Hello
I would like to know what a retired citizen of British Columbia,
Canada has to pay in Federal, State, City, property and/or any other
government imposed taxes including death tax on income derived from
capital gains, interest and dividends.  I would also like to know if
he would be liable for those taxes if he resided abroad on a permanent
basis.

In other words, the cost of living in Costa Rica is much less so if he
lived there on a permanent basis would he still have to pay Canadian
Taxes.

regino-ga:

Thank you for your Question. I will divide this Answer into several parts. 

===============================================

First, you ask what a retired citizen of British Columbia, Canada,
would have to pay in taxes on income derived from capital gains,
interest, and dividends.

To answer this, we must first presume that the retired citizen is
currently a resident of British Columbia, Canada, as defined by the
Canada Revenue Agency. I will go deeper into this distinction in the
answer to the second part of your question. We will also assume that
the retired citizen has been resident in Canada since January 1st,
2006, and that we are talking about their tax situation for fiscal
year 2006.

Applicable Taxes
----------------

As a resident, the individual would be responsible for paying both
federal and provincial income tax on any taxable income.

If they own any real estate, they will have to pay property tax on
that property to the municipality that the real estate is located in.
Rural property is taxed by the provincial government of BC, directly.

Any purchases made by the individual in British Columbia may be
subject to provincial sales tax (PST), and also to the federal goods
and services tax (GST).

There is no 'death tax' in Canada, but someone's death can create
taxable situations (as outlined here:
http://www.rbcinvestments.com/ds/ep_taxes.html ).


Income Tax
----------

Current applicable income tax rates can be found on the Canada Revenue
Agency website, here:

http://www.cra-arc.gc.ca/tax/individuals/faq/taxrates-e.html

The federal tax rates for 2006 are:

  15.25% on the first $36,378 of taxable income; plus,
  22% on the next $36,378 of taxable income; plus,
  26% on the next $45,529 of taxable income; and plus,
  29% of taxable income over $118,285.

The BC provincial tax rates for 2006 are:

  6.05% on the first $33,755 of taxable income, plus,
  9.15% on the next $33,756, plus,
  11.7% on the next $10,000, plus,
  13.7% on the next $16,610, and plus,
  14.7% on the amount over $94,121 

These tax rates are applied to an individual's taxable income. Taxable
income is calculated based on the individual's income from all
Canadian sources, less any tax credits allowed by the revenue agency.
As well, if the individual is a resident of Canada and has income from
foreign sources, that income may also be taxable (it depends on
whether the foreign income has been taxed in the country of origin
already, and whether Canada has a tax treaty with that foreign
nation). It is the responsibility of the individual to report any
foreign income on their Canadian tax return.

All individuals are provided a 'basic personal amount' of income for
which they are not taxed, with this amount varying depending on their
province of residence. For our hypothetical BC resident, the amounts
for 2006 are:

  Federal basic personal amount: $8,839
  Provincial basic personal amt: $8,858

These amounts are deducted from the total income before calculating
each of the income taxes payable (ie. deduct only the federal amount
when calculating the federal income tax, deduct only the provincial
amount when calculating the provincial income tax).

There are other non-refundable tax credits available, summarized here:

http://www.taxtips.ca/nonrefundablecredits.htm


Capital Gains, Interest, Dividends, and Taxable Income
------------------------------------------------------


Generally speaking, the current capital gain 'inclusion rate' in
Canada is 50%. That is, for every dollar of net capital gain that an
individual realizes as the result of a transaction, only fifty cents
of that gain is considered when calculating taxable income. Examples
of transactions where this applies, can be found here:

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/reporting-income/lines101-170/127/gains/when/menu-e.html

Interest income is 100% included in calculating taxable income:

http://www.cra-arc.gc.ca/tax/individuals/topics/income-tax/return/completing/reporting-income/lines101-170/121/menu-e.html

Dividend income is taxable as well, with the applicable rate depending
on whether the divident is received from a Canadian corporation. Draft
legislation for the 2006 tax year will mean that 145% of the value of
any dividend received from a Canadian corporation must be included in
calculating taxable income, but it qualifies you for a dividend tax
credit of 27.5% of the actual dividend for federal income tax, and
17.4% of the actual dividend for the BC provincial income tax. If the
dividend is from a non-Canadian corporation, then 125% of the actual
dividend in included in taxable income, with credits of 16.67% for
federal, and 6.375% for the BC provincial income tax. This is much
better illustrated with an example, and a good one can be found here:

http://www.taxtips.ca/divtaxcredits.htm 


Property Tax
------------

Property tax is collected by municipal governments (or by the province
in the case of property located in unincorporated rural areas) based
on the assessed property value as listed by the BC Assessment
authority ( http://www.bcassessment.bc.ca/ ).

Applicable property tax rates are set by each municipality based on
their budgetary needs, and includes requirements ranging from civic
services, to school boards, to transit systems. The rates vary greatly
depending on the size of the municipality and the property values. A
summary of these tax rates can be found here:

http://www.cserv.gov.bc.ca/LGD/infra/statistics_index.htm

The data here is especially informative, as it compares the property
tax on a hypothetical representative house in each municipality; you
can clearly see the impact of property values on the tax rate needed
to sustain the local government's budgetary requirements.


Sales Tax
---------

In British Columbia, provincial sales tax is charged at 7% of the
purchase price on the retail sale of applicable goods and services. In
addition, the federal goods and services tax (GST) is charged at 6% on
most retail purchases.

Application of the PST is outlined here:

http://www.rev.gov.bc.ca/ctb/publications/brochures/bcsales.htm

--
"ARE ALL PURCHASES AND LEASES TAXED? 
  
No, you may purchase or lease certain goods and labour services
without paying PST. Exempt goods include clothing and footwear for
children under 15, all food products for human consumption, restaurant
meals, books, magazines, newspapers, medications and bicycles.

Labour services that are not taxed include automobile towing and
emergency battery boosting, clothing alterations and services to
exempt items (such as bicycle repairs, dry cleaning and laundry and
personal services like hairdressing)."
--

Application of the GST is outlined here:

http://www.cra-arc.gc.ca/tax/business/topics/gst/individual/taxable/taxablexempt_multi-e.html

--
"Exempt goods and services
A small number of goods and services are exempt from GST/HST. This
means GST/HST is not charged. Some common examples of exempt goods and
services are:

- used residential housing; 
- most health care and dental services; 
- certain childcare services; and 
- many educational services. "
--


Tax Situation Upon Death
------------------------

The fine folks at taxtips.ca describe this situation best, so I will
simply direct you to their website to read more on the tax impact
should a person die:

http://www.taxtips.ca/wills_&_estate_tax.htm#MinimizeTaxDeceased


===============================================

 
The second part of your Question asks whether the retired citizen of
British Columbia, Canada, would be liable for any of these taxes if he
resided abroad on a permanent basis. We will use Costa Rica as the
place of residence for this part of the Answer.


Residential Status and Canadian Taxes
-------------------------------------

The Canada Revenue Agency takes great pains to define whether or not a
Canadian citizen has to pay taxes if they are not a resident of
Canada. In fact, they have written a comprehensive Interpretive
Bulletin on this topic:

http://www.cra-arc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html

To summarize, if a Canadian citizen who was originally deemed a
resident of British Columbia, Canada, were to move to Costa Rica,
severing all residential ties with Canada (in other words, by
primarily not having plans to return to Canada, not maintaining a home
in Canada, not having an employment contract in Canada, and not having
a spouse still residing in Canada), then they would most likely be
deemed to no longer be a resident of Canada. In this case, the
following tax guide from the Canada Revenue Agency explains what needs
to happen next:

"Emigrants and Income Tax"
http://www.cra-arc.gc.ca/E/pub/tg/t4056/README.html

The greatest impact is the deemed disposition of property owned on the
date that the individual ceases to be a resident of Canada. Any
capital gains is calculated on the fair market value of the property
on that date. As discussed in the guide, it is possible to defer
paying any applicable income tax until such time as the property is
actually sold; however, the key point is that the Canada Revenue
Agency expects to be paid the tax owing eventually. Canada does not
have a tax treaty in place with Costa Rica at this time, so this may
result in a form of double taxation should the capital gains also be
taxable in Costa Rica at the time of actual disposition.

In addition to capital gains, if the former resident of Canada
continues to receive interest or dividend income from Canadian sources
(such as a bank, or a Canadian corporation), then those sources must
be informed of the change in residential status so that they can
withhold tax directly at the source to remit to the Canada Revenue
Agency on your behalf.

If the former resident continues to own real estate in Canada, he or
his agent will continue to have to pay property tax on that property.

===============================================


I hope that the above provides you with the information you were
seeking. The Canada Revenue Agency also maintains a rich website with
lots of information for individuals with tax-related questions. In
particular, they have a section devoted to international and
non-resident topics:

http://www.cra-arc.gc.ca/tax/nonresidents/menu-e.html

Please let me know if you would like me to clarify any part of this Answer.

Regards,

aht-ga
Google Answers Researcher

This was excellent work.  Thank you very much.