The news of Prince Harry and Meghan Markle deciding to split their time between the UK and Canada has certainly been making headlines this month. And while the royal couple have their hands full with their move, it’ll be very important for them to set themselves up for success come tax season, should they become Canadian residents!
Luckily for Harry and Meghan, Canada’s tax system is similar to that of many countries.
First Things First
Newcomers to Canada need to obtain a social insurance number (SIN), which the Canada Revenue Agency (CRA) uses to identify you for tax and benefit purposes. Note even if Meghan already has a temporary SIN from her previous work experiences in Canada, she will need to apply for a permanent one once becoming a permanent resident of Canada.
Disclosure of Foreign Investment Property
This is a important one, with hefty fines should a newcomer not disclose foreign investment property to the CRA. Known endearingly as Form T1135, penalties are up to $25 per day, up to a maximum of $2,500, plus arrears interest, for failure to file the T1135 form on time. Yikes! If Harry or Meghan owned foreign investments, including foreign stocks in a Canadian non-registered brokerage account, with total cost exceeding $100,000 at any point, they are required to file form T1135.
Her Majesty, the Queen owns Frogmore Cottage (where Harry and Meghan reside when in the UK), so they will likely be in the clear for property at least.
Generally, you cannot deduct moving expenses incurred to move to Canada, so might be worth it to take that economy flight after all!
Canada child benefit and child disability benefit
The Duke and Duchess are responsible for the care and upbringing of their child Archie, so they should check to see if they may be eligible for the Canada child benefit (CCB) and any benefits for certain related provincial or territorial programs for that child.
The CRA bases the amount of your benefits on the following:
- the number of eligible children you have and their ages
- your province or territory of residence
- your adjusted family net income
- your child’s eligibility for the disability tax credit
Completing the Tax Return
Harry and Meghan will need to document the date they become residents of Canada for income tax purposes, as much of their first year will be prorated based on the date of entry.
The royal couple may be able to claim deductions on their return and should set themselves up from the get-go with any registered retirement savings plan contributions (RRSP), pension income splitting, treaty exempt income (as UK and Canada do have a tax treaty!), and any province-specific deductions. If Harry and Meghan decide to move to Ontario, we’ll let them know some more details they should be aware of!
While there remains many unknowns as to what the Duke and Duchess of Sussex plan to do when they settle in Canada, a likely possibility is that they might need to set up one or more companies for their endeavors.
Stay tuned for Part 2: How Harry and Meghan Should Set Up their Business to Save Money at Tax Time (we may even be able to help shed some light on the debate over who should pay for their security costs!)