Financial Planning, Investment Counselling, Tax and Accounting

Contents

Choosing seasonal retirement outside of Canada
New children's fitness tax credit
The average price of a resale home in Canada rose by 11.1 per cent in 2006

Choosing seasonal retirement outside of Canada

Whether in search of a warmer climate or a renewal of family or cultural ties, many retired Canadians choose to spend a significant part of each year outside of Canada. If you have decided to spend a portion of your retirement years in a foreign country, you should know that an extended stay can have important implications for you and your family. It is vital to do your research and have a sound plan in place before you depart.

Canadian residency status

As a general rule, as long as your total absence from Canada is less than six months, Canadians are free to visit one or several foreign countries without fear of losing their residency status. Most foreign countries welcome Canadian tourist with the only requirement for entry being a valid Canadian passport. Some countries do require a visa and others have very strict limitations on the length of time you can visit. Costa Rica, for example, only allows visitors to stay up to 90 days. As such, before you leave Canada, it is important to find out precisely what documentation you will require and how long you can stay in your selected country as a tourist.

Taxation issues

The question of residency is primarily a taxation issue, not an immigration issue. Despite spending part of the year in a foreign country, snowbirds will continue to pay Canadian income taxes as though they had never left. It is however possible that you will also be assessed income taxes by the foreign jurisdiction.

If you visit countries that have tax treaties with Canada, like the U.S. and Mexico, these treaties protect you from this double taxation but you may still have to file a return in these countries. If you are spending time in a country that does not have a tax treaty with Canada, you should do some investigating and consult a foreign tax advisor to determine how this affects your personal tax situation.

Retirees who own property outside of Canada, such as a vacation home, must report those assets to the Canada Revenue Agency (CRA). This is to ensure a resident’s Canadian tax return reflects any capital gains and interest on foreign assets.

Health care issues

Health care is primarily in the hands of the provinces and each has their own residency requirements. Most stipulate that you must be physically present in your province of residence for at least 183 days each year. Check with your provincial health care office to ensure that the length of time you plan to be outside of Canada does not disqualify you from coverage. If this happens, you will likely be subject to a waiting period, after you return to Canada, before your coverage is reinstated.

Canadian provincial health care provides only limited coverage during your temporary absence from Canada and this coverage usually does not last more than three months. Further, the level of benefit this coverage provides may be inadequate to cover medical costs in a foreign country. For these reasons, you should consider purchasing private health care insurance to provide coverage for medical services received outside of Canada. Keep in mind that these policies typically only cover unexpected short-term health problems and if you have any special needs, research the facilities that you may require access to in advance.

New children's fitness tax credit

The Government of Canada proposes to allow, starting in 2007, a non-refundable tax credit on eligible amounts paid by parents to register a child in an eligible program of physical activity.

Amount of the tax credit

The proposed children's fitness tax credit will allow parents to claim a maximum of $500 per year for eligible fees paid for each child who is under 16 at any time during the year. As with most other non-refundable tax credits, the credit is calculated by multiplying the eligible amount by the lowest marginal tax rate (15.5% in 2007).

Example:

Mary registered her three children, Julie (9 years old), Samantha (10 years old), and Eric (15 years old) in an eligible program of physical activity and paid fees of $750 for each child on January 16, 2007. To calculate the amount that she can deduct from her taxes owing on her 2007 income tax return, she uses the following formula:

Step 1:

Step 2:

Eligible activities

The Department of Finance has indicated that, in order to qualify for the tax credit, a program must be:

• ongoing (either a minimum of eight weeks duration with a minimum of one session per week or, in the case of children's camps, five consecutive days);
• supervised;
• suitable for children; and
• substantially all of the activities must include a significant amount of physical activity that contributes to cardio-respiratory endurance plus one or more of: muscular strength, muscular endurance, flexibility, or balance.

Don't forget to ask for a receipt

You can only claim fees that are related to the cost of registering a child in an eligible program of physical activity. Receipts will be required to substantiate your claim for the credit. The organization will determine the part of the fee that qualifies for the tax credit.

The year in which the tax credit can be claimed is determined by the date when the fees are paid, not when the activity takes place.

The average price of a resale home in Canada rose by 11.1 per cent in 2006

The average price of a resale home in Canada rose by 11.1 per cent in 2006 according to year-end figures released last month.

According to the Canadian Real Estate Association (CREA) the average home sold through the Multiple Listing Service (MLS) went for a record $276,974 last year.

The 11.1 per cent increase was the largest since 1989.

The biggest jump was in booming Alberta where the average resale home was up 30.8 per cent in 2006 over 2005. The Northwest Territories followed with a 21.4 per cent increase and Manitoba with 12.2 per cent.

The highest average price, meanwhile, was in British Columbia, with an average price of $390,963 in 2006, a rise of 17.7 per cent from $332,224 in 2005. The second highest was $291,065 in the Northwest Territories, followed by $285,497 in Alberta. Most provinces in central and Atlantic Canada posted annual increases in the four to seven per cent range. But Newfoundland and Labrador's average home price slipped 1.2 per cent in 2006 to $139,542 — the only province to record an annual drop.

"The resale housing market became more balanced in 2006 due to an increase in new listings but it was still a seller's market — particularly in the western provinces," CREA said in a statement.

However, the real estate association said prices showed unmistakeable signs of easing in the fourth quarter. It pointed out that the average year-over-year price in December rose by 8.4 per cent over the previous December. That was the smallest increase of the year.