Factual Resident vs Non-Resident

My_question_is: Canadian-specific
Subject:        Factual Resident vs Non-Resident
Expert:         taxman at centa.com
Date:           Saturday June 10, 2006
Time:           02:24 AM -0700
Hi David:
I need your advice as I am very confused about my 2005 tax
issues.  Before this happens, I thought as long as I file my
taxes accordingly, I am good, but not anymore.  I think I am very
ignorant about Canadian tax system. Below is my predicament.
I am a Singapore citizen by birth, single, and was a landed
immigrant in 1989 in Toronto. Then in 1993, I became a Canadian
citizen but did not apply for the Canadian passport.  Then in
1996, I returned to Singapore in end 1996 after severing all ties
in Toronto.  I filed NR73 to the International Tax Dept and I was
determined as a 'non-resident'.  I did not file taxes with Canada
as I do not have any investments or interests derived from Canada
and I did not visit Canada during my residency in Singapore.
Then in end 2002, I returned to Canada, this time, Vancouver BC
and I informed the International Tax Centre about my return.
While in Vancouver BC, I filed all my taxes.  In Sept 2005, I had
to return to Singapore due to family matter.  Like the previous
time, I informed the International Tax Centre about my departure
and filed NR73. Before my departure, I closed all my bank
accounts, cancelled all credit cards and BC medical plan,
terminated my apartment lease, and did not mantain a mailing
address.  However, this time I was determined as a factual
resident and I am taxable on my world income.  Naturally, I asked
for a re-determination and they requested form NR74 because they
needed more information.  I did as requested.  The
re-determination concluded that I am a factual resident and the
reason is that I have made significant ties when I returned to
Canada in 2002 and also because they said I indicated to them
that Singapore does not tax on individual's overseas income. The
fact is that Singapore has tax treaty with Canada and the obvious
reason is to avoid double taxation on the same income.  I tried
to explain but instead was asked to refer to T4131. After reading
T4131, I feel that I should not be determined as a factual
resident for all my reasons mentioned above.  Anyhow I submitted
my tax to Surrey Tax Centre as though I have never left Canada.
When I received my tax assessment, I noticed my Basic Personal
Claims for both federal and provincial have been pro-rated, quote
'since you were a resident of
Now that I am determinated as a factual resident by the
international tax centre, what do I need to do if:
1) I wish to stay in Singapore on a permanent basis and would
like to be a non-resident for tax purposes?
2) I were to return to Vancouver to start anew?
I thank you so much for taking the time to read my long-winded
mail and I hope you will answer my questions.
Confused Resident Abroad
david ingram replies:
If you move to Singapore and have your residence there and NO
residence available in Canada, Under Article IV (2)(a) you are
only taxed in Singapore on your world income.  Canada would still
get to tax you first on your Canadian Income.
Even if you owned a $1,000,000 house in Canada, if it was rented
on a full time basis - i.e. lease of more than a year - it is not
considered to be "available" to you and you are not taxable in
The treaty reads as follows
Article IV
Fiscal Domicile
1. 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 his residence,
place of management or any other criterion of a similar nature.
It also includes a partnership, an estate or a trust but only to
the extent that the income derived by such person is subject to
tax in a Contracting State as the income of a person resident in
that State.
2. Where by reason of the provisions of paragraph 1 an individual
is a resident of both Contracting States, his status shall be
determined in accordance with the following rules:
  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, 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
by mutual agreement endeavour to settle the question and to
determine the mode of application of the Convention to such
Sometimes you can be a factual resident of Canada and still not
taxable when in a treaty county as you are.
In this case, you would report your world income to Canada on the
relevant line and then deduct all the non-Canadian income on line
256.  The instructions for this are actually to be found in the
simple government guide.
So make sure that your 2005 return did not include any
non-Canadian income on line 260.  If you put your Singapore
income on it, you need to file a T1-Adj to deduct it on line 256.
David Ingram's US / Canada Services
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email to taxman at centa.com
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