Grand Cayman Islands resident wants to know about GST -

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Dear Mr. Ingram,
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I am currently residing in an offshore tax haven.  I moved here from =
Canada at the beginning of January of this year and am holding a two =
year contract with my company. I plan on declaring non-residency back in =
Canada.  I am 27 years old and have no assets (ex. Car, house) back home =
and am currently closing all bank accounts, memberships, visa, etc, in =
order to satisfy the non-resident criteria. I have filed my 2003 =
Canadian Taxes and have a refund of over $2000.  Am I entitled to this =
refund or do I have to send it back to the government?  I also have =
received my quarterly GST check.  My accountant said that it is =
recommended that I return the GST check back, however I am still =
entitled to my tax refund.  What do you recommend?
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Kind regards
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david ingram replies:
Keep the refund, send back the GST cheque.  GST cheques are only issued =
to residents of Canada.
Got to www.centa.com and read the US/Cdn Taxation section on the right =
hand side.  It will give you a lot of information about being offshore.
I have reproduced the more interesting parts here - Pay attaention to =
the Dennis Lee case and Judge Teskey's decision.
OUT OF CANADA AND RESIDENT - IN CANADA AND NON-RESIDENT=20
It is possible to be physically "in Canada" and be treated as a =
Non-Resident and it is possible to be out of the country for seven =
years, or never have even lived in Canada, but wanted to, and be taxed =
as a Canadian resident as the following three cases show. In case you =
missed it, the reason for the different rulings is the "INTENT" of the =
parties involved.  Wolf Bergelt intended to leave Canada.  David MacLean =
was only working out of the country.  He still maintained a residence =
and could not ever become a resident of Saudi Arabia anyway. Dennis Lee =
"wanted" to live in Canada.=20
In 1986, Wolf Bergelt won non-resident status before Judge Collier of =
the Federal Court, even though he was only out of the country for four =
months and his family stayed behind to sell his house. He had given up =
his memberships, kept only one bank account and rented an apartment in =
California until his house in Canada was sold. Four months after his =
move, his company advised him that he was being transferred back to =
Canada. Judge Collier said his move was a permanent (although short) =
move and he was a non-resident for tax purposes for those four months.=20
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 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
  a.. - past and present habits of life;=20
  b.. - regularity and length of visits in the jurisdiction asserting =
residence;=20
  c.. - ties within the jurisdiction;=20
  d.. - ties elsewhere;=20
  e.. - permanence or otherwise of purposes of stay;=20
  f.. - 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
  g.. - residence of spouse, children and other dependent family members =
in a dwelling maintained by the individual in Canada;=20
  h.. - memberships with Canadian churches, or synagogues, recreational =
and social clubs, unions and professional organizations (left out =
mosques);=20
  i.. - registration and maintenance of automobiles, boats and airplanes =
in Canada;=20
  j.. - holding credit cards issued by Canadian financial institutions =
and other commercial entities including stores, car rental agencies, =
etc.;=20
  k.. - local newspaper subscriptions sent to a Canadian address;=20
  l.. - rental of Canadian safety deposit box or post office box;=20
  m.. - subscriptions for life or general insurance including health =
insurance through a Canadian insurance company;=20
  n.. - mailing address in Canada;=20
  o.. - telephone listing in Canada;=20
  p.. - stationery including business cards showing a Canadian address;=20
  q.. - magazine and other periodical subscriptions sent to a Canadian =
address;=20
  r.. - Canadian bank accounts other than a non-resident account;=20
  s.. - active securities accounts with Canadian brokers;=20
  t.. - Canadian drivers licence;=20
  u.. - membership in a Canadian pension plan;=20
  v.. - holding directorships of Canadian corporations;=20
  w.. - membership in Canadian partnerships;=20
  x.. - frequent visits to Canada for social or business purposes;=20
  y.. - burial plot in Canada;=20
  z.. - legal documentation indicating Canadian residence;=20
  aa.. - filing a Canadian income tax return as a Canadian resident;=20
  ab.. - ownership of a Canadian vacation property;=20
  ac.. - active involvement with business activities in Canada;=20
  ad.. - employment in Canada;=20
  ae.. - maintenance or storage in Canada of personal belongings =
including clothing, furniture, family pets, etc.;=20
  af.. - obtaining landed immigrant status or appropriate work permits =
in Canada;=20
  ag.. - 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
In 1990, John Hale was taxed as a resident on $25,000 of directors fees =
he had received from his Canadian Employer and on $125,000 he received =
for exercising a share stock option given to him when he had been a =
resident of Canada (the option, not the stock). Judge Rouleau of the =
Federal Court ruled that section 15(1) of the Great Britain / Canada Tax =
Convention did not protect the $125,000 as it was not "salaries, wages, =
and other remuneration". It was, however a benefit received by virtue of =
employment within the meaning of section 7(1)(b) of the act.=20
Even a car you do not own can make you a resident as the next sailor =
found out.=20
In 1988, FrederickReed was claimed by the Canadian Government as one of =
their own. He lived on board ship and shared an apartment with a friend =
in Bermuda but only occasionally. He also stayed with his parents in =
Canada when visiting his employer in Halifax. Judge Bonner of the Tax =
court ruled that he could not claim his place of employ or the ship as =
his residence and just because he did not have a fixed abode, did not =
make him a non-resident. He was also the beneficial owner of a car in =
Canada which even though of minor consequence, served to add to his =
Canadian Residency. He had in fact borrowed money from a credit union to =
buy the car, even though it was registered in his father's name. He had =
maintained his Canadian Driver's licence as well.=20
An interesting case in June, 1989 involved Deborah and James Provias who =
left Canada in October of 1984. They had sold a multiple unit building =
to James' father on September 21, 1984 but the statement of adjustments =
did not take place until December 1, 1984. They tried to write off =
rental losses and a terminal loss against other income as `departing =
Canadians'. Judge Christie of the Tax Court ruled that they had left =
before the sale and were not entitled to the terminal loss or another =
capital loss as these could only be applied against income earned in =
Canada from October 13, 1984 (the day they left) to November 30, 1984 =
(the day before the sale) and there was no income, only a rental loss.=20
But June, 1989 was a good month for Henry Hewitt. He had been a =
non-resident living in Libya for four years and received some back pay =
after returning to Canada. DNR tried to tax him on the money but Judge =
Mogan of the Tax Court came to the rescue. He ruled that although =
Canadians were usually taxable on money when received, that assumed that =
the money itself was taxable in Canada, which was not true in this case. =
In 1989, James Ferguson lost his claim for non-residency status but from =
the information, it didn't stand a chance anyway. He had been in Saudi =
Arabia on a series of one year contracts for four years. His wife =
remained employed in Canada, and he kept his house, car, driver's =
licence, union membership, and master plumber's licence. Judge Sarchuk =
ruled that he had always intended to return to Canada and was a =
resident.=20
A similar situation involved John and Johnnie M. Eubanks in the United =
States. He was working on an offshore oil rig in Nigeria with a Nigerian =
work permit and attempted to claim non-resident status for the purposes =
of exempting the foreign earned income exclusion. His wife was in the =
United States at all times and because he worked 28 days on and 28 days =
off, he returned to the U.S. for his rest periods using 4 days for =
travel and 24 days for rest with his family. He did not spend any 330 =
day period (out of a year) in Nigeria and only had a residency permit =
for the purposes of working in Nigeria. Judge Scott ruled he was a =
resident of the U.S. and taxed him some $20,000 with another $6,000 =
penalties and interest.=20
The Tax departments in Canada and the U.S. issue Interpretation =
Bulletins and Information Circulars and Guidance Pamphlets. These =
documents sometimes get people in trouble because the individual reads =
the good part and doesn't pay any attention to the exceptions. The =
following case ran contrary to a Guidance Pamphlet issued by the IRS.=20
On and Off-shore Oil rigs were involved with William and Margaret Mount =
and Jesse and Mary Wells. William and Jesse worked in the United Arab =
Emirates. However, they kept their homes and families in Louisiana and =
kept their driver's licences in Louisiana and voted in Louisiana. No =
evidence was shown that they had tried to settle in The United Arab =
Emirates. Judge Jacobs turned down claimed exclusions of approximately =
$75,000 each.=20
There isn't any question about what oil rig people talk about on oil =
rigs. It has to be "how to beat the tax man". Unfortunately, they all =
seem to think it is easy. Another such story follows.=20
In 1989, Clarence Ritchie found out that bona fide residence means just =
what it says. You cannot be a non-resident of the U.S. for tax purposes =
if you are not a bona fide resident of another country. He was working =
on the Mobil Oil Pipeline in Saudi Arabia and although when he left he =
was married with a couple of kids, by the time he returned permanently, =
he was a happily divorced man. Judge Scott ruled that though he did not =
have an abode in the United States, he had not established one in Saudi =
Arabia and therefore was not entitled to the foreign earned income =
exclusion which requires you to be away for 330 days out of 365. He had =
worked a 42 days on, 21 days off schedule and usually returned to the =
U.S. for his days off although he did spend time in Tunisia, England, =
Italy and Greece.=20
On a final note, as explained on page 143 of the "PINK" 17th edition of =
my ULTIMATE TAX BOOK, it is possible to have three countries after you =
for tax. If you are thinking of taking a job because a recruiter told =
you the money is tax free, think twice and check three times with =
competent individuals about what the rules "really are". No government =
likes giving up the right to tax its citizens.=20
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