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Mortgage interest as a deduction in Canada

QUESTION: I read your Nov 2001 paper and have a question.  Is it possible that CCRA would argue 
that you should have used business income to pay business expenses and that you just shuffled
things around for the tax deduction? Has this been challenged? Also, do all buiness expenses qualify?
david ingram replies:

Sure, anything is possible.  However, in 42 years in this business I have never seen it happen.

It has been challenged several times that I know of and everyone has won as long as they clearly show that the BORROWED money was used to pay the business expenses.  Bulletin IT-533 speaks to this as well.

What does not work is when you try and claim interest because you "could" have used it for business purposes.  You need a paper trail.

And it is obvious that you shuffled things around for the tax deduction.  That is good planning.

All and any business expenses qualify,. �
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Canadian Teacher wants to work in California

QUESTION: I am a Canadian citizen and an elementary school teacher. I want to move to California in the next year or so. Can you advise me on the best way to
proceed such a move. 
david ingram replies:

In fact, it is likley better to start in LA and branch out later. But if you do not want to do LA, you
 can start off by looking at the California requirements for 5 year certificates, etc., at:

Just three years ago, California was running regular job search drives in Toronto and Vancouver and other Canadian cities and were doing the paperwork to import Canadian teachers into anywhere in California.  I do not know of any of those happening outside of California now so I imagine that if you did find a California Teaching job, there will not be a lot of enthusiasm to get you a visa unless you luck into the Los Angeles system which is explained further on..

However, there are 27 job fair recruiting  events in  California here:

If you wish to teach K-12, you will need an H visa.  Those are taking a longer period of time to obtain and you won't be starting in September. If you do manage to get one, it will more likely be September 2008.

On the other hand, if you were teaching post secondary, you would qualify for a TN visa and those can be obtained in one day.

The good part is that California has a record of taking Canadian teachers.  If you were wanting to teach in Hawaii, you would be ouit of luck becasue the public school system will NOT take a foreign teacher under any circumstances unless they already have a green card at least and the private schools who will take a foreign teacher and get a visa are usually well staffed and it si only the odd job that shows up.

A new bill was passed effective Jan 1 2007 governing out of state teachers - read these new rules at

----------------------------There is also a visiting teacher exchange program which you could use to get your foot in the door.  Their deadline was March 15, 2007 but theoretically you could get in line for next year - see more at

This organization holds interviews in Halifax, Ottawa, Toronto, Winnipeg, Calgary and Vancouver.

On your own, you can have your credentials evaluated for the Los Angeles Foreign teacher's program at:

to quote part of their website, (notice the reference to work sponsorship - that means a visa)

Out of country teacher applicants must also meet additional Los Angeles Unified School District employment requirements to be considered for employment and work sponsorship. These include, but are not limited to, recent work in their field, strong letters of recommendation covering the past three years of employment, fingerprint clearances, tuberculosis testing and a complete physical examination, as well as a personal qualities interview. Candidates who demonstrate superior professional competence and exemplary personal qualifications may be given the opportunity to teach / provide service to Los Angeles Unified School District students.

Los Angeles Unified School District is currently interviewing credentialed, out of country Math, Science and Special Education applicants. The Bureau of Citizenship and Immigration Services will be issuing H1-B Visas, with an effective date of October 1, 2007. The District will begin to request work authorization for successful candidates beginning April 1, 2007 until the quota of visas is exhausted.

This information is provided for the convenience of potential foreign teacher / support service provider applicants who may be seeking employment. Please note that the Los Angeles Unified School District is not responsible for any fees associated with any organizations listed below. Additionally, out of country candidates are advised that under no circumstances is the District able to consider any candidates involved with a local or foreign employment agency. District policy prohibits such candidates from being considered for hiring and work sponsorship.

Hope this all helps -- Good luck --- Remember, when you get that job you have to send the first year's dual country return here.  You will go crazy trying to find someone in California who can do your Caandian and US and California return at the same time.
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FREE SEMINAR on Mortgage Interest as a Deduction in Canada

Hi  David, I own a condo in VAncouver which I bought for 280K four years ago. WE just had an appraisal from the bank putting it at 450K. WE would like to move to Nova Scotia next year, rent out our condo here, and buy a place in NS. with an indefinite time period of being there but with the aim of coming back in 5-10 years, keeping both places. The plan is to rent out our condo here and buy there to live in. We will probably use our credit line to make the downpayment on a place in N.S. If we can claim a tax write off for the interest of an investment I am wondering how that works if the investment will then be a place we will be  living in. Can we still claim it? Is the interest on the investment a tax deduction on the income you earn  - how does it work? IS there any way we can still use it in this situation as it is our second property? How do I go about learning more about the tax deductions of an investment and acutally apply it? Thanks very much,   -----------------------------------------------------------------------------------
david ingram replies: 

I charge $400 for an individual consultation on this subject by phione or in person.  However you are in luck.

Leave Sunday, August 12th open.  I will be conducting a FREE three part seminar on that date at the Holiday Inn at 711 West Broadway in Vancouver..

12 noon to 2:30 PM -    Mortgage Interest as a deduction including Singleton (won), Overs (won), Evans(won)  and Lipson (lost) Cases.

3 PM to 5 PM -    Reporting rules for US persons with Canadian Financial Accoutns and Canadian RRSP accounts.
                           simply put a US citizen with no US income whatsoever is supposed to file a US tax return no matter where they live in the world.
                            More important than that, is the fact that if the US citizen has a Canadian RRSP, it is considered a foreign trust.  Assuming that there is more than
                            $10,000 US in all the US persons foreign accounts, failure to report the foreign trust (RRSP) to the IRS AND the Departmetn of the Ttreasury
                             can result in minimum fines of $10,000 (per foreign account) and maximum fines of $500,000 plus 5 years in jail plus 35% of the money in the
                            RRSP plus 5% for every year not reported.  - O U C H !!!

5:30 to 7:30 PM   US Tax returns - who has to file - aimed at Canadians who have been working in the US and Americans living in Canada or Canadians with
                            rental property in the US on which they are losing money. Snowbirds should attend this as well if they are in the USA more than 120 days a year.

Anyone intending to attend this seminar about mortgage interest or when a Candian has to file a return should read the November 2001 newsletter for mortgage interest and information about what Canadians have to file a US return. 

If they are a Snowbird, they should read the April 1994 newsletter.

If they are a dual citizen, the Oct 1993 newsletter - These can be found at in the top left hand box. 

Then anyone who is filing both returns should go to the second box down on the right hand side and read the US/Caanda Taxation section.

Print the above out.  Highlight questionable sections and bring them along to the seminar so you remember your questions.
Those interested in the mortgage interest as a deduction concept should read Fraser Smith's, "The Smith Manoeuvre", available at any good bookstore although you may need to have them order it for you.

Phone (604) 731-8900 to register for all or any of the seminar. �
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Hong Kong resident with brother living in house in Canada.

QUESTION: My Brother is a non-residant Canadian Citizen currently living in HongKong, He lived in HongKong over 10 years. Now he want to buy a house in Toronto and let me live in it for several years, I don't pay rent to him. After a few years later, when he came back to Canada, I give back the house to him. What is the best way to deal with this situation for saving tax purpuse? If he transfer money to my account in Canada and buy the house with my name on the title, I can sign a letter as his trustee in a lawyer office. I hold the house for him. will he change his non-residential status? Do I need to pay tax when I fill tax form next year? Do we need to pay tax in the future when I return the house to him? will he pay tax when he sell the house in the future? thanks!

  david ingram replies:

If your brother loans you the money to buy a house and you buy a house and live in the house and maintain the house and it is your house, then any profit is tax free.

If your borother gives you the money to buy the house and you are going to give the house to him when he returns to Canda then you are just the trustee and it is his house an dthat means that the CRA might try and tax him as they did David MacLean who was in Saudi Arabia for seven years

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 your brother's case, he can be a resident of Hong Kong and likely is.  That means that any uincrease in the value of the house (if you are holding it for him as you suggest) is subject to Canadian capital gaisn tax when he moves ito it or it is sold while he is still in Hong Kong. �
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Part II CORRECTION Fiancee wants to work in Canada

I said the exact opposite of what I meant.   I have two husbands working whose wives are the Canadian students.  Oh well, I love it when someone points these things out and out of 13,900 readers, only one has pointed it out so far.   Maybe nobody reads these missives,.   Thanks Behzad   ------------
Dear David,

I've been reading your great emails during the last two years, and I thought to return the favor.

Wives and common law partners of the current full time students in canada are elligible to apply for an open work permit (a permit that doesn't bound to a single company). Please check here.

Best regards,

On 7/8/07, US / Canada Income Tax Help - CEN-TAPEDE <[email protected]> wrote:

 QUESTION: Hi, my boyfriend of 3 years and I are both US citizens.  
He is going to be attending grad school at the University of Waterloo in Ontario, Caanda

We are not married and do not intend to be married at present.
We have been unable to live together durring the past three years because he was a
full time student and did not have time to have a job and study so has been
living with his parents and I could not afford to support us both.
This means that we cannot be considered common law partners.
I need help in obtaining a work permit so that I can come with him.
I don't really see how I can get one because I have been working at a call center

for the past two years (only real work exp.) and only have a high school diploma
...soooo, i don't know if i have any chance of obtaining one...

OR is it possible for me to live in Canada but work in the US?
Any advice would be great, I'm desperate!

 david ingram replies:

I am afraid that you are out of luck.  There is no logical visa available to you to come to Canada.  The best I can suggest is your moving to Niagara Falls New York and working there.  At  least you will be close enough for significant visits. you could spend Friday night to Monday morning with your man and Mon to Thursday nights in New York.  Depending upon his schedule, he might spend alternate weekends with you.  Think of it.  Every second weekend in Niagara Falls, The most famous honeymoon destination ever.

Even if you married, you could not work in Canada if you came to Canada with him as the wife of a student..

Visas are usually only issued when a company applies for one in your name because the company  needs your services.

Maybe apply to companies in Waterloo and see if someone is willing to apply for a visa for you.

You can also apply to come on your own  but that is at least an 18 month process at the moment.
This is the self-assessment test for an individual to determine his or her
eligibility to immigrate to Canada without being sponsored by a spouse.
This is why we need a Fortress North America.  Canada and the USA and likely Mexico should have open borders like the European Union.  63  years ago, The Germans and Italians were at war with the rest of Europe.They wer killing each other by the thousands.  Today, you can drive through 25 countries without encountering a border, there is a common currency for most of it and a citizen of France can work without question in London England or Berlin, Germany without getting any permission whatever.

Canada has never been at war with the US.  The last battle was British troops from what became Canada battling US troops in the war of 1812 - 1814 when British Troops burnt down the White House.  In fact, I laugh every time they play the Star Spangled Banner at a Hockey Game because the author was a prisoner on a British Warship in Chesapeake Bay and the rockets red glare and bombs bursting in air is a description of the Britsh Bombarding Fort Mchenry,  Baltimore and Washington at the same time the Britsh  torched the White House. To be sure, after a night of bombardment, the flag with 15 stars and 15 stripes was flying over Fort McHenry. So the Star spangled Banner is the story of the last battle between the British (US Allies in Iraq) and the US.

Read the story yourself at:

We should take the 30,000 people off the US Canada and US Mexico border and open the continent up to mobility of jobs.

Then we should adopt a Common Currency, The 'Amero' sounds good.

Enough of my political statement.

Good luck.

David Ingram wrote:
--------------------------------------------------------------- ------------------------------------------------
It is very unlikely that blind or unexpected email to me will be answered.  I receive anywhere from 100 to 700  unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients.  Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject and get answered first.  I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when i am out of town. 

However, I regularly search for the words"PAYING CUSTOMER" and always answer them first if they did not get spammed out. As an example, as I write this on June 28th, since June 16th (12 days), my 'spammed out' box has 7,118 unread messages, my deleted box has 2630 I have actually looked at and deleted and I have answerd 63 email questions I have answered for clients and strangers.  I have also put aside 446 messages that I am maybe going to try and answer because they look interesting.

Therefore, if an email is not answered in 24 to 36 hours, it is lost in space.  You can try and resend it but if important, you will have to phone to make an appointment.  Gillian Bryan generally accepts appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321

David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office)
email to [email protected]
Disclaimer:  This question has been answered without detailed information or consultation and is to be regarded only as general comment.   Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist for expert help, assistance, preparation, or consultation  in connection with personal or business affairs such as at . If you forward this message, this disclaimer must be included."

David Ingram gives expert income tax & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
Phone consultations are $400 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada.
This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,600 would be for two people with income from two countries

$2,800 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
With a Rental for $350
A Business for $350 - Rental and business likely $450

And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.
Just a guideline not etched in stone.  
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US/Canadian marriage - Dan Cuppett US Immigration Attorney


My daughter is planning to get married to an American citizen. She wants to have her marriage to be done in Quebec-Canada. What is the best and quickest way to get a legal stay in the US?
Also is it possible for her to keep traveling back and forth while her entry visa is under process?
I would appreciate your quick reply.


david ingram replies:

Travelling back and  forth is a no-no without an advance parole obtained by filing form I-131.

If this is a problem, she will need a US Immigration Attorney


Daniel C. Cuppett, Esq.
Law Office of Mark Schneider
57 Court Street
Plattsburgh, NY 12901
[email protected]

If you need local help.
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Dual US/Canada Residency


My wife and I hold US residency cards and we are Canada landed residents, we are currently living in US. My wife plans to reside in Canada and start school. I plan to stay in US and commute once a month to Canada.
1 - Will I have to pay taxes in both countries?
2- Will I lose my residency in Canada if I am working in US?
3- Can I hold both?
4- If I can not hold both and revoke my Canada residency do I have to still pay Canada taxes since my wife is living there
5- Will I have to give up my Canada residency to commute freely between both countries?
6- What is the best solution in my case?


david ingram replies:

assuming you have been in the US long enough, you should apply for citizenship immediately and your wife should get her US status before coming to Canada.  She (and you) have three years from date of issue to move to Canada because you only need to be in Canada for 24 ouot of 60 months to keep it alive.

If you are in the position where you just got your green cards AND the PR cards at the same time (this happens more often than one would think), then  you have a problem because she cannot stay in the US long enough to get her US citizenship so she might as well come to Canada if that is what she wants.

BEFORE she leaves the US, she should file form I-131 which will keep her green card alive long enough for her to get her Candian citizenship and then return to the US if she wishes.  the I-131 HAS TO BE FILED (but does not have to be apprved)
 BEFORE she leaves and renewed every year.  The record around here is a renewal for eight years.

You will be a factual resident of Canada but exempt from paying Canadian Tax if your intent is to remain in the US and have your wife return.  You would file a Caandaian return, report your US income on line 104 and then remove it on line 256 under Article IV of the TAX Treaty.

Your wife would do the same in reverse because she has to file a US return because of her green card.

You will be skating on a fine line but I know a dozen couples from Brazil, India, Greece, etc., who have done the same thing over the years.. �
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self employment in Montreal Quebec Canada - works in Vermont


Hi.  I am a US citizen and recently received my canadian PR status and moved to Montreal.  My place of employment is in Vermont and I drive to the states once a week for a couple of days to work.  I want to start a home based business doing crafts (I previously have experience in jewelry making), but I am a little lost on the process now that I am living in Canada.  I want to be able to sell my work in Vermont while I am there, and also sell it in Montreal where I now live.  I also will have a web page and who knows where my clients will buy from.  Who will I owe taxes to and how will I report my income?  Since I already have a regular job in the states, should I try to base this business out of the states as well?  Since the crafts are "assembled" at my residence in Canada, even if I buy the raw materials from the US and sell the finished products in the US, I am unsure of the legality of it all.  Any help would be appreciated.  Thanks!!!!!!!!

david ingram replies

As a Canadian Resident, you first obligation on your 'world wide' income is to Canada under Article IV of the US / CANADA Income Tax Treaty.

As a US citizen, you are also required to report your world wide income.

Both countries have the right to tax source income first. 

'source' does not mean where the money was paid from.  It means where the money was earned.

SO!!!!  If you are physically working in Vermont 3 days a week and telecommuting from Montreal 2 days a week, Vermont and the US feds get first dibs at the 60% and Quebec and Canad get first dibs at the 40% earned in Canada.  You have picked about the most complicated employee tax return you can do in North America because you have foreign tax credits going back and forth.

Throw in the self employment and you are an accountant's retirement plan (just joking).

If you are producing your crafts in Quebec and exporting them and doing over $30,000 a year gross (before any expenses) you will also need to register for a GST number.

The rest goes past the limits of this free Q & A.  You need to deal importing materials and exporting a finished profuct as well.

If you are selling on eBay and mailing from Canada, you will have one set of rules.

If you are going to drive across the border and mail from the US (cheaper and easier) you will likely want to export your product in multiples.

While it is getting started, you might want to make it, wrap it, address it, and take it across the border to mail.  DON'T SEAL THE PACKAGE because the US border people might want to see what is in the package.

PLUS, you are now an importer/exporter from and to the US. You need to go inside at the US side and buy a $100.00 a year licence or spend $5.00 each time you export something from the US and $5.00 each time you take something in.

I am also assuming you will need to pay Canadian duty bringing the raw items in to Canada because it will be too small to set up something like a bonded warehouse.  You might find it easier to pay a little more and source from Canada.

You also might want to talk to a Commercial Border Brokerage Firm.  At this stage, you are too small to get someone really interested but  You will get information and if you do use them a couple of times, you can likely copy the method and do it yourself afterwards.
Allied Custom Brokers in Montreal is one possibility - they have 509 employees - 'somone' might have a few minutes for you.

R& W Customs Brokers only have 8 employees and might be easier to deal with

There are a dozen others of course.
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living in Blaine - working in Vancouver

Hi there,   I'm a Canadian Citizen living in New Westminster. I cannot afford to buy a house in this area (Lower Mainland). I have found some affordable properties south of the border, in Blaine and surroundings. >From a financial and commuting standpoint, it makes perfectly sense to buy a property there, and commute daily to my job in Vancouver. But I have no ideea what the legal implications would be, on both sides of the border. Would you please tell me if it makes sense, from a legal point of view and if possible at all?   Thank you very much.   --------------------------------------------------------
david ingam replies:

Unless you are an American citizen and / or married to a US citizen or marry a US citizen who will sponsor you to live in the US, it is out of the question.

Nothing stops you from buying a house in Blaine and spending Friday Sat and Sun night every week and keeping an apartment in Vancouver for the four nights a wek (have to be in Caanda more than the uS for US border trules and BC Medical) but you can't be sleeping in the US every night or living in the US without a 'live there' visa and there is not any 'live there' visa.

And if you can afford the Blaine House, the commuting gas AND the Vancouver Apt, you can likely really afford to buy something smaller in the lower Mainland.

If yiu could get a US employer to hire you as a management consultant or scientific technician or computer system analyst or librarian, etc., one day a week  in Bellingham, you could get a TN visa which would have to be renewed every year but MC TN visas are hard to get.

The reason for the one day a week suggestion is that you could still wotrk in Vancouver.

The problem is that to live in the USA, visas are only for employees or spouses as a rule.  You can apply for a green card but the last I looked it was over 15 years waiting time.

goto and read the 'Entering the USA' section in the second box down on the right hand side.

Last, but not least, if you do manage to make the move by marrying an American, your BC medical is cancelled because you have to 'live in BC' and 'make your home' in BC to qualify. If you have extended medical benefits at work, they are also cancelled because you need the basic plan to qualify.  To replace a good corporate medical plan in BC will cost you $400 to $600 a month US. �
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Resident vs non-resident tax question

Hi David,   I thank you in advance for your response and wisdom.   I am an Australian citizen who has spent the last FIVE years in Canada, working there full-time and filing tax returns.  My wife is a Canadian citizen also living and working in Canada and filing tax returns.  I am a permanent resident of Canada and she is now a 'temporary' permanent resident of Australia.    In February 2007, we moved to Sydney, Australia, where I am studying at university full-time and working part-time.  We will be here until the end of my studies (end of 2008) and then perhaps a short time beyond that.  My wife has just got her permanent resident status here in Australia and has not been working thus far, but will likely commence working now that she has the green light to do so.    My queries relate to taxes.  For all intents and purposes we are still Canadian residents as we have bank accounts there, loans with Canadian institutions, have property and maintain social contacts.   What are we required to do in terms of filing tax returns in our absence.  As I am working here I will obviously be required to file a tax return at the end of the Australian tax year.  How can we best reduce the amount of taxes that we pay in Canada?   Many thanks,   ------------------------------------------------
david ingram replies:

Not sure why this was not rejected completely.  You should have received a rejection letter but somehow or other it hung up so I will answer it as one of 196 others which did the same thing (I intend to answer 6 a day for the next month which means no new questions will be answered for a month and i would usually answer 2 or 3 a day).

It sounds like you are going to remain a Factual Resident of Canada.  Being a factual resident is not a bad idea when you are in Australia becasue Article IV of the Canada Australia Income Tax convention means that you will only pay tax on your world income to one country or the other.

File your Canadian tax return by reporting your world income.  Include your Australian earnings on line 104 of the Candian return.  Then, and this is the cool part, deduct the total Australian income on line 256 under Article IV of  the Canada Australian Tax Convention.

You can find the treaty at


This leaves you taxable in Canda on any interest or dividends, etc, but tax free on your wages.

Read on for more non-resident information and sample tax cases. Thsi comes from my old Inncome TAX Guide which I quit writing in 1991.  This version was last changed in 2000.  Nothing new applies.

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%. So we have the anomaly that a Canadian with money in a bank in the U.S. has no withholding but an American with money in a Canadian Bank has 15 cents out of every dollar withheld as a foreign withholding tax. The American would report his interest on schedule A of his 1040 tax return and claim the tax withheld as a foreign tax credit on a form 1116.


More important perhaps is the problem with rental properties in Canada. When owned by a non-resident, they are subject to a 25% withholding (or 15% if living in Bangladesh) tax. If the renter does not pay this tax,  the government can come along two years later and demand the tax.

Imagine the consternation of a tenant of a house in the British Properties in West Vancouver, or Rosedale in Toronto. Assume the tenant has been paying $2,000 a month for a $500,000 house owned by a Hong Kong resident. After three years of paying $24,000 a year to the `non-resident', they finally buy a house and move. Two months later, there is a knock on the door and a National Revenue representative is standing there demanding 25% of $72,000 for NON-RESIDENT withholding tax (this is a true story by the way, only the owner was in London).

There is a way around this problem. The tenant can ask to see, or rather DEMAND to see a copy of the landlord's filed and accepted NR6 form. (See forms in back of book). This form allows the tenant or agent of the landlord to deduct a lesser amount (or nil if a loss) than 25% of the gross rent. It allows for expenses to be taken off and the tax can then be withheld at 25% of the net, rather than the gross. The property management division of david ingram & Associates Realty Inc. files about 300 of these NR6 forms a year. (This is only necessary if you are paying directly to a landlord whom you KNOW to be a non-resident of Canada.  If you are paying to an agent or Canadian Resident, you are okay.)

Please note, the NR6 MUST BE FILED BEFORE the first rent cheque is received or 25% of the gross rent must be remitted. For years, we were in the habit of filing `this years' NR6 late with last years tax return. In 1989, National Revenue stopped accepting this sloppy practice and demanded them on time.