We are moving to Costa Rica but do not want to sell our home here. We plan to rent it out and use the income to live down south.
Based on that information, it sounds like your direction would be to become a non-resident of Canada for tax purposes.
As you mentioned, things like a blind for permanent residency down South and not planning to come back very much at all and essentially staying down there to enjoy the lifestyle, it doesn’t sound like you would be able to make a strong case to be a deemed resident of Canada. As well, when you do become a permanent resident of another country, you are deemed to be a non-resident of Canada for tax purposes.
So, having said all that, the biggest concern that you face is that there’s a very clear rule that non-residents who own property in Canada must have 25% of the gross rental income that’s collected from the tenants remitted to the Canada Revenue Agency as a non-resident withholding tax. Please note that this is the gross rental income that I am referring to. So if the tenant is paying you $2000 a month, your property manager is required by law to withhold $500 per month and submit that to the revenue Canada Agency on your behalf.
From that, you would just file a nonresident tax return every year where you could declare your income from your Canadian investments and also this rental income. And you will have the opportunity to try and get some of the taxes back.
Unfortunately, at this time Canada does not have a tax treaty with Costa Rica, so there is not a reduced tax rate available below the 25% rate that I have mentioned above.
