TIL: Danish taxes are higher than Canadian taxes.

As a completely useless piece of advice for most people, I learned today that Canadians working in Denmark are advised not to give up their Canadian resident status – advice that is the complete opposite for Canadians working abroad in other countries.

As I understand, it comes from two different sides: one is that house appreciation for Canadians (non-resident) abroad is subject to Capital gains tax for the period while you’re away.  If you expect to be away while real estate prices are rising, you can be slapped with a hefty tax bill when you later sell your house.  (Apparently, you need to have your house appraised before and after your time abroad in order to minimize that problem.)

The second is that Canadian taxes are lower than Danish taxes, so you won’t be forced to top up your tax payments to the Canadian government after paying Danish tax.  As I understand it, there is an agreement between the two countries (as there is between many western countries) that income won’t be taxed twice – so which ever country you pay taxes to first gets the first cut, and then the second country will treat the taxes you’ve already paid as a credit.

For Canadians living in the USA, the same agreement is in place, but the taxes are much higher in Canada than the US, so it’s usually suggested that you give up your resident status in Canada while living abroad – and I’d just assumed that the same would be the case in Denmark. However, clearly that’s not the case.  By the time you’ve paid Denmark’s income tax, you’ve paid more  (if not MUCH more) tax so that Canada’s Revenue Agency  just leaves you alone, regardless of your income you make or your residency status in Canada.

Thus, for my time abroad, I’ll still officially be residing in Canada.  Yay for the Canadian tax system working in my favour!

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