada Pension Plan (CPP) and decide to move abroad, it is crucial to understand the tax implications. Depending on your new home country, you can eliminate or reduce the withholding tax.
The amount of taxes you pay depends on your overall income, the type of tax required, and whether you are a Canadian resident. If you are a non-resident, you must file a Canadian income tax return each year. In addition, you can request a reduced tax rate if you are eligible.
OAS pension payments are subject to a flat 25% withholding tax. In addition, you may be subject to an Old Age Security recovery tax, also known as a clawback, if you have more income than the pension amount.
Depending on your country, the amount of withholding tax you must pay will be determined by the tax treaty between the two countries. Non-residents can save up to 15% on taxes if they live in a tax treaty country.
Can you combine your pensions from both countries?
You may have accumulated pension rights in multiple jurisdictions if you have spent time or earned money in more than one country. One such country is Canada. It has signed social security agreements with other countries. For example, a Canadian ex-pat working in Canada may be eligible for a state pension from that country. So, is it worth your while to meld your allowances? This is a question for your independent financial adviser.
The decision takes work. You will need to weigh the pros and cons before making the decision. A savvy financial adviser can point you in the right direction. After all, you are probably in retirement or prepping for it.
One last caveat is that each country’s unique pension system is distinct. This may make the task of merging your pots a tad more challenging. Fortunately, a little legwork on your part will do the trick.
Consult a lawyer before moving
There are some things that you should know before moving out of Canada. These include the ten-year rule and the OAS pension. It would help if you also talked with a cross-border tax expert to learn about your tax exposure. Depending on your situation, consider insurance.
The ten-year rule means that you must have been a Canadian citizen or legal resident when you left. If you meet this requirement, your OAS payments could continue. However, you may still qualify for social security agreements.
For example, Helen’s father might qualify for a partial OAS pension. But if he does not meet the ten-year criterion, he will not receive complete assistance.
If you are considering leaving Canada, you should consult a cross-border tax accountant for information on your financial and tax situation. They can advise you on how to minimize your tax exposure and ensure that your assets are taxable in the country you’re leaving.