If you plan to relocate to another province, every choice you make will affect your taxes very significantly. In fact, it is not rare to see the right choice pay big for 2 reasons:
- Quebec is one of the most taxed provinces in Canada.
- Quebec is the only province where there are 2 tax returns to be produced.
While the substance of the rules that will be discussed remains the same across the provinces, we will primarily focus our attention on moves to and from Quebec.
Province of residence
For tax purposes, your province of residence is determined on December 31 at 11:59 pm. Determining the province of residence is first and foremost a matter of intention at the time. There are however some guidelines based on where you have the strongest attachment. In general, the strongest connection is determined as follows:
- Where you live: rental lease or the property where you usually live.
- Where your family is living.
- Where social ties lie: Driver’s license, medical insurance.
- Where your economic bonds are: bank account, employment…
Are you moving in December or January?
Do you expect to leave or arrive in Quebec at the beginning or end of the year? Talk to your accountant first. He will be able to accurately calculate the tax payable in each province according to its tax rate and advise you to delay or speed up your move.
Example 1 – Benefits related to Alberta (province)
George has resided in Alberta for 4 years now and makes about $100k per year. Following the loss of his job during the COVID-19 crisis, he makes the decision in December to move back to Quebec. He discusses it with his accountant and he knows that:Alberta is the least taxed province in Canada.
Québec is the most taxed province in Canada.
The solution seemed obvious, but in terms of numbers, the answer is surprising. George has every interest to settle in Quebec only starting in January.He would thus save $6926. A convincing enough incentive to stay in Alberta for a few extra weeks.
Example 2 – Benefits related to Quebec
Francia made $10k during the year while residing in Quebec. She would like to reunite with her sister who lives in Toronto. And as her friend George advised her, she contacted her accountant to advise her.According to Francia’s accountant, her case is more subtle than George’s because, although Quebec is the most taxed province, it has the highest taxes. Quebec is also the province that offers the most fiscal “sweets” for people with low incomes.
After a few simulations, the accountant comes up with the following results:
By staying in Quebec, Francia will have a tax return of 2880$.By becoming an Ontario resident, Francia will receive a tax return of $1579.
The result is incontestable, contrary to George, Francia has every reason to reside in Quebec until at least January to receive an additional $1300.
Things to keep in mind
As stated at the outset, the province of residence is primarily a factor of intent. Each province has guidelines that it can use to contest filed returns. For example, Revenu Québec could object to George’s return and require him to file a return as a resident of Quebec.
So, respect the spirit of the tax law and these guidelines within a reasonable framework to avoid any unpleasant surprises. If in doubt, one of our accountants will be pleased to help you during a consultation.