My_question_is: Canadian-specific Subject: Factual Resident vs Non-Resident Expert: taxman at centa.com Date: Saturday June 10, 2006 Time: 02:24 AM -0700 QUESTION: Hi David: I need your advice as I am very confused about my 2005 tax issues. Before this happens, I thought as long as I file my taxes accordingly, I am good, but not anymore. I think I am very ignorant about Canadian tax system. Below is my predicament. I am a Singapore citizen by birth, single, and was a landed immigrant in 1989 in Toronto. Then in 1993, I became a Canadian citizen but did not apply for the Canadian passport. Then in 1996, I returned to Singapore in end 1996 after severing all ties in Toronto. I filed NR73 to the International Tax Dept and I was determined as a 'non-resident'. I did not file taxes with Canada as I do not have any investments or interests derived from Canada and I did not visit Canada during my residency in Singapore. Then in end 2002, I returned to Canada, this time, Vancouver BC and I informed the International Tax Centre about my return. While in Vancouver BC, I filed all my taxes. In Sept 2005, I had to return to Singapore due to family matter. Like the previous time, I informed the International Tax Centre about my departure and filed NR73. Before my departure, I closed all my bank accounts, cancelled all credit cards and BC medical plan, terminated my apartment lease, and did not mantain a mailing address. However, this time I was determined as a factual resident and I am taxable on my world income. Naturally, I asked for a re-determination and they requested form NR74 because they needed more information. I did as requested. The re-determination concluded that I am a factual resident and the reason is that I have made significant ties when I returned to Canada in 2002 and also because they said I indicated to them that Singapore does not tax on individual's overseas income. The fact is that Singapore has tax treaty with Canada and the obvious reason is to avoid double taxation on the same income. I tried to explain but instead was asked to refer to T4131. After reading T4131, I feel that I should not be determined as a factual resident for all my reasons mentioned above. Anyhow I submitted my tax to Surrey Tax Centre as though I have never left Canada. When I received my tax assessment, I noticed my Basic Personal Claims for both federal and provincial have been pro-rated, quote 'since you were a resident of Now that I am determinated as a factual resident by the international tax centre, what do I need to do if: 1) I wish to stay in Singapore on a permanent basis and would like to be a non-resident for tax purposes? 2) I were to return to Vancouver to start anew? I thank you so much for taking the time to read my long-winded mail and I hope you will answer my questions. Sincerely, Confused Resident Abroad ------------------------------------------------------- david ingram replies: The CANADA SINGAPORE TAX CONVENTION IS QUITE CLEAR. If you move to Singapore and have your residence there and NO residence available in Canada, Under Article IV (2)(a) you are only taxed in Singapore on your world income. Canada would still get to tax you first on your Canadian Income. Even if you owned a $1,000,000 house in Canada, if it was rented on a full time basis - i.e. lease of more than a year - it is not considered to be "available" to you and you are not taxable in Canada The treaty reads as follows Article IV Fiscal Domicile 1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the law of that State, is liable to taxation therein by reason of his residence, place of management or any other criterion of a similar nature. It also includes a partnership, an estate or a trust but only to the extent that the income derived by such person is subject to tax in a Contracting State as the income of a person resident in that State. 2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, his status shall be determined in accordance with the following rules: a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (hereinafter referred to as his "centre of vital interests"); b) if the Contracting State in which he has his centre of vital interests cannot be determined or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode; c) if he has an habitual abode in both Contracting States or in neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement. 3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question and to determine the mode of application of the Convention to such person. ----------------------------------------------------- Sometimes you can be a factual resident of Canada and still not taxable when in a treaty county as you are. In this case, you would report your world income to Canada on the relevant line and then deduct all the non-Canadian income on line 256. The instructions for this are actually to be found in the simple government guide. So make sure that your 2005 return did not include any non-Canadian income on line 260. If you put your Singapore income on it, you need to file a T1-Adj to deduct it on line 256. ============================ David Ingram's US / Canada Services 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 10 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 taxman at centa.com www.centa.com www.david-ingram.com 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. 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