QUESTION:
I am temporarily living in Malaysia but CCRA has determined that I remain a
"factual resident" of Canada. Based on my 2004 tax assessment I have room in
my 2005 RRSP. However, I have been told by my bank (BOM) that I cannot make
further contributions to my already existing RRSP mutual fund account unless
I return to BC. Is that correct? They would open a non-mutual fund RRSP
account for me. Your comments please.
===========================================================
david ingram replies:
The CRA has not told you that A factual resident in a treaty country is not
necessarily taxable in his foreign income.
You do not need deep research by a team of lawyers and accountants to find
this out. For instance in the T1-General Guide, Page 9, Part D, it clearly
states that if you are under a treaty, this may not apply to you.
You should not likely buy an RRSP and, in truth, you may not qualify for tax
exclusion under Article IV of the Canada Malaysia Income Tax Convention.
However, you "do" need to sit down or consult by phone with someone who does
understand the treaty and non-resident rules.
I charge $375.00 an hour for that kind of consultation by phone.
If it is determined that you are a "taxable" factual resident as opposed to
a non-taxable factual resident and you do need a RRSP, use your Canadian
Address and buy the plan you want from someone who does NOT know you are
living in Malaysia.
Although technically illegal for the securities or mutual fund people to
sell it to you if you are not living in BC (A B C mutual fund sales person
can not sell you mutual funds if you move to Alberta either), there are
69,000 (just a guess) people in similar situations to yours, buying their
RRSP's by using their brother's, sister's, parents', friend's or even in a
couple of cases I have dealt with lately, the actual address of their mutual
fund salesman. I have to tell you that the latter action is just plain
stupid. In both of the cases, I have dealt with this year the problem came
to light when the mutual fund person (in one case) and the life insurance
salesman (in the other) died.
The following is the actual wording from the treaty:
Article IV
Fiscal Domicile
1. For the purposes of this Agreement, 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 his domicile, residence, place of management,
place of incorporation or any other criterion of a similar nature.
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:
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
closest (hereinafter referred to as his "centre of vital interests");
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;
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;
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.
3. 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 be mutual agreement endeavour to
settle the question and to determine the mode of application of the
Agreement to such person.
================================
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