Leaving Canada: Questions for Your Accountant & Provincial Health Plan

For Canadians planning a move to Costa Rica, your biggest financial and administrative decisions happen in Canada before you board the plane. Whether you plan to remain a Canadian tax resident who spends five winter months in Guanacaste or sever Canadian residential ties permanently, you must coordinate two separate systems: your provincial health insurance plan and the Canada Revenue Agency (CRA).

1. Provincial Health Plan Absence Limits (Verify Before Departure)

Each Canadian province and territory sets its own physical-presence requirements to maintain public health coverage, as well as extended-absence exemptions (often available once every several years with advance notice). Even while your provincial coverage remains active, out-of-country emergency reimbursement pays only a tiny fraction of private hospital charges abroad—making private travel or expat medical insurance essential.

2. CRA Tax Residency vs. Costa Rican Immigration Status

Obtaining Costa Rican residency (or a Digital Nomad visa) does not automatically make you a non-resident of Canada for tax purposes. Under CRA Income Tax Folio S5-F1-C1, the CRA evaluates:

• Significant Residential Ties: A dwelling place in Canada available for your occupation, a spouse or common-law partner in Canada, and dependents in Canada.
• Secondary Residential Ties: Personal property in Canada (cars, furniture), social ties, Canadian bank accounts and credit cards, a Canadian driver's licence, and provincial health insurance coverage.
• No Canada–Costa Rica Income Tax Treaty: Unlike the U.S. or Mexico, Canada and Costa Rica do not have a bilateral convention for the avoidance of double taxation (only a Tax Information Exchange Agreement, TIEA, signed in 2011). Because Costa Rica uses a territorial tax system (generally taxing income earned from Costa Rican sources rather than foreign pensions), the absence of a tax treaty mainly means Canadian non-resident withholding tax on pensions (CPP, OAS, RRIFs, RRSPs) defaults to Canada's statutory 25% Part XIII withholding rate unless reduced under a Section 217 election.

3. Questions to Ask Your Canadian Cross-Border CPA

1. Based on our housing, family, and financial plans, will the CRA classify us as factual residents (taxed on worldwide income) or emigrants / non-residents?
2. If we sever Canadian residential ties, what is our estimated Departure Tax (deemed disposition at fair market value under ITA s. 128.1, Forms T1161 and T1243) on non-registered investments, private company shares, and non-Canadian real estate?
3. If we remain Canadian tax residents and purchase a Costa Rican property whose cost base exceeds $100,000 CAD—and rent it out for part of the year—what are our annual Form T1135 and rental income reporting obligations?
4. If we become non-residents of Canada, how does the 25% Part XIII non-resident withholding tax apply to our CPP, OAS, RRSP/RRIF withdrawals, and Canadian dividends—and would filing a Section 217 return lower that effective tax rate?
5. How are TFSAs treated if we become non-residents of Canada (where TFSA contribution room stops accruing and penalties apply to non-resident contributions)?