Tax implications of long-term volunteering/working out of Canada - international non-resident cross border income tax help estat


I am a retired Canadian woman in my early 50s who is considering volunteering in Honduras (teaching English to disadvantaged children) for an extended period of time. While I am away, my main source of income will be interest income and capital gains on my investments.

In Honduras, I will likely receive room and board and a stipend of approximately $200/month to assist with living expenses.

Does Canada have a tax treaty with Honduras? If so, can you refer me to the relevant government legislation?

Many Canadians live in Canada for 1/2 year and live out-of-country the other half. Are there tax advantages to this? 

What are the tax implications if I am out of Canada for an entire year or more and do not have a Canadian address? Are there benefits, to declaring myself a non-resident of Canada?  For example, while living out of the country, can I cash out my RSP without paying tax on it?

I do not necessarily need to volunteer in Honduras if there is another country that offers more tax benefits.

Any help/advice will be greatly appreciated.  Thanks very much.

david ingram replies:

There is no tax treaty with Honduras. 

There is no tax advantage to six months in Canada and six months out.  The advantage is that by spending 183 nights or more ion your home province, you keep you provincial medical alive.  For most of us, the cost of out of country medical without basic coverage is prohibitive.   For instance at 65, most Canadians will pay $800 to $1,200 us PER MONTH for medical coverage ou8t of the country i fthey do not belong to a basic provincial medical plan.  Ontario only requires you to be in Ontarion for 153 nights a year to remain covered for OHIP and medical.

I am not even going to try and touch this one in any detail.  If you truly leave Canada as a resident and take up a bone fide residence in any other country, Canada will tax you 25% on any interest or dividends paid to you  in the other country unless you are in a tax treaty country, in which case the Canadian tax on interest will likely be 10% and the Canadian tax on dividends and royalties will likely be 15%.

AND, you will need to buy private medical insurance.unless you are in Australia, England or Sweden where there are national universal health insurance plans.

Over the years I am sure i have had  over 100 people who left the country and kept paying their provincial medical premiums or kept the free card and found out to their $100,000 or more dismay that they were not covered when their medical emergency ocurred.  The December 1992 issue of Reader's Digest had four such stories as I remember.  There is nothing new about this fact but people keep on falling into the false sense of security that they are covered because they have a piece of plastic. 

I will compare it to auto insurance.  You might have a wonderful car insurance policy with $5,000,000 public liability and $100 deductible for collision.  However, if you are in anb accident and have been drinking, your car insurance is null and void.

If you do become a resident of "any" other country, you will pay 25% tax on any lump sum withdrawal from your RRSP.  At one time, the tax treaties with Spain and Holland and a couple of other countries did allow you to take out your RRSP tax free from Canada but those situations no longer exist for any place that I know.  If yiou are in most tax treaty countries today, the withholding on a monthly annuity or RRIF paymnet from your RRSP is 15% and 25% if you are not in a tax treaty country.

Honduras is as good as any country for your purpose.  The Island of Roatan is particularly nice when there are no hurricanes expected.

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Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at If you forward this message, this disclaimer must be included."
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Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or a phone consultation is in Canada.
This is not intended to be definitive but in general I am quoting $800 to $2,400 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out
$2,400 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.
Just a guideline not etched in stone. 
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