Moving from Canada to France: Tax and the Canada-France Treaty

Canada-France tax treaty: what changes when you move to France?

Once you are no longer a Canadian resident, Canada taxes only your Canadian income, mostly by withholding at source, and the Canada-France treaty decides which country may tax what. In the year you leave, you file a final Canadian return with your departure date, and most property you own that day is treated as sold. France's treaty is unusual on pensions: a Canadian workplace pension stays taxable only in Canada; France still counts it when working out French tax on your other income, then credits the French tax on it (Article 23).

A case stops being simple when you keep a home or family in Canada, have a workplace pension plus a large RRSP or RRIF, leave from Quebec, own a Canadian corporation or rental, or hold shares with large gains on the day you leave. Gather your move date and your family's, a list of what you owned on that day with its value and original cost, pension, RRSP and RRIF statements, and proof of your French residence.

French tax law itself (French residence, rates, returns, wealth and inheritance taxes) is outside this page.

When do I stop being a Canadian tax resident after moving to France?

You usually become a non-resident on the latest of the day you leave Canada, the day your spouse or common-law partner and dependants leave, and the day you become a resident of France (CRA). If you lived in France before moving to Canada and are going back, you usually become a non-resident on the day you leave, even if your spouse stays behind for a while to sell the home. What counts as cutting residential ties is in Canadian tax residency; to ask the CRA for its view on Form NR73, see asking the CRA to decide your residency.

If both countries treat you as a resident under their own law, Article 4(2) of the treaty breaks the tie in this order:

1. Where you have a permanent home available.
2. If you have one in both, where your centre of vital interests (personal and economic relations) is.
3. If that cannot be decided, or you have a home in neither, where you have a habitual abode.
4. If still tied, the country of which you are a national.
5. If you are a national of both or neither, the two tax authorities settle it by mutual agreement.

The treaty counts you as a resident of a country only if you are liable to tax there because of your domicile or residence (Article 4(1)), so keep French residence and tax records. A tie-breaker case is fact-heavy and worth reviewing before you file.

What do I owe Canada in the year I leave for France?

You file a final Canadian return with your departure date. On that day Canada treats you as having sold most of your property at fair market value, and you list your property on Form T1161 if it was worth more than $25,000 in total (CRA). Canadian real property, RRSPs, RRIFs and pensions are not deemed sold. Nor is property you owned when you last became a Canadian resident, or inherited since, if you were resident in Canada no more than 60 months in the preceding 120 months. You can elect on Form T1244, by April 30 of the year after departure, to defer the tax; the CRA asks for security when the deferred federal tax is over $16,500, or $13,777.50 for a former Quebec resident (CRA). The calculation and forms are in leaving Canada. If you leave from Quebec, Revenu Québec has its own departure steps: see leaving Quebec.

Can Canada still tax my gains after I live in France?

Yes, in two main cases. Under Article 13 of the treaty, Canada may tax:

• Canadian real property, and shares or interests in a company, partnership or trust whose assets consist principally of Canadian real property (Article 13(1)). Property through which the company, partnership or trust carries on its business, other than rental property, does not count toward that test.
• Other property, as a former resident, if you are a Canadian national or lived in Canada for ten years or more before the sale, and you were a Canadian resident at any time in the five years before the sale (Article 13(5)).

Other gains are taxable only in France (Article 13(4)).

Article 13(5) keeps a right for Canada; it does not create a tax. Canada taxes a non-resident's gain only if Canadian law reaches it, mainly when the property is taxable Canadian property. Listed shares are generally not, unless at any time in the previous 60 months you and related persons owned 25% or more of a class and more than half their value came from Canadian real property or resource property. Selling your former home later is covered in selling your home after leaving Canada.

How much does Canada withhold on Canadian dividends and interest paid in France?

Canada's tax on dividends paid to an individual resident of France is capped at 15% of the gross dividend (Article 10(2)), instead of the usual 25%. A French company that controls at least 10% of the Canadian payer's voting power is capped at 5%.

Canada's tax on interest is capped at 10% (Article 11(2)). In practice, most interest you receive from an arm's-length payer, such as a bank deposit, is exempt from Canadian withholding under Canadian law (T4058), so the cap matters mainly for interest from a related person or your own company. Income from a Canadian estate or trust is capped at 15% if France taxes it (Article 21(2)).

Your bank or broker applies the treaty rate only once you give it your French address and Form NR301 declaring your treaty residence; see Canadian bank and brokerage accounts after leaving. Rates for other countries are in non-resident tax rates in Canada.

Canada-France tax treaty and pensions: which country taxes my workplace pension?

Canada does. Article 18(1) says periodic or non-periodic pensions arising in one country and paid for past employment to a resident of the other are taxable only in the country where they arise. A pension from a Canadian employer's plan therefore stays with Canada, the reverse of many other treaties.

The treaty does not cap Canada's rate on that pension, so the payer withholds 25% under Canadian law (T4058). That withholding is generally your final Canadian tax, but a section 217 return lets you pay Canadian tax at resident rates on pension, RRSP, RRIF, CPP and OAS income when that is lower; the return is due by June 30 of the next year. Whether it helps is in the non-resident return for pension and RRSP income. Keeping or transferring the pension is in workplace pension when you move abroad.

Canada-France tax treaty and RRSP, RRIF, CPP and OAS: how much does Canada withhold?

Canada generally withholds 25% from RRSP, RRIF, CPP, QPP and OAS payments to a resident of France, because the treaty sets no lower cap; a section 217 return may lower it. The treaty does not name RRSPs, RRIFs, CPP or OAS, and it sets no cap on Canada's tax on them:

• Annuities (stated sums paid periodically) may be taxed where they arise (Article 18(3)).
• Income not covered elsewhere may also be taxed by the country where it arises, under that country's law (Article 21(2)).

Service Canada does not list France among the treaty countries with a reduced rate, so OAS, CPP and QPP paid to a resident of France fall under its 25% row for all other countries (Service Canada). RRSP and RRIF payments to a non-resident are also withheld at 25%, and the CRA points to its Part XIII calculator for pension and annuity rates; confirm the rate there for your payment type. Form NR5 can lower withholding during the year when you will file a section 217 return; see lower withholding on Canadian pensions abroad. Whether to cash out an RRSP before or after the move is in RRSP cash-out before or after leaving Canada.

Because Canada's tax on pensions paid to France is 25% or more, an OAS recipient in France files the OAS Return of Income each year by April 30, or OAS stops from July (Service Canada).

Can a Canadian retire in France and keep OAS?

Usually yes, with enough Canadian residence: Service Canada says you normally need 20 years of residence to keep OAS while living outside Canada (Service Canada). France has a social security agreement with Canada, which can count French periods toward that eligibility rule but does not increase the payment. Applying for CPP and OAS from abroad is in retiring abroad from Canada.

I keep my Canadian home and rent it out: what does Canada tax?

Canada keeps taxing Canadian rent and a later sale of the property. The tenant or agent withholds 25% of the gross rent. If you file Form NR6, undertaking to file a section 216 return, the agent can withhold on net rent instead; the section 216 return then taxes net rent and refunds any excess (T4058). The steps, Form NR6 and deadlines are in non-resident landlords.

I work in France for my Canadian employer: which country taxes the pay?

Once you live in France, pay for work you do in France is taxable only in France (Article 15(1)). Pay for days you work in Canada may still be taxed by Canada, and France then gives relief under Article 23. The 183-day rule covers the opposite case: if you are still a Canadian resident and work in France, France may not tax the pay when you are there no more than 183 days in any twelve-month period, the employer is not a resident of France, and the pay is not borne by the employer's permanent establishment in France (Article 15(2)). Payroll withholding and remote work in depth are in working for a Canadian employer from abroad.

How does the treaty avoid double tax between Canada and France?

Each country credits the other's tax on income the treaty lets the other tax. Canada deducts French tax on French-source income from Canadian tax, under Canadian foreign tax credit rules (Article 23(1)). France counts the Canadian income in computing French tax and gives a tax credit instead of a deduction (Article 23(2)(a)). For a workplace pension taxable only in Canada, France counts the pension but its credit equals its own tax on it, so that pension does not bear French tax on top of Canadian tax (Article 23(2)(a)(i)). For dividends, interest, annuities, other income and gains Canada may tax, it equals the Canadian tax paid, capped at the French tax on that income. How France applies the credit on its return is French law; check it with a French adviser.

What do I file in Canada each year after the move to France?

It depends on your Canadian income:

The full year-by-year test is in do you file every year after leaving Canada.

Example

All figures are illustrative and in Canadian dollars.

A retired teacher moves from Quebec City to Bordeaux

She receives a C$36,000 yearly workplace pension. Under Article 18(1), only Canada may tax it. The payer withholds 25%, C$9,000. With little other income, a section 217 return may lower her Canadian tax, so she compares resident-level tax with the C$9,000 before the June 30 deadline. Because she left Quebec, she also has Revenu Québec departure steps.

A couple leave Toronto with C$300,000 of Canadian bank shares

The shares pay C$12,000 of dividends a year. With Form NR301 on file with the broker, Canada's tax is capped at 15%, C$1,800, instead of 25%, C$3,000. The shares were deemed sold on the day they left, so their departure return reports the gain; they can elect on Form T1244, by April 30 of the next year, to defer paying the tax on it.

A Canadian citizen sells listed shares four years after moving to Lyon

Article 13(5) leaves Canada a right to tax, because she is a Canadian national and was resident within the past five years. Canada uses it only if Canadian law reaches the gain. Listed shares that are not taxable Canadian property are usually outside Canadian tax, so in most cases Canada does not tax the gain; under Article 13(4) only France may. If she deferred the departure tax on these shares with Form T1244, that deferred tax on the gain up to her departure date comes due when she sells.

Different for you?

• You keep a home, spouse or dependants in Canada, or both countries claim you: Canadian tax residency and a cross-border tax review.
• You have a workplace pension plus an RRSP or RRIF and want to know if a section 217 return pays: the non-resident return for pension and RRSP income and cross-border tax help.
• You are leaving Quebec: leaving Quebec and cross-border tax help.
• You will keep and rent your Canadian home: non-resident landlords and the cross-border tax service.
• You own shares, crypto or a private company with large gains on the departure date: leaving Canada and cross-border tax help.
• You own a Canadian corporation: close or keep your corporation when leaving Canada and corporate tax help.
• You left in a past year and never filed a departure return, a section 217 return or the OAS Return of Income: cross-border tax help.
• You are moving somewhere else: moving from Canada to Portugal, moving from Canada to Spain.