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Hi Allison,

You Canada Pension Plan or Quebec Pension Plan benefits will be taxed in Canada only and you will need to submit a T1 General annually as you usually do now. This will change if you become a "Deemed Non-Resident for Tax Purposes" at which point you would be subjected to a 25% withholding tax on any Canadian sourced income. This will really not be in your best interest since that is a non-refundable tax which quits any tax liability. You will not need to file a T1 General from that point on, but you won't get any refunds on taxes paid.

Once you become a "Deemed Non-Resident" you then should file an T4145 Election under Part 217 and a T1 - General to correct that situation (filing as normal).



You are also required to report your "Worldwide Income" on your Canadian T1 General. So, if you have any Ecuador (or any other country) sourced income you must report it. That is NOT to say that you will be taxed on it. That said, it is calculated in your overall income so it might have the end result of bumping you up into a higher income tax bracket, which means you might pay slightly higher tax on your Canadian sourced income, but even that's not too likely.

If your only source of income will be your CPP/QPP benefit payment you can actually reduce your income tax withheld by filing an NR-5 form. I did exactly that and my rate dropped down to 10%, and if you have no other Canadian sourced income then you won't exceed the Basic Personal Exemption and you will get every cent of that back in the form of an Income Tax Refund when you file your annual return.

If you have any income in Ecuador, depending on their tax laws (they may not require you to report under a certain annual income, like Brazil - I don't know) you will need to of course file an income tax return in Ecuador too. They may also require you to report "Worldwide Income" (many countries do now) so you'd have to report your CPP/QPP benefits, but would not be taxed on that income.

See the following information:



Cheers,
William James Woodward, Expat-blog Experts Team

Thank you for your very thorough and informative reply.
How would I become a "deemed non resident for tax purposes"? Is it avoidable? It really doesn't sound like a good situation to be in.
Thanks again,
Allison

If you request to be "Deemed a Non-Resident for Income Tax Purposes" (which is only beneficial for those whose tax liability would be over 25%) or if you have absolutely no bank account, residential ties, family, permanent address in Canada. You should really not hope for this to happen because it is really not in your best interest. If possible you should arrange with a close family member (child, sibling, etc.) to use their address as you "permanent residence" and make sure to keep your Canadian bank account open in order to receive direct deposits of CPP/QPP, Income Tax Refunds, etc.

Thank you, again, for clearing that up for me,
Allison

Hi again, after thinking about this, I'm confused again. If someone is deemed a non-resident, they are subject to a 25% with holding tax, but if they file an NR 5, they end up paying only 10% ? Doesn't NR 5 mean non-resident?
  The pension I receive is from military service, I don't get CPP yet, so I guess this means I wouldn't even be able to file an NR5?

You will only file an NR-5 should you somehow become a Deemed Non-Resident. Right now if you're earning a Canadian income and continue to earn Canadian income in Ecuador you just file your (normal)T1 General as usual. If you already e-File your returns each year so much the better you just continue to do that. You do nothing different whatsoever unless you're in an over 25% tax bracket once in Ecuador and request to be "Deemed a Non-Resident", or if your circumstances (previously described) cause the CRA to deem you one themselves.

The process is the same for earned income, pension income (CPP/QPP, DVA, private, etc.).

If your DVA pension is your only source of income once you move to Ecuador, you do nothing other than file as usual. If you also have other income in Canada you report it too. If you have Ecuador sourced income you report that as "World Income" once you begin receiving CPP you just add it on the appropriate line.

If for some reason you do end up being a Deemed Non-Resident you will need to file the NR-5 and request to be a "Deemed Resident" file an NR-5 and begin using the T1 General For Non-Residents and Deemed Residents. which is a different form from the ordinary T1 General,

NOTE:  T1 General for Non-Residents and Deemed Residents CANNOT be e-Filed, these must be paper filed and mailed to the International Tax Services office of CRA.