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The view from an oceanfront cottage at Coral Sands Resort over Pink Sands Beach, in Dunmoretown, Harbour Island, Bahamas.The Canadian Press

Sunny climes have long beckoned retirees who are fed up with freezing Canadian winters. Along with warm temperatures, lower taxes – or no taxes whatsoever – particularly appeal to the wealthy.

The controversy over the release of the so-called Panama Papers, as well as the federal government's new push to raise taxes for high-income earners and to maximize revenue collection, are focusing attention on foreign tax havens. High-net-worth individuals looking to limit their tax exposure by relocating in retirement need to follow residency, tax and other rules.

"For the super-wealthy, taxation can be a very convincing reason to change residency," says Tina Tehranchian, a certified financial planner who is the branch manager and senior financial planner at Assante Capital Management Ltd. in Richmond Hill, Ont.

It's no surprise that Canadians of all income levels are keen to retire in warm places. Popular destinations are detailed in publications such as International Living, which issues an annual top-10 index of foreign retirement spots. This year they range from Portugal and Spain to Thailand, Ecuador and Panama.

Lower income earners and people who have not saved up enough for retirement look for destinations that are significantly cheaper to live than Canada. In Nicaragua, you can have a great retirement for $1,200 a month, Ms. Tehranchian says, which is about what a Canadian might receive from Canada Pension Plan and Old Age Security payments.

High-net worth Canadians, meanwhile, take up residence where they can pay little or no tax, which is more important than ever now that those in the highest tax bracket are paying as much as 53 per cent.

Either way it's important to realize that "you're changing your way of life," she says. It's therefore best to seek advice from qualified financial planning, tax, accounting and legal professionals, both in Canada and the place you're thinking of residing.

Those who want to change their tax home must become a resident in the new country and a non-resident of Canada, which is also best accomplished with professional counsel.

Tax considerations are "a significant factor," says Ron Choudhury, a partner at Miller Thomson in Toronto who specializes in tax planning for wealthier individuals. He says his clients ask particularly about low-tax retirement destinations. "As our tax rates keep climbing, the questions keep increasing."

High-net-worth retirees look for stable, warm jurisdictions with a high degree of English spoken and a comfortable lifestyle, while minimizing their taxes both there and in Canada. Mr. Choudhury steers clients away from countries where controls are lax and that may attract investments that are shady in both their legality and security. "Do not confuse legitimate tax planning with tax evasion," he says.

It's imperative to terminate Canadian residency, which means cutting all primary ties to Canada and as many secondary ties as possible, Mr. Choudhury says. Primary ties include your principal residence, your spouse and your dependents; in other words, if you keep your home in Canada and your spouse and children retain residency here, you are unlikely to be considered a non-resident. Secondary ties can be vacation properties, provincial health-care plans, credit cards, cars, bank accounts, newspaper subscriptions and memberships in Canadian organizations.

"The idea is to eliminate as many of those ties as possible," he says, noting that it's especially important to leave your provincial health-care plan.

Upon departure, a final tax return must be filed. The emigrant will be deemed to have disposed of all assets (barring certain exceptions, such as real property and RRSPs, and is taxed on inherent gains on such assets. This can become expensive if capital gains have accrued, Mr. Choudhury cautions. You can ask to post a security to buy time if you lack sufficient cash.

You must take up residency in a new country – living on a boat won't do it – which can require the payment of a hefty fee for a residency permit.

Emigrants should also note which countries Canada has bilateral tax treaties with, Mr. Choudhury says. Dividends, periodic pension payments and other such passive income receipts are subject to a 25-per-cent withholding tax in Canada for non-residents, but that amount can be reduced to 10 or 15 per cent where such a treaty exists.

Some low-tax countries without full bilateral treaties instead have Tax Information Exchange Agreements with Canada, but those do not offer any reduction from withholding taxes, Mr. Choudhury says. The new country in which you are living can give you credit for tax paid in Canada, although you won't get anything back if the personal tax rate in your new place of residence is zero and you're not paying anything, of course.

Emigrants going abroad also should do some estate planning before they go to make sure "you're not exposing your assets to estate taxes," Ms. Tehranchian says, which especially has ramifications for wealthier people. For example in the United States, inheritance taxes are triggered for those with worldwide assets worth about $5.3-million or more.

Low-tax destinations

High-net-worth retirees looking for low-tax jurisdictions to emigrate to should seek advice from financial experts both in Canada and their destination country. Tax havens have varying tax rates, pacts with Canada, security and economic stability. The costs of a residency permit and property also need to be factored in. Here are a few top locales.


  • Has a humid, subtropical climate, though summer temperatures rarely exceed 30 degrees. Its economy has been buffetted by the global recession, yet it retains one of the highest GDP-per-capita ratios in the world.
  • Personal tax rate: 0 per cent.
  • Tax Information Exchange Agreement in force with Canada.
  • Residency permits are free, but the price of property can be substantial.


  • Has a warm, tropical climate and a highly successful tourist industry. The country has a stable government and relatively stable economy.
  • Personal tax rate: 0 per cent.
  • Tax treaty in force with Canada.
  • The annual residence permit fee is $1,000 Bahamian dollars per head of household (about $1,300 Canadian) plus a small fee for dependents. A permanent residence permit costs $10,000 (about $13,000 Canadian) per head of household and a lesser amount per dependent.

Cayman Islands

  • This nation has the highest standard of living in the Caribbean. The country is known for having never levied any form of income, wealth, capital gains or payroll taxes on its residents.
  • Personal tax rate: 0 per cent.
  • Tax Information Exchange Agreement in force with Canada.
  • A residency permit varies based on income, but it may be as high as $12,500 Cayman dollars (about $19,700 Canadian).

United Arab Emirates

  • This Middle Eastern country is highly developed and has one of the highest GDP growth rates in the world.
  • Personal tax rate: 0 per cent.
  • Tax treaty in force with Canada.
  • The cost of a residency permit is 1,100 UAE dirhams (about $385 Canadian) for owners of real estate.

Hong Kong

  • It’s one of the world’s most important financial centres and a top tourist destination.
  • Personal tax rate: 17 per cent, on income of more than $120,000 Hong Kong dollars (about $20,000 Canadian).
  • Tax treaty in force with Canada.
  • A residency permit costs about $32 (Canadian), with no fee to apply for permanent residency after seven years.