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Canadian working in US - Windfall Elimination Provision

> I have an opportunity to work as an employee in the us for the next 7 to
> 10 years. I am 53. What is the impact on CPP and what can I expect form
> Social Security if I work for 1) 7 years or 2) 10 years. I have paid the
> max CPP since 1977 and expect to pay the max FICA.
> -------------------------------------------
> david ingram replies:
> You will receive approximtely 30/40th's of your CPP but it will not be
> based upon a lower earnings level than if you were still in Canada for
> the last ten years.
> However, if you do not work a full 10 years (40 quarters) you will not
> qualify for medical in retrirement if you do decide to stay in the US
> (i.e. get a green card).  You can qualify at 7 years but have to pay a lot
> more. (less at 8 years, even less at 9 years and the least at ten years or
> more).
> You will receive 7 or 10/40th's of the max FICA
> (Social security) less a claw back for what is called the Windfall
> Elimination Provision.  You can find out more about the WEP  by reading
> these older questions
> ------------------------------------------------
> Thanks to Andrew for adding to this subject. - the original question and
> answer are at the bottom. david
> ------------------------------------
> David, any totalization request made to SSA to include CPP contributions
> will NOT affect one's CPP, which is fixed SOLELY on the basis of CPP
> contributions.
> One's SS will of course be smaller if totalization is used, than one who
> worked a full 40 quarters, and one's SS will be reduced marginally by
> one collecting CPP as well as SS (by Pension Windfall provisions of
> SS). But neither collecting SS, nor using totalization will in ANY WAY
> affect CPP payout.
> One will indeed collect from BOTH SS and CPP when totalization is used.
> Remember too that the poster will be eligible for a portion of his OAS
> as well.
> -----Original Message-----
> Sent: Friday, October 24, 2003 16:15
> Subject: [CEN-TAPEDE] Returning to Canada early because of heart
> disease.
> I was born Dec 22/39 in Canada. I worked in Canada until Feb of 1997,
> moved to the US and presently work with a TN1 visa.
> I developed heart disease and have had two attacks since '01
> I would like to return to Canada and retire there near my family before
> it's too late.
> I understand I have to work in the US for 40 quarters to get their
> Social Security, I only have 27.
> I assume I cannot collect from both, but what is the result of applying
> the US/Canada treaty to my case?? Do I apply it to the Canadian or US
> fund and which one is more advantageous.
> =================================================
> david ingram replies:
> You will want to apply Canadian Earnings to the US Social Security to
> make up your time if they will allow it.  With 27 quarters, they likely
> will and it will be to your advantage to get eh higher US money for two
> reasons.
> One it is a higher pension on a pro rata basis.  Two - when received in
> Canada, only 85% is taxable.
> You will then receive a smaller CPP which will be more than made up by
> what you receive from the US Social Security.
> Your biggest problem is medical in the US. If you cannot see yourself
> continuing to work in the US, there is no sense but if you can get
> another 5 quarters in (up to 32) you can then buy your US social
> security medical and if you keep on working and putting in more
> quarters, you will get to the point where the full medical is free and
> you will have your 40 quarters. Remember, it is only 3 1/3 more years
> and you only need to earn $4,000 a year to qualify for four quarters a
> year.
> Perhaps, you could continue on a part-time basis for instance. I do
> notice that none of your company's three locations appear to be near the
> border but if you are filling a needed function, perhaps you could
> telecommute and live in Blaine, Washington, Pembina, North Dakota,
> Niagara Falls, or Calais, Maine (all US border towns), fill up your
> Social Security and be close enough to your Canadian Family to get the
> best of both.
> ------------ and other older questions
> My_question_is: Applicable to both US and Canada
> Subject:        Pensions
> Expert:         [email protected]
> Date:           Sunday January 14, 2007
> Time:           01:56 PM -0500
> Can an American Citizen ,living in Canada as a Permanent Resident married
> to
> a Canadian Citizen and having worked in the U.S. and Canada collect both
> Pensions as he  paid into both pensions and lived and worked in the
> U.S.first for twenty years and another twenty years in Canada.Does he have
> to report the U.S. Pension in Canada and the Canadian in U.S. He has
> aU.S.passport for entry into the U.S. and a Permanent Resident Card for
> entry to Canada.
> --------------------------------------
> david ingram replies;
> Under Article XVIII(5) of the US / Canada Income Tax Convention, he or she
> is only taxable on the pensions in the country in which he or she lives.
> He or she does qualify for both pensions but only half of the CPP (20 out
> of
> 40 years) and less than half of Social Security because of a clawback
> provision called the Windfall Elimination Provision when he or she has not
> put a total of 30 years into US Social Security.
> You can find US Government explanations of the WEP at
> and
> and
> The following older Q & A might help -
> [email protected]: Please see bottom of message if you wish to unsubscribe.
> ------------------------------------------
> My_question_is: Applicable to both US and Canada
> Subject:        US Social Security
> Expert:         [email protected]
> Date:           Wednesday December 13, 2006
> Time:           07:38 PM -0500
> I lived and worked in the US for 5 years, and recently returned to Canada.
> I
> have worked in Canada a total of 30 years.
> Do I qualify for any SSI compensation for the 5 years there or would I
> have
> needed to work the requisite 10 years to qualify for SSI pay?
> =============================================
> david ingram replies:
> When you hit retirement age, you will fill in an application for US Social
> Security and an application for Canada Pension Plan.
> In general, The US will give you credit for five years of contributing to
> Canada Pension Plan to make up the ten years qualifying period.
> Then, because you have not contributed for 30 years, they (the Social
> Security Administration) will apply the Windfall Elimination Provision and
> send you about half of the actual Social Security benefits you earned.
> This is NOT discrimination against Canadian or other country workers
> however. The WEP also applies to US people who have worked in different
> occupations in different states.  For instance teachers in some states do
> not contribute to Social Security. If they move to a different state where
> they do, the WEP reduces their Social Security in the US because of the
> "Windfall" of the other states pension. So it is not just used against
> Canadians.
> The following older answers may help as well as they contain comments from
> other readers.
> ------------------------------------------------------------
> This was an older centapede that dealt with two other opinions about the
> Windfall Elimination provision
> david
> Social Security - Foreign Work test -
> Frank C sends more information about this very important matter for those
> who have contributed to Social Security and to CPP as well. Read on and
> save
> if it applies or might apply to you in the future.
> ==========================================
> David,
> One further correction.  The Windfall Elimination Act does not affect
> someone receiving OAS from Canada, only CPP.  The U.S. legislation refers
> to
> pensions derived from working.  (Unlike Canada, the U.S. offers no pension
> to people just because they have reached a certain age.  They must have
> worked, or their spouses must have worked.)  So, if you WORK in Canada,
> and
> have worked less than 30 years in the U.S., the WEA will affect you.
> And...if you take Social Security early (before the standard retirement
> age
> for the year you were born) and work in Canada, you'll be hit with yet
> another rule: the "Foreign Work Test".  This rule takes away one month of
> SS
> benefits for each 45-hours you work in Canada in a month!  This
> effectively
> means that you can't be receiving early SS in Canada (say, at 62) and
> working in Canada, unless your wages are so high that you don't mind
> forfeiting your SS.  Once you reach full retirement age, though, you can
> work in Canada as much as you like.  Here's a good article on this
> subject:
> Interestingly, I was born in the same year as Mark (below) and also plan
> to
> use my university years in Canada to qualify for full OAS.  Sure hope that
> time is considered as "living" in Canada!  (How could it not??)
> Frank C
>>I obviously did not understand the 30 year rule or substantial payments to
>>FICA to avoid a Clawback when receiving OAS / CPP from Canada .  My
>>understanding was that the US / Canada Social Security Totalization rules
>>overrode the WEP but it appears I may have been incorrect.  Read on if you
>>are going to be collecting both with les than 30 years into the FICA (US
>>Federal Insurance Contribution Act or Social Security),  I have no time to
>>study or figure it out at the moment so will leave it to others.  I have
>>received several different replies:
>>Andrew Nelson sent the first correction:
>>I guess you are not aware of the Windfall Elimination Provision (WEP)
>>that hits many cross-border workers.
>>THAT is what this person is complaining about. It really does sock
>>anyone who earns foreign pension (including CPP) but has less than 30
>>years (not 10) of SS-contributions.
>>As the writer states, it does result in a substantial knock down of SS,
>>unless the person can manage to reach the 30 year mark.
>>This is the SSA's equivalent of the IRS's AMT provisions, and can hurt
>>pretty bad.
>>There is a couple of pros out there (namely Keats) who have been
>>successful in getting the SSA to use the totalization treaty to override
>>WEP, but it is not simple.
>>Keats has a chapter on it in his latest Border Guide. Only his latest
>>version, since WEP is just now hitting retirees.
>>Mark sends the second addition
>>Warning:  the following is wordy but I've included some details that might
>>useful in your practice.  I also have a new question at the end.  Hope I'm
>>stretching my luck...
>>Thank you for such a rapid response and for forwarding all those dialogues
>>others that pertained to my situation.  I was prepared to wait several
>>knowing you have quite a backlog.
>>I very much like your suggestions about H&R Block and Jim Pettinger.  I'm
>>his mailing list and have often thought about attending one of his
>>but haven't as I'm not much interested in export-import.  I will
>>give him a shout.  I've also wondered about the Victoria Clipper (Seattle
>>company) that docks here in Victoria a block from where I live.  I just
>>an accounting job advertised by a Canadian mining company literally metres
>>south of the border in Blaine.  They have gold mines in both countries.
>>hoping their newly hired accountant leaves soon;)  Seems to me I'd be a
>>fit for them to visit their mines in Alaska and B.C. & Quebec.
>>As to the US/Canada Social Security Agreement, my understanding is that
>>apply if I were working in Canada on a short-term basis, but I've been
>>in Canada nearly 5 years, so I've contributed to CPP for a few years now.
>>you know, it takes nearly that long to complete the citizenship path,
>>I've just done a couple weeks ago.  I did pay a personal visit to Social
>>Security in Bellingham a couple years ago to learn more about the Windfall
>>Elimination Provision, and I did find out they would never deduct more
>>of my CPP from Social Security.  Such generosity.  I have 25 years worked
>>the US (I'm 57 y.o.) but with 30 I would escape the WEP penalty
>>spoke with the manager of the SocSec office in B'ham so he knew my
>>and he never said the totalization agreement would apply.
>>    See WEP info:
>>    FYI, WEP was instituted in 1983 during the Reagan presidency as
>>    part of a package to save Social Security. For someone like me,
>>    contributing to another country's system, it's just a tax grab
>>    ripoff, in my humble opinion. I liken it to paying premiums on
>>    two life insurance policies and then having the beneficiary find
>>    out upon my demise that the 1st company won't pay because there
>>    had been a second policy. Never mind I'd paid premiums for both.
>>I'm aware of the relative withholding rates for FICA vs. CPP, and I would
>>work for someone else in the US to avoid the self-employment rate.  I
>>for the five years I'd work in US, it would work to my benefit to pay the
>>higher FICA rate as I would increase my retirement income about $200/mo.
>>between earning more SocSec and avoiding the WEP.  I intend to live in
>>in retirement in spite of higher taxation because my partner is Canadian
>>and detests the U.S.
>>I won't be subject to the OAS clawback in retirement, sorry to say, though
>>should approach the $60K annual income limit.  Jointly, our goal is to
>>about $60K income EACH so we avoid the clawback.  By the way, I currently
>>self-employed in Victoria as a small-time (friends & family) financial
>>The current net income limits for OAS clawback, from 0-100%, are $60,806-
>>$98,850.  (You had used a figure of $80,000+ for the upper limit in your
>>I wasn't going to send this to you until I heard back on the first one,
>>we're already there!
>>I fall into Category 2 below (between the dotted lines) for a full OAS
>>Full Pension
>>Normally, if you meet the conditions in either of the two categories
>>below, you qualify for a full pension:
>>Category 1 - You meet the one condition below
>>    You lived in Canada for at least 40 years after turning 18.   NO
>>Category 2 - You meet the three conditions below
>>    1. You were born on or before July 1, 1952.                   YES
>>    2. Between the time you turned 18 and July 1, 1977, you
>>       lived in Canada for some period of time.                   ???
>>    3. You lived in Canada for the 10 years immediately before
>>       your application was approved.                             YES
>>#1)  I was born in 1948.
>>#3)  I will have been resident in Canada 12 full years when I turn 65.
>>The gray area for me is condition #2, as I was a student at U. of Alberta
>>1976.  There is some question, even among the local OAS office personnel,
>>whether that qualifies as 'living' in Canada.  My own opinion is that I
>>not 'live' anywhere else during that time.  I cannot find any definition
>>of 'living' or 'residence' in the OAS Act or in OAS appeal cases.
>>So, at long last, my question for you:
>>The difference between a partial (12/40=30%) and full OAS pension for me
>>just over $4,000/yr., not an insignificant amount in my retirement
>>I'd like to know what my chances are of qualifying for the full pension.
>>Thanks again for all your help and super-rapid response.
>>david ingram replies:
>>I do not know of anyone that specializes in OAS appeals.  Does anyone
>>The original Q & A follows:
>> > Subject:        Employment opportunities for US-Canadian dual citizen
>> > Expert:         [email protected]
>> > Date:           Tuesday November 08, 2005
>> > Time:           10:52 PM -0800
>> >
>> >
>> > I am US-born and recently became a Canadian citizen also.  I want to
>> > White Rock, or vicinity (to preserve my Canadian Old Age Security
>> > eligibility), and commute daily to work along the I-5 corridor between
>> > Blaine and Bellingham.
>> >
>> > I am caught in the trap of the US Social Security 'Windfall Elimination
>> > Provision' which will deduct the exchange-related equivalent of 1/2 of
>> > Canada Pension Plan benefit from my US Social Security benefit unless I
>> > another five years of 'substantial earnings' in the US.
>> >
>> > Are you aware of any employment agencies on either side of the
>> > border that recruit dual citizens in particular?  I read in one of your
>> > email replies that dual truck drivers are in great demand, but having
>> > most of my career as an accountant, that's probably not a fit for me.
>> > ideas are much appreciated.
>> > --------------------------------------------------------
>> >
>> > david ingram replies:
>> >
>> > I do not know of agencies that specifically deal with dual citizens.
>> > "we" should start one up. If you are an accountant, take the H & R
>> > Block
>> > course in Bellingham and the one in Vancouver and get into dual country
>> > work.  I am always looking for someone who is good at that.
>> >
>> > Look for a company that works on both sides of the border.
>> >
>> > Calling Jim Pettinger at 604  273-4474 might give you some ideas.  Jim
>> > International Market Access with warehouses in Bellingham and Richmond
>> > runs regular seminars on cross border issues.
>> >
>> > I would bet that he has over 100 clients who might be able to use the
>> > services of someone who can work on both sides of the border with no
>> > restrictions.
>> >
>> > With regard to the US / Canada Social Security Agreement, i do not
>> > understand your concern.  What the agreement is set up to deal with is
>> > making sure that you only get one or the other of a pension for the
>> > same
>> > time worked.
>> >
>> > In general, if you can put into the US system, you will receive
>> > more when you apply for your CPP or FICA.
>> >
>> > If you work as an employee in the USA, you will have to contribute your
>> > to the FICA (Federal Insurance Contributions Act) at roughly 6.23% up
>> > to
>> > maximum of ($87,900 -400) $87500 for a total of $5449.80.
>> >
>> > At the same time you will be paying another 1.45% of the income with no
>> > limits so at $100,000 you would pay $1,450 and at $200,000 you would
>> > pay
>> > $2,900 but would still only owe the $5450.00 of Social Security (FICA).
>> >
>> > If you were self employed, you would pay both halves.
>> >
>> > Compare this with the CPP which charges employees 4.45% on a maximum of
>> > ($40,500 - $3.500) $37,000 or $1,831.50  and that is it.  (all figures
>> > 2004 calculations by the way).
>> >
>> > As for the Old AGE Pension that Canada hands out, remember that it now
>> > an earnings test and is all clawed back by $80,000+ earnings.
>> >
>> > The best situation for an over 65 person is to have worked the last ten
>> > years in the US to qualify for the US social Security and Medicare A &
>> > Live in Washington state and you have medical as good as BC's and a
>> > much
>> > lower tax rate on your pension income.
>> >
>> > I am 99% sure that you will end up with more money that way then living
>> > Canada and trying to collect OAS
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Non- resident living over seas in Dubai


Hi David

We are currently living & working in Dubai and to the best of my knowledge, I have a non-resident status in Canada. I have been out for 6.5 years now and we are planning to come back within the next 3 years. I was employed for 3 years of this tenure. I have a canadian licence (which I needed in order to get a licence in the UAE) and I have a canadian visa card and a non-resident bank account. Otherwise, we have no other ties to Canada. Furthermore, my husband is not a Canadian citizen. Will maintaining any of the above effect my status as a non-resident with regards to being taxable?
Hope you can help...
--------------------------------------------------------------------------- david ingram replies:   Five years ago, I would have suggested that the driver's licence was an absolute no-no but today, because of  the World Trade Center Disaster, many of the countries in your area are suspicious of a carrier of a Canadian Passport who do not have a Canadian driver's licence to match.  Still, having a Canadian Visa card ABD a driver's licence could be enough to make them look at you because there is no reason to keep a Canadian visa card for 6.5 years. 

A non-Canadian husband is only a bit of a help.  Read the following and decide if you should get rid of the licence (you do have a Dubai licence now) and credit card.  Dennis Lee was taxed even though immigration would not let him into Canada.

The following was my answer to someone wanting to move to Dubai. 
My_question_is: Canadian-specific
Subject:        Thinking of moving to Dubai to work for government from Canada
Expert:         [email protected]
Date:           Saturday March 31, 2007
Time:           11:25 AM -0500



I have been bantering back and forth with a possible offer to work for the government of Dubai.. if I do accept the offer and go, I want to keep my condo and my car here in Canada... I will establish a residence there as well.. my question is how much tax will I have to pay out of my income from over there.. I do not wish to sell everything and put it in storage... the car maybe, but it is a lease and I don't currently own it.. but Dubai is ready to take care of my obligations here, so I say keep it.

Thanks for your time

david ingram replies:

If you keep a car and home here and return for visits, you will be taxable at full rates on whatever you earn in Dubai.

read the following:
So what are the rules?

Well, to leave Canada for tax purposes, you must give up clubs, bank accounts, memberships, driving licences, provincial health care plans, family allowance payments (if you are a returning resident, you can continue to get Family Allowance out of the country), your car, and furniture. You can keep a house here as an investment and rent it out, but it must be rented on lease terms of a year or more. And you MUST have an agent sign an NR6 for you (see example). This NR6 has the Canadian Resident AGENT ** guarantee the Canadian Government that if YOU do not pay your tax to Canada, the AGENT WILL. Even after fulfilling the foregoing, the Canadian government can still tax you or "try" to tax you on your income out of the country. If you are being paid by a Canadian Company, they can quite often succeed.

Even though you can collect family allowance out of the country, don't! One client's wife found out that she could get family allowance out of the country if she said they were coming back to Canada. She got some $3,000 of family allowance and cost the family some $80,000 in income tax when they came back to Canada from Brazil. I will never forget the husband's expression when he found out why he had been reassessed and I will never forget his wife's explanation. She said he was a skinflint and never gave her any money. The total episode cost them their house.

** The "agent" referred to above can be a friend, relative, or a business such as ours. We charge a minimum of $40.00 per month to be an "AGENT" for an NR-6 filing. This $480 per year is "in addition" to any other fees but "well worth it" of course. It stops your mother, father, brother, next door neighbour or ex-best-friend from being plagued by paperwork they do not understand.


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.

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.

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.

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.

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.

Judge Teskey said:

"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":

  • - past and present habits of life;

  • - regularity and length of visits in the jurisdiction asserting residence;

  • - ties within the jurisdiction;

  • - ties elsewhere;

  • - permanence or otherwise of purposes of stay;

  • - 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);

  • - residence of spouse, children and other dependent family members in a dwelling maintained by the individual in Canada;

  • - memberships with Canadian churches, or synagogues, recreational and social clubs, unions and professional organizations (left out mosques);

  • - registration and maintenance of automobiles, boats and airplanes in Canada;

  • - holding credit cards issued by Canadian financial institutions and other commercial entities including stores, car rental agencies, etc.;

  • - local newspaper subscriptions sent to a Canadian address;

  • - rental of Canadian safety deposit box or post office box;

  • - subscriptions for life or general insurance including health insurance through a Canadian insurance company;

  • - mailing address in Canada;

  • - telephone listing in Canada;

  • - stationery including business cards showing a Canadian address;

  • - magazine and other periodical subscriptions sent to a Canadian address;

  • - Canadian bank accounts other than a non-resident account;

  • - active securities accounts with Canadian brokers;

  • - Canadian drivers licence;

  • - membership in a Canadian pension plan;

  • - holding directorships of Canadian corporations;

  • - membership in Canadian partnerships;

  • - frequent visits to Canada for social or business purposes;

  • - burial plot in Canada;

  • - legal documentation indicating Canadian residence;

  • - filing a Canadian income tax return as a Canadian resident;

  • - ownership of a Canadian vacation property;

  • - active involvement with business activities in Canada;

  • - employment in Canada;

  • - maintenance or storage in Canada of personal belongings including clothing, furniture, family pets, etc.;

  • - obtaining landed immigrant status or appropriate work permits in Canada;

  • - severing substantially all ties with former country of residence.

"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."

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.

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." 

The case above is not unusual in any way. It is a fairly typical situation in my office.

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.

Even a car you do not own can make you a resident as the next sailor found out.

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.

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.

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.

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.

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.

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.

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.

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.

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.


Non-residents of Canada with investments in Canada are subject to a 25% non-resident withholding tax on any money paid to them while they are out of the Canada. Therefore, if they have $10,000 in the Bank of Montreal and they live in Argentina, The Bank of Montreal must withhold 25 cents out of every dollar of interest paid to the account. Most tax treaty countries such as Great Britain, Germany, the United States, and Australia have a reciprocal agreement with Canada that limits the withholding to 15%.

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Selling a house in England


In 1990 we inherited a house in England.  We rented it out to the same family all this time.  We now want to sell it.  We know we will be paying Capital Gains Tax on the sale here, but are there taxes due in England also.
david ingram replies:

The rents and capital gain are taxable in the UK first.

Any tax paid to the UK can be used as a foreign tax credit on your Canadian T1 on lines 431 and 433 of schedule 1 (and equivalent lines of the provincial; 428 form) or if you ARE AN AMERICAN, ON FORM 1116 OF YOUR 1040.

The capital gain goes on Schedule 3 of your Canadian return or Form D of  your US return.

In addition, the rents since 1990 should have been reported in Canada on form T776 or in the US on schedule E with any tax paid to the UK claimed as a foreign tax credit as above.

Glad to look after and correct if you failed to report over the last while.

You should have been filing a UK tax return all these years to report the rent unless the tax was deducted at source as described in the following.  In any case, you needed to report it on your US or Canadian return.

Skip to main content HM Revenue and Customs logo
» Practitioner Zone search news search Fequently asked questions Complaints   businesses & corporations employers individuals & employees The Non-resident Landlords Scheme Contents

The Non-resident Landlords Scheme is a scheme for taxing the UK rental income of non-resident landlords.

The scheme requires UK letting agents to deduct Basic Rate tax from any rent they collect for non-resident landlords. If non-resident landlords don't have UK letting agents acting for them, and the rent is more than £100 a week, their tenants must deduct the tax. When working out the amount to tax the letting agent/tenant can take off deductible expenses .

Letting agents and/or tenants don't have to deduct tax if HM Revenue & Customs (HMRC) tells them not to HMRC will tell an agent/tenant not to deduct tax if non-resident landlords have successfully applied for approval to receive rents with no tax deducted. But even though the rent may be paid with no tax deducted, it remains liable to UK tax. So non-resident landlords must include it in any tax return HMRC sends them.

Applications by non-resident landlords for approval to receive rent with no tax deducted Non-resident landlords who are eligible can apply at any time for approval to receive their UK rental income with no tax deducted. This includes applying before they have left the UK or before the letting has started.

Applications should be made

Applications should be sent

Tell me more about

What happens when approval is refused/withdrawn? Refusal of approval HMRC may refuse approval if they are not satisfied that:

  • the information in the application is correct, or
  • the non-resident landlord will comply with their UK tax obligations.
Withdrawal of approval HMRC may withdraw approval if:

  • they are no longer satisfied that the information in the application is correct, or
  • they are no longer satisfied that the non-resident landlord will comply with their UK tax obligations, or
  • the non-resident landlord fails to supply information requested by HMRC.
  • How can I appeal?


What is the relationship to Self Assessment? HMRC will tell an agent/tenant not to deduct tax if the non-resident landlord has successfully applied for approval to receive rents with no tax deducted. But rent paid with no tax deducted remains liable to UK tax. So non-resident landlords must include it in any tax return HMRC sends them.

All non-resident landlords who receive rents with no tax deducted will have a tax district.

Some individuals who are not resident in the UK for tax purposes are not sent an annual tax return automatically, even though they have UK rental income. This is because many non-residents will have sufficient UK personal allowances to cover any liability.


Who are letting agents? A letting agent is a person who:

  • has a 'usual place of abode' in the UK, and
  • acts for a non-resident landlord in the running of their UK rental business, and
  • has the power to receive income of the non-resident landlord's rental business, or has control over the direction of that income, and
  • is not an 'excluded person'.
  • An excluded person is someone whose activity on behalf of a non-resident landlord is confined to providing legal advice/services. However, solicitors who draw up a lease and collect the rent for the first period are not excluded persons.

HMRC Residency have produced a booklet called Non-resident Landlords - Guidance Notes for Letting Agents and Tenants that tells people what their responsibilities are under the scheme. In addition, there is a brief Letting Agent's Guide to the NRL Scheme which outlines the main features of the scheme.

Tell me more about

Which tenants have to operate the Non-resident Landlords Scheme? Tenants of non-resident landlords have to operate the scheme if:

  • the rent they pay is over £100 a week, and either

    • they pay the rent direct to a non-resident landlord, or
    • they pay the rent to a person outside the UK, or
    • they pay the rent to a person who is not a letting agent in the UK.

HMRC Residency may sometimes instruct tenants to operate the scheme even where the rent paid is less than £100 a week.

HMRC Residency have produced a booklet called Non-resident Landlords - Guidance Notes for Letting Agents and Tenants that tells people what their responsibilities are under the scheme.

Tell me more about

HM Armed Forces personnel and other Crown Servants The Non-resident Landlords Scheme applies to members of HM Armed Forces and other Crown Servants - for example, diplomats - if they have a 'usual place of abode' outside the UK. They are treated no differently from any other non-resident landlords, even though their employment duties overseas are treated as performed in the UK for the purpose of charging their salaries to tax. So if their absence from the UK is for more than 6 months, they are within the scheme.

Members of HM Armed Forces and other Crown Servants are dealt with by HMIT Public Department 1 and South Wales Area office. The addresses are:

Public Department 1
Ty Glas Road
CF14 5XZ

Telephone: 029 20325048
Fax: 029 20325954

South Wales Area office
Ty Glas Road
CF14 5YA

Telephone: 029 20325363
Fax: 029 20325957


Administration of the Non-resident Landlords Scheme The Non-resident Landlords Scheme is administered by HMRC's HMRC Residency. Tax is collected by the Accounts Office at Cumbernauld.

HMRC Residency have produced a booklet called Non-resident Landlords - Guidance Notes for Letting Agents and Tenants. This tells people what their responsibilities under the scheme are. In addition, there is a brief Letting Agent's Guide to the NRL Scheme which outlines the main features of the scheme.


Who are non-resident landlords? Non-resident landlords are persons (this term includes individuals, companies and trustees) who have


Conditions for applying to HMRC Residency for approval to receive rental income with no tax deducted Non-resident landlords can apply to receive their rent with no tax deducted on the basis that either

  • their UK tax affairs are up to date, or
  • they have not had any UK tax obligations before they applied, or
  • they do not expect to be liable to UK income tax for the year in which they apply, or
  • they are not liable to pay UK tax because they are Sovereign Immunes (these are generally foreign Heads of State, governments or government departments).


What happens when approval is given? When approval has been given, HM Revenue & Customs sends

  • a notice of approval to receive rent with no tax deducted to the non-resident landlord, and
  • a separate notice to the letting agents or tenants named on the application form authorising them to pay rent to the non-resident landlord without deducting tax.

Authority to pay rent to a non-resident landlord with no tax deducted is generally backdated to the beginning of the quarter in which HMRC receives the non-resident landlord's application. As the tax year for the Non-resident Landlords Scheme starts on 1 April, the quarters are the three-month periods that end on 30 June, 30 September, 31 December and 31 March. So if a non-resident landlord applies to us on, say, 20 September, the authority we send to his letting agent/tenant will usually take effect from 1 July.


'Usual place of abode' Although we refer to 'non-resident' landlords, it is usual place of abode and not non-residence that determines whether a landlord is within the scheme or not.

In the case of individuals, we normally regard an absence from the UK of 6 months or more as meaning that a person has a usual place of abode outside the UK. It is therefore possible for a person to be resident in the UK yet, for the purposes of the scheme, to have a usual place of abode outside the UK.

Where can I get more help?


Forms, booklets and leaflets You can obtain:

General forms These forms are in PDF format. To view or to download blank forms for future use, you need Adobe Reader.

Return form
You can ask for these forms and leaflets by contacting HMRC Residency.


Contacting HMRC Residency For help and advice about the Non-resident Landlords Scheme you can telephone the HMRC Residency helpline.

Non-resident landlords, other than HM Forces personnel and other Crown Servants, who are applying for approval to have rents paid without deduction of tax should also send their applications to this address.


Which tax district deals with non-resident landlords? All non-resident landlords who receive rents with no tax deducted will have a tax district. These are

For companies:

HM Revenue & Customs
HMRC Residency
Fitz Roy House
PO Box 46

Telephone: 0115 974 2041 or 2049
Fax: 0115 974 1992

or trusts:

HM Revenue & Customs
HMRC Residency
Unit 364
St John's House
Merton Road
Merseyside L69 9BB

Telephone: 0151 472 6001
Fax: 0151 472 6247

or other individuals



Which tax district deals with individuals who are non-resident landlords? Non-resident landlords who are individuals that receive rental income without tax deducted are dealt with by different tax offices, depending on their status.

For HM Armed Forces personnel and other Crown Servants whose usual place of abode is outside the UK, the tax office is:

Public Departments 1, Cardiff Telephone:029 20 325048

Fax: 029 20 325954

South Wales Area office Telephone: 029 20 325363

Fax: 029 20 325957

If you e-mail us, we will endeavour to answer your query as quickly as possible. Please note that Internet e-mail is not secure. This means we will reply by e-mail only where we feel your confidentiality will not be breached. Otherwise, we will e-mail you to explain that we will be replying fully by letter or telephone.

For individuals whose usual place of abode is outside the UK, the tax office is:

HMRC Residency
Unit 367
St John's House
Merton Road
L69 9BB

For UK-resident individuals, the tax office is their General Claims District (GCD).


How to contact the Accounts Office Cumbernauld Quarterly returns and payments of tax due under the Non-resident Landlords Scheme, made using form NRLQ should be sent to Accounts Office Cumbernauld. You can contact them by writing to:

HM Revenue & Customs
Accounts Office Cumbernauld
Non-resident Landlords Unit
St Mungo's Road
G70 5TR

or by telephoning 01236 785118.

How to contact Audit Unit (NRL) The Audit Unit (NRL) are responsible for conducting audit inspections to check that letting agents and tenants are meeting their obligations under the Non-resident Landlords Scheme. They are also responsible for form NRLY. You can contact them at:

HM Revenue & Customs
Audit Unit (NRL)
St John's House
Merton Road
L69 9BB

Telephone: 0151 472 6087/6284

Fax: 0151 472 6124


Issuing form NRLY Form NRLY is normally sent to letting agents in May each year. You can also ask the Office Audit Unit (NRL) to send you one.


Electronic filing of annual returns If letting agents wish to explore the possibility of submitting returns electronically they should contact the:

Audit Unit (NRL) Telephone: 0151 472 6218

Fax: 0151 472 6124.


Appeals against refusal or withdrawal of approval to receive rent with no tax deducted Where HMRC refuses, or withdraws, approval to receive rent with no tax deducted, the non-resident landlord can appeal to them within 90 days.

Where HMRC and the non-resident landlord cannot reach agreement, the appeal will be referred to the General Commissioners or, if the non-resident landlord wishes, to the Special Commissioners. Both of these bodies are independent appeal tribunals.


Letting agents' obligations Letting agents that have to operate the Non-resident Landlords Scheme must

Tell me more about

Monitoring compliance with the NRL scheme The Audit Unit (NRL) carry out audit inspections from time to time to check that letting agents have complied with their obligations under the Non-resident Landlords Scheme.

A key aspect of the inspection involves checking records held by the letting agent.


Tenants' obligations Tenants who have to operate the Non-resident Landlords Scheme have to

Tell me more about

How letting agents and tenants calculate and account for tax Tax under the Non-resident Landlords Scheme is deducted by letting agents/tenants.

Letting agents/tenants must calculate the amount to tax each quarter.

They then need to apply the Basic Rate to arrive at the amount of tax due.

They pay the tax to the Accounts Office at Cumbernauld, using the quarterly payslip form NRLQ.

Tell me more about

Deductible expenses Letting agents or tenants must generally tax the rental income they pay to non-resident landlords unless HMRC has told them not to. In calculating the amount to tax, they take into account any 'deductible expenses' they pay in a quarter. These are expenses that they can reasonably be satisfied will be allowable expenses for the non-resident landlords when the profits of their rental businesses are computed.

Please see the Property Income Manual for advice on allowable expenses.


Annual returns Letting agents who have to operate the Non-resident Landlords Scheme must send an information return on form NRLY to the Audit Unit (NRL) by 5 July following the year ended 31 March for which the return is made. Letting agents must show separately for each non-resident landlord (other than those gross-approved by Public Department 1 or South Wales Area office)

  • the landlord's name and address
  • the amount of rental income for the year to 31 March, before the deduction of expenses
  • where the letting agent is not authorised to pay rental income to the landlord with no tax deducted
    • the deductible expenses for the year to 31 March, and
    • the total of the tax shown as payable in the letting agent's quarterly returns for the year to 31 March
  • where the letting agent is authorised to pay rental income to the landlord with no tax deducted, the landlord's approval reference number given by HMRC Residency (authorities issued by Public Department 1 and South Wales Area office do not have approval reference numbers, and there is no need for such landlords to be included on the form NRLY).


Quarterly returns Letting agents and tenants must pay the tax due each quarter under the Non-resident Landlords Scheme using form NRLQ. Quarterly returns are due for the periods ending 30 June, 30 September, 31 December and 31 March.

Form NRLQ will normally be issued automatically by theAccounts Office in Cumbernauld.

Letting agents and tenants must enter on form NRLQ

  • the quarter to which the return form relates (where this date has not been pre-printed on the form), and
  • the total amount of tax due in respect of all their non-resident landlords for that quarter, or
  • where there is no tax due in the quarter but the letting agent is due a repayment the amount of the repayment claimed.

Letting agents and tenants should send the completed form NRLQ and payment for the amount due to the Accounts Office in Cumbernauld in time to arrive there no later than 30 days after the end of the quarter to which it relates. For example, the form NRLQ for the quarter to 30 September 2000 must arrive at the Accounts Office by 30 October 2000.


Records Letting agents and tenants must keep adequate records to satisfy HMRC auditors that they have complied with their obligations under the scheme. In particular, for each non-resident landlord, letting agents and tenants should keep separately

  • a record of rental income received by the letting agent or paid by the tenant (showing the date and amount of each receipt or payment)
  • copies of any correspondence with the landlord regarding their usual place of abode, and
  • unless the letting agent is authorised to pay rental income with no tax deducted,
    • a record of expenses paid (showing the date and amount of each payment and a brief description of the expense), and
    • invoices and receipts (or copies) to provide evidence of expenses paid.

Letting agents and tenants should retain records for six years after the end of the year to 31 March to which they relate.

Records may be retained on microfilm, microfiche or any other medium which preserves an exact copy of the original document. Letting agents and tenants who wish to retain documents in this way should contact HMRC Residency before destroying the originals.


Assessments Under the Non-resident Landlords Scheme, tax is payable by letting agents and tenants without the need for HMRC to make tax assessments. But where HMRC have reason to believe that

  • an amount should have been paid but was not, or
  • a quarterly return is incorrect

they can make an assessment.

When an assessment is made, the letting agent or tenant will be told how they can appeal. Appeals have to be made in writing to the Audit Unit (NRL) within thirty days of the date of the assessment.

Interest is due on amounts paid late. The Accounts Office in Cumbernauld may charge interest on assessed income tax from the date when the amount of tax became due until the date it is paid.


How do letting agents register with HMRC Residency? Letting agents who have to operate the Non-resident Landlords Scheme must register with HMRC Residency within 30 days of the date on which they are first required to operate the scheme.

Letting agents may register by completing form NRL4 (PDF 17K) and sending it to HMRC Residency. HMRC Residency will send the letting agent a registration number and the appropriate forms and information needed to operate the scheme.


Basic rate of tax The basic rate of tax for each tax year can be found in our Rates and Allowances section


Forms and notes available to download All of these forms are in PDF format. To view a PDF document you must have Adobe Reader installed on your machine. If you require this material in large print or Braille please contact HMRC Residency. To save a file to your hard drive, right click on the link and choose the save option.


How letting agents and tenants calculate the amount to tax When calculating the amount to tax, letting agents/tenants should:

  • Add together the rent they actually receive in the quarter plus
    • any rent that they had the power to receive, and
    • any rent paid away at their direction to another person.


    • any deductible expenses that they paid in the quarter, and
    • any deductible expenses that were paid away in the quarter at their direction by another person.

It is the date letting agents/tenants actually receive/pay the rents (or pay the deductible expenses) that determines when they calculate tax. The periods for which the rents (or expenses) are due are not relevant.


Allowable expenses of a rental business Broadly, in calculating the profits of a rental business, expenses are allowable where

  • they are incurred wholly and exclusively for the purposes of the rental business; and
  • they are not of a 'capital' nature.

Information about what constitutes an expense of a 'capital' nature is provided in The Property Income Manual. For example, the cost of land and buildings and the cost of improvements and alterations is expenditure of a capital nature.


Examples of expenses which are allowable Expenses paid by letting agents and tenants which will normally be allowable expenses are:

  • accountancy expenses for the rental business
  • advertising costs of attracting new tenants
  • cleaning
  • costs of rent collection
  • Council Tax while the property is vacant but available for letting
  • gardening
  • ground rent
  • insurance on buildings and contents
  • interest paid on loans to buy land or property
  • interest paid on loans to build or improve premises
  • legal and professional fees
  • maintenance charges made by freeholders, or superior leaseholders, of leasehold property
  • maintenance contracts (for example gas servicing)
  • provision of services (for example gas, electricity, hot water)
  • rates
  • repairs which are not significant improvements to the property, including
    • mending broken windows, doors, furniture, cookers, lifts, etc.
    • painting and decorating
    • replacing roof slates, flashing and gutters
  • water rates.
Some expenses which are not allowable expenses Letting agents and tenants can deduct only those expenses which they pay or which are paid on their direction. This means they cannot deduct

  • expenses which the landlord pays, even if they have details of the expenses
  • expenses which have accrued in a quarter but which have not been paid in the quarter
  • capital allowances, and
  • any personal allowances due to the landlord.
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sale of rental house


Hi there, I am thinking of selling a rental property (in BC) and wish to be more educated on tax implications. The property was bought in 1989 as a principal residence and remained a principal residence until 1995. In 1995 I went to university and I rented out the house-I never moved back and rented it until now. In the mean time I bought another house in 2002 and used it as my primary residence until 2005 and sold it (paid no tax). I have been renting since then. How can I minimize the tax payable for the sale of my rental house? (bought for 80k sell for 250k+-)

david ingram replies:

When you rented the house out in 1995, you should have filed the following declaration with the rental statement:

"I hereby elect to treat the property at     111 Any Street
                                                                Any Town, BC

as my principal residence even though I do not ordinarily live in it."

Although you should have filed this with the tax return,I HAVE NEVER SEEN (TO THIS POINT ANYWAY) THE CRA TURN DOWN A LATE FILED ELECTION if you did not depreciate or claim CCA (capital cost allowance) on teh building.  If you claimed CCA, you will owe capital gains tax on the increase in value from 1995 to today.  If you did not depreciatre or claim CCA, yo get an extra 5 years.

In either case, you have to fill in CRA form T2091 to calculate the taxable amount. 

Find the form at

Find the worksheet for the form at
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Buying condo for son

Dear Sir,
I read your article "Real Estate Heaven in 2007" with interest, and thought that maybe you'd be so kind as to answer this question for us. Your email address was listed, so I sure hope it's OK to contact you for this type of concern.
We want to get our 26 year old son into the real estate market. He makes $50,000 per annum with 0 savings.
We are thinking about buying  an investment house (affordable) further in the Valley on a 50/50 basis for him (and us). Because we are retired, we are choosing to buy a place where the price/income is reasonably close.  We would pay the downpayment of 20%, and share the mortgage 30/50, rent 50/50. It's too far away for him to live in.

Eventually, we hope he'll be able to afford something of his own closer to his work in Vancouver.
Will this affect his future 'land transfer' exemption and his ability to roll over his RRSP's as a first time home buyer if his name is on the investment property?
If the answer is "Yes", legally what would be the best way to give him the best advantage?
We are  not exactly real estate savvy; therefore we don't want to overlook something in the planning stage that will have negative repercussions later.
Thanking you in advance.
david ingram replies:

Ozzie Jurock asked me to reply to this. And, as you realize there ae two separate items to consider in BC.  One is the Provincial First Time Buyer's exemption from paying the Property transfer tax and the secind is the ability to take the money out of his RRSP on a tax deferred basis.

I will deal with the RRSP issue first.  - He WILL be a first time home Buyer for this purpose if he does not live in the rental house. The following is a quote with example from the Government's HOME BUYERS GUIDE Pamphlet which you can read in full at:

You have to be considered a first-time home buyer Generally, before you can withdraw funds from your RRSPs to buy or build a qualifying home, you have to meet the first-time home buyer's condition. If you are a person with a disability, or you are acquiring a home for a related person with a disability or helping such a person acquire a home, you may not have to meet this condition. Please refer to the section called "Exception to the first-time home buyer's condition".

You are not considered a first-time home buyer if, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence.

If at the time of the withdrawal you have a spouse or common-law partner, it is possible that only one of you will be considered a first-time home buyer (see Example 1).

Example 1
In 2003, Paul sold the home he had occupied as his principal place of residence for five years. He then moved into a rented apartment. In 2003, he met Jane and she moved in with him. Jane had been renting her own apartment, and had never owned a home.

Jane and Paul were married in August 2006. They would like to withdraw funds from their RRSPs to participate in the HBP in September 2006. Since Paul owned and occupied his home during the period beginning January 1 of the fourth year before the year he wants to make the withdrawal, he is not considered a first-time home buyer, so he cannot participate in the HBP in 2006. Paul will be able to participate in the HBP in 2008, as he will not have owned a home that he occupied as his principal place of residence since January 1, 2004.

However, Jane is considered a first-time home buyer, since she never owned a home, and she did not live with Paul during the period in which he owned and occupied his home as his principal place of residence. She can participate in the HBP in 2006, providing all the other requirements are met.

If Jane does not participate in the HBP in either 2006 or 2007, Paul can participate in the HBP in 2008. If they want to participate together in the HBP, they both have to wait until 2008 at which time they can withdraw funds under the HBP to buy or build a qualifying home.

In this section, the word "home" has the same meaning as the term "qualifying home".

To determine if you are considered a first-time home buyer, complete the following questionnaire:

Are you considered a first-time home buyer? Question 1 - Did you, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, own a home that you occupied as your principal place of residence?

Yes check box You are not considered a first-time home buyer.

No check box Go to question 2.

Question 2 - Do you have a spouse or common-law partner?

Yes check box Go to question 3.

No check box You are considered a first-time home buyer.

Question 3 - Did your spouse or common-law partner have an owner-occupied home, at any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the withdrawal, that you occupied with that individual while you were living together as spouses or common-law partners?

Yes check box You are not considered a first-time home buyer.

No check box You are considered a first-time home buyer.

If you could not participate in the HBP in a particular year because you did not meet this condition, see the section called "If you could not participate in a particular year, can you participate in a later year?"

Exception to the first-time home buyer's condition - You do not have to meet the first-time home buyer's condition to participate in the HBP if any of the following situations applies to you:

  • you are a person with a disability and you withdraw funds from your RRSPs under the HBP to acquire a home that is more accessible, or better suited to your needs;
  • you withdraw funds from your RRSPs under the HBP to acquire a home for a person with a disability related to you by blood, marriage, common-law partnership or adoption, and the home is more accessible or better suited to the needs of that person; or
  • you withdraw funds from your RRSPs under the HBP and give those funds to a person with a disability related to you by blood, marriage, common-law partnership or adoption, to acquire a home that is more accessible, or better suited to the needs of that person.

If any of the above exceptions do not apply, you have to meet the first-time home buyer's condition at the time you make a withdrawal from your RRSPs under the HBP. If this condition is not met at the time of the withdrawal, the amount will have to be included in your income.

That deals with the RRSP, Next is the BC government's Property transfer Tax.exemption.

As described, yiur son would qualify for the first time exemption because the rental was not his principal residence.

To qualify for this, he cannot have owned a principal residence anywhere which means in any other couontry as well.

You can find all the rules at the Government site at:
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Using RRSP to make a Canadian mortgage deductible - NO

Message: question for david ingram:
in reading this passage from your november 2001
newsletter, i am wondering if  this strategy can be used for
mutual funds held in a rrsp?
quote from newsletter:

"for instance, if all you have is a mutual fund account with
reinvested dividends, take the dividends into your
own hands and pay down the mortgage and
borrow the money to buy “about the same” amount
of mutual funds that the dividends would have
bought. this works, even if you borrowed the money to
buy the mutual funds in the  first place. "


david ingram replies:

This does not work for money that is tied up in an RRSP. �
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Canadian parents helping Canadian daughter and her US husband purchase a home in the US - Bill Spohn Lawyer


My husband and I would like to assist my daughter and her husband in purchasing their first home in Illinois.  Due to their level of income at this time {new baby, just married, husband just starting in his career, both have college degrees, great future... etc}its not enough to qualify for the modest house they would like to buy.
How can my husband and I help them out? Is there a limit on how much cash we can send them? Can we co-sign on a US mortagage? Can we buy the house and have them live in it, having them pay us rent to cover the mortgage costs.. would we have to live in the house in the US for any part of the year? What suggestions might there be? By the way, my daughter is in the US legally after having gone through  the hassles of alien fiance visa - and her/their son, born in Canada, has dual citizenship.

david ingram replies:

You are not subject to gift tax.  You can give any amount you want to yor son and law and daughter and grandchild. 

Whatever you do, don't buy the house and rent it to them unless you really like filling out paperwork and are willing to pay capital gains tax on any increase in value.

You could, I suppose, buy it in your name with a provisio in writing that it is their house and you are holding it in trust for them.

 They would then make all payments for everything (although you could give them a gift once in a while) and treat it as their own and when their fortunes changed enough or the mortgage came up for renewal or something, it could be transferred to their name but if you do this make sure that you have a document in place that has proper witnessing, etc.

This same thing can be done in Canada to get a property for children and make sure that they sell tax free as a personal residence.

Even without the documentation, if your children are treating the property as their own it is called a constructive trust and is likely theirs tax free if all the money goes to them upon sale (after paying back something yo may have loaned them).

Bill Spohn, a West Vancouver lawyer did send a caveat (that you should have paperwork) to a previous Q & A which I agree with wholeheartedly . He has given it a lot of thought.  You can contact him for some legal advice about how to do the paperwork if you wanted some [email protected].  Please note that his comment was about Canada only and he is not a US lawyer. �
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Work permit expiring before Spousal sponsorship for PR status (permanent residence in Canada (like a US green card)) likely to b

QUESTION: My partner and I have made a stupid mistake. We applied under the rules for family class within Canada. I misread the rules and thought that her sponsorsip was going to take about 36 days. I now find out that this is for applications outside Canada. The problem is that we bought a new house and she gave up her job on the basis that the application would be processed in 30 days. We now find out that it will take 7-8 months and my work permit expires in November. What are our options?

david ingram replies:

I do not understand your question.  If you applied at Mississaugua, the processing time on the Website today is 36 days and they are processing applications started on June 21 now.

If you applied from out of the country and are going through London (as your email address implies) because you are a Brit, they are processing 80% of the cases in 3 to 7 months -

If you are an American, Buffalo is processing 30% of the cases in 3 months and 80% in 16 months.

BUT if you applied from within Canada, the Mississaugua Office processing time is 36 days and you can see that at

You might want to check again.

In the meantime, you have a couple of choices. 

1.    Get your employer to renew your work permit. 

2.      Apply to stay in Canada as a visitor until the sponsoprship is through.

You can find the application to extend your stay at:

There is an excellent guide explaining the process at:

Your application MUST be there more than 30 days befoe the expiration of your current work permit.  You may continue to work after making the application until you receive a rejection.

If rejected, of course, you have another problem so you might want to apply to remain as a visitor at the same time.  (two fees)
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Capital Gains tax free on land.

My question is: Canadian-specific

QUESTION: I am rather confused about capital gains tax. I have heard that you are allowed to make $750,000 (??) in capital gain on real estate in your lifetime, regardless of whether it is your principal residence, without triggering capital gains tax. Is this true? If so, how does one go about reporting it in one's taxes? Again, if this is true and you are a married couple, would that amount be for each person?

david ingram replies:

Never heard the $750,000 amount before.

However, from Mar 1985 to February 1992, a person could make $500,000 tax free capital gains in their lifetime on any investment.

In February 1992, that privelege was cancelled for Real Estate

In February 1994. that privelege was removed for the stock market but there was a 'top-up" provision by filing for T664 (too late now).

Today the $500,000 still exists for an active farm or fishing operation or for the sale of a Canadian Controlled Private corporation which is running an active business you have been involved with for two full years.  In this case, you could have a proprietorship or partnership for two years and roll it into a corporation and sell teh corporation 2 or 3 days later as long as the underlying business had been operated by you for two years.

Each individual is entitled to the $500,000 exemption.
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CONSTRUCTIVE TRUST Taxation - Parents helping buy apartment for son in Edmonton

My question is: Canadian-specific

QUESTION: We are in the process of purchasing a condo in Edmonton for our children to live in for at least the next 3 years.  The oldest son  is also putting money towards the down payment with the intention of buying it outright in the future. We can structure things just about any way needed as nothing is in writing yet.  Do you have any suggestions so we don't make mistakes.

Thanks ----------------------------------------------------------------------
david ingram replies:

If the idea is to keep any thought of the CRA attacking an eventual transfer of the title to your son, you should justhave it in his name in the first place and you have loaned or given him the money for the purchase.

If you intend to share in any profit, then that profit would be subject to Capital gains tax whether in his name or yours because he is just holding your share in trust.

On the other hans, if your name is on it and you do not intend to share in any profit and that is in writing and you do not share inany profit, then it is tax free as well, because you are just holding it in in trust for him.  Make sure this agreement is in writing. 

But logically, if your name is on it, there is more chance of the CRA attacking the deal sometime in the future than if only his name is on it and he is occupying the property as his persoanl residence.
This older Q & A will help as well

from: xxxxxxxxxxxxxxxxxxxxxxx
QUESTION: Me and my husband own a second house, title and mortgage is in our names. My mother lives there for free, thus we do not declare any rental income. We want to sell the house. What's the best way to pay less tax or avoid it? Do I have to pay tax even if it's my mom's primary residence? Can I transfer a title in her name, she sells it as her primary residence and pays no tax?
david ingram replies;

This is the kind of income tax help I like giving because it deals with family matters and expert family matter income tax help is really hard to find.

If the house was yours, bought and paid for by you and mother did not pay anything towards its upkeep or its purchase, then, any profit on this second residence is taxable to you.

On the other hand if mom sold another property and put her money into this second residence which was registered in your name for estate purposes and mom paid the mortgage, hydro, gas and repairs, etc., then it is your mother's house and you only held it in trust for her.  She had a constructive trust as the owner of the propety and it would be tax free.

Your situation may be somewhere in between.  The problem is that for some reason or other few lawyers and tax people understand what a constructive trust is. Your mom, for instance, may not have had enough to buy the place you wanted so you and your husband ponied up more and rather than loan her the money, put it in your name to protect your interst from ohers.

In general, a constructive house is formed when a person who does not own a property (car, boat, mobile home, house, condo) treats it as their own by paying all the bills and doing all the maintenance, etc, as if it was their own.

If you put upa lot of money and mom put up half and you put it in your name to protect your money from the possibility that mom might die and you were trying to keep 'your' money from your siblings, it was likley your mother's and tax free.

If on the other hand, you and your husband are clearly getting all the money when the house is sold, you and your husband  will owe capital gains tax on the sale.

hope this helps.

And of course, when it comes time to do the return for the sale, you know where we are. �