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My question is: Canadian-specific
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QUESTION: I 've left Canada in 2002. I don't have
major residential ties except the bank account.
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I did not file any of the NR forms (non residency).
Am I still considered as resident ???
Do I have to file income tax return for 2003?
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david ingram asks:
what country did you go to?
ingram
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Oman
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David Ingram replies:
I love this question because it gives me achance to explain the =
difference between going to a tax treaty countryt like the US, GB, =
Australia, New Zealand, Spain, Indonesia and a 100 other countries where =
(usually) article IV of the relevant tax treaty generally reads as =
follows. I have included the US / Canada version here.
>From your question, you will need to do a Canadian Return for the start =
of 2002 when you were still a resident of Canada unless you had no =
income.
Your bank account should be a non-resident bank accout. If you go to =
www.centa.com and read the [US/Canada Taxation] section, it will give =
you a good idea of what happens in international taxation with some =
sample tax cases. I have used some of the parts of that section here.=20
Article IV - Fiscal Domicile - (it is the same number in most treaties) =
For the purposes of this Convention, the term "resident of a Contracting =
State" means any person who, under the law of that State, is liable to =
taxation therein by reason of that person's domicile, residence, =
citizenship, place of management, place of incorporation or any other =
criterion of a similar nature, but in the case of an estate or trust, =
only to the extent that income derived by the estate or trust is liable =
to tax in that State, either in its hands or in the hands of its =
beneficiaries. For the purposes of this paragraph, a person who is not a =
resident of Canada under this paragraph and who is a United States =
citizen or alien admitted to the United States for permanent residence =
(a "green card" holder) is a resident of the United States only if the =
individual has a substantial presence, permanent home or habitual abode =
in the United states and that individual's personal and economic =
relations are closer to the United states than any other third State. =
The term "resident" of a Contracting State is understood to include:=20
(a) the Government of that State or a political subdivision or local =
authority thereof or any agency or instrumentality of any such =
government, subdivision or authority, and=20
(b) (i) A trust, organization or other arrangement that is operated =
exclusively to administer or provide pension, retirement or employee =
benefits, and=20
(ii) A not-for-profit organization that was constituted in that =
State, and that is, by reason of its nature as such, generally exempt =
from income taxation in that State.=20
2. Where by reason of the provisions of paragraph 1 an individual is a =
resident of both Contracting States, then his status shall be determined =
as follows:=20
(a) he shall be deemed to be a resident of the Contracting State in =
which he has a permanent home available to him. If he has a permanent =
home available to him in both Contracting States, he shall be deemed to =
be a resident of the Contracting State with which his personal and =
economic relations are closer (centre of vital interests);=20
(b) if the Contracting State in which he has his centre of vital =
interests cannot be determined, or if he has not a permanent home =
available to him in either Contracting State, he shall be deemed to be a =
resident of the Contracting State in which he has an habitual abode;=20
(c) if he has an habitual abode in both Contracting States or in neither =
of them, he shall be deemed to be a resident of the Contracting State of =
which he is a national;=20
(d) if he is a national of both Contracting States or of neither of =
them, the competent authorities of the Contracting States shall settle =
the question by mutual agreement.=20
Where by reason of the provisions of paragraph 1 a person other than an =
individual is a resident of both Contracting States, the competent =
authorities of the Contracting States shall by mutual agreement =
endeavour to settle the question and to determine the mode of =
application of the Convention to such person. Notwithstanding the =
preceding sentence, a company that was created in a Contracting State, =
that is a resident of both Contracting States and that is continued at =
any time in the other Contracting state in accordance with the corporate =
law in that other Contracting State shall be deemed while it is so =
continued, to be a resident of that other State.=20
You can see that the countries themselves have set it up so that they =
will get tax. It is up to you to arrange your affairs to pay the least =
tax possible.=20
Both Canada and the U.S. will tax you on any money you earn within the =
country. The BIG question is:=20
WHEN ARE THEY GOING TO TAX YOU ON THE REST OF YOUR WORLD INCOME?=20
Canada taxes on RESIDENCY, not citizenship. Basically, if you have been =
in Canada for more than 183 days (counting the hours - one hour is only =
one hour, not one day as in the States), you are taxable on your world =
income, no matter where it is located and under whose name you have your =
assets stashed away. That is why Howard Hughes left Canada when he did =
back in the 70's. If he had stayed in Canada (even as a visitor) two =
more days, he would have been taxable on his world wide holdings.=20
Note that in March, 1999 Denise Rondpre of Revenue Canada Customs =
Excise and Income Tax issued a policy letter to Foreign Air Crew flying =
for Canadian Airlines and Air Canada. This directive stated that it was =
Revenue Canada's opinion that one hour in Canada constituted a full day =
in spite of the fact that the courts have ruled against them and the =
law, itself, has not changed. I do not think that this is enforceable, =
but you must be aware of it.=20
That explains Article IV which essentially says that if you are in Japan =
or Indonesia for more than 183 days in a year and have your house and =
family in Japan, Japan gets to tax your world income and Canada could =
only tax your Canadian Income.
On the other hand, if you are in Saudi Arabia, Oman, Kuwait, Dubai, The =
Turks and Caicos, The Grand Cayman Islands or another non-treaty =
country, you have to give up all of your Canadian ties. Keeping a house =
in edmonton or Vancouver or Brampton with your kids livin gin it while =
they go to school is guaranteedd to make you taxable in Canada. Also =
filling in the NR73 or NR74 non-resident questionnaires and getting the =
CCRA to rule that you are a non-resident does not guarantee that you =
will be free either. as the following taxpayer found out after being in =
Saudi Arabia for SEVEN YEARS "and" having a letter from Revenue Canada =
stating that he was a non-resident.
In 1985, David MacLean lost his claim for non-residence status even =
though he was gone for seven years. He kept a house and investments in =
Canada and returned a couple of times a year to visit parents. He had =
even been to the Tax Office and received a letter on January 29, 1980 =
stating that his Canadian Employer could waive tax deductions because he =
was a non-resident. However, he did not advise his banks, etc. that he =
was a non-resident so that they would withhold tax, he did not rent his =
house out on a long term lease and he did not do any of the things that =
makes a person a "NON-RESIDENT". Judge Brule of the Tax court of Canada =
said that he thought Mr. MacLean had stumbled on the non-resident status =
by chance rather than by design. In other words, to become a =
non-resident of Canada, you must become a bone fide resident of another =
country. As a rule, only a Muslim born in Saudi Arabia to Saudi Arabian =
parents can become a Saudi Arabian citizen. The best that David MacLean =
can hope for is that he has a Saudi Arabian temporary work permit.=20
In other words, when a person leaves a place, they usually leave and =
establish a new identity where they are because the "new place" is where =
they live now. Trying to "look" like a non-resident is not the same as =
"BEING" a non-resident - think about it.=20
In another case, Dennis Lee was not even allowed into the country but =
was taxed by Judge Teskey in the following decision.
In 1989, Denis Lee won part but lost most of his claim for non-resident =
status. He was a British Subject who worked on offshore oil rigs. He =
maintained a room at his parents house in England and held a mortgage on =
his ex-wife's house in England. For the years 1981, 82 and 83 he did not =
pay income tax anywhere. in 1981 he married a Canadian and she bought a =
house in Canada in June of 1981. On September 13, 1981, he guaranteed =
her mortgage at the bank and swore an affidavit that he was "not" a =
non-resident of Canada. [As I have said in the capital gains section of =
this book, bank documents will get you every time.] During this time he =
had a Royal Bank account in Canada and the Caribbean but no Canadian =
driver's licences or club memberships, etc.=20
Judge Teskey said:=20
"The question of residency is one of fact and depends on the specific =
facts of each case. The following is a list of some of the indicia =
relevant in determining whether an individual is resident in Canada for =
Canadian income tax purposes. It should be noted that no one of any =
group of two or three items will in themselves establish that the =
individual is resident in Canada. However, a number of the following =
factors considered together could establish that the individual is a =
resident of Canada for Canadian income tax purposes":=20
- past and present habits of life;=20
=20
- regularity and length of visits in the jurisdiction asserting =
residence;=20
=20
- ties within the jurisdiction;=20
=20
- ties elsewhere;=20
=20
- permanence or otherwise of purposes of stay;=20
=20
- ownership of a dwelling in Canada or rental of a dwelling on a =
long-term basis (for example, a lease of one or more years);=20
=20
- residence of spouse, children and other dependent family members =
in a dwelling maintained by the individual in Canada;=20
=20
- memberships with Canadian churches, or synagogues, recreational =
and social clubs, unions and professional organizations (left out =
mosques);=20
=20
- registration and maintenance of automobiles, boats and airplanes =
in Canada;=20
=20
- holding credit cards issued by Canadian financial institutions =
and other commercial entities including stores, car rental agencies, =
etc.;=20
=20
- local newspaper subscriptions sent to a Canadian address;=20
=20
- rental of Canadian safety deposit box or post office box;=20
=20
- subscriptions for life or general insurance including health =
insurance through a Canadian insurance company;=20
=20
- mailing address in Canada;=20
=20
- telephone listing in Canada;=20
=20
- stationery including business cards showing a Canadian address;=20
=20
- magazine and other periodical subscriptions sent to a Canadian =
address;=20
=20
- Canadian bank accounts other than a non-resident account;=20
=20
- active securities accounts with Canadian brokers;=20
=20
- Canadian drivers licence;=20
=20
- membership in a Canadian pension plan;=20
=20
- holding directorships of Canadian corporations;=20
=20
- membership in Canadian partnerships;=20
=20
- frequent visits to Canada for social or business purposes;=20
=20
- burial plot in Canada;=20
=20
- legal documentation indicating Canadian residence;=20
=20
- filing a Canadian income tax return as a Canadian resident;=20
=20
- ownership of a Canadian vacation property;=20
=20
- active involvement with business activities in Canada;=20
=20
- employment in Canada;=20
=20
- maintenance or storage in Canada of personal belongings including =
clothing, furniture, family pets, etc.;=20
=20
- obtaining landed immigrant status or appropriate work permits in =
Canada;=20
=20
- severing substantially all ties with former country of residence. =
=20
"The Appellant claims that he did not want to be a resident of Canada =
during the years in question. Intention or free choice is an essential =
element in domicile, but is entirely absent in residence."=20
Even though Dennis Lee was denied residency by immigration until 1985 =
(his passport was stamped and limited the number of days he could stay =
in the country) and he did not purchase a car until 1984, or get a =
drivers licence until 1985, Judge Teskey ruled that he was a =
non-resident until September 13, 1981 (the day he guaranteed the =
mortgage and signed the bank guarantee) and a resident thereafter.=20
My point is made. Residency for "TAX PURPOSES" has nothing to do with =
legal presence in the country claiming the tax. It is a question of =
fact. My thanks to Judge Teskey for an excellent list. The italics are =
mine and refer to the items which I usually see people trying to "hold =
on to" after they leave and are trying to become non-residents. No =
single item will make you a resident, but there is a point where the =
preponderance of "numbers" leap out and say, "He / She is a resident of =
Canada, no matter what he / she says." =20
The case above is not unusual in any way. It is a fairly typical =
situation in my office.=20
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
Calls accepted from 10 AM to 10 PM 7 days a week
Res (604) 980-3578 Cell (604) 657-8451
Bus (604) 980-0321=20
[email protected]
www.centa.com www.david-ingram.com
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 & =
the author and any and all non-contractual duties are expressly denied. =
All readers should obtain formal advice from a competent financial, or =
real estate planner or advisor & appropriately qualified legal =
practitioner, tax or immigration specialist in connection with personal =
or business affairs such as at www.centa.com. If you forward this =
message, this disclaimer must be included."
This from "ask an income tax and immigration and bankruptcy expert" from =
www.centa.com or www.jurock.com or www.featureweb.com. Canadian David =
Ingram deals daily with tax returns dealing with expatriate:
multi jurisdictional cross and trans border expatriate problems for the =
United States, Canada, Mexico, Great Britain, the United Kingdom, =
Kuwait, Dubai, Saudi Arabia, South Africa, Thailand, Indonesia, Egypt, =
Antarctica, Japan, China, New Zealand, France, Germany, Spain, Italy, =
Russia, Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland, =
Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India, Pakistan, =
Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba, Bahamas, Bermuda, =
Barbados, St Vincent, Grenada,, Virgin Islands, US, UK, GB, American and =
Canadian and Mexican and any of the 43 states with state tax returns, =
etc.
income tax wizard wizzard guru advisor specialist consultant taxman =
Alaska, Alabama, Arkansas, Arizona,=20
California, Colorado, Connecticut, =20
Delaware, District of Columbia, Florida,=20
Garland, Georgia, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky,=20
Louisiana, Maine, Maryland, =20
Massachusetts, Michigan, Minnesota, =20
Mississippi, Missouri, Montana, Nebraska, =20
Nevada, New Hampshire, New Jersey,=20
New Mexico,New York, North Carolina, =20
North Dakota, Ohio, Oklahoma, Oregon.=20
Paris, Rome, Sydney, Australia Hilton
Pennsylvania, Rhode Island, Rockwall,=20
South Carolina, South Dakota, Tennessee, =20
Texas, Utah, Vermont, Virginia,=20
West Virginia, Wisconsin, Wyoming,=20
British Columbia, Alberta, Saskatchewan,=20
Manitoba, Ontario, Quebec City,=20
New Brunswick, Prince Edward Island,=20
Nova Scotia, Newfoundland, Yukon and=20
Northwest and Nunavit Territories, =20
Mount Vernon, Eumenclaw, Coos Bay=20
and Dallas Houston Rockwall Garland=20
Texas Taxman and Tax Guru and wizzard=20
wizard - Your name has been added to our email list because of an =
enquiry we have received, we may not answer your question but=20
another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
=20
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