Deemed Non-Resident: Do I Misunderstand Something?

(in all links replace STARTLINK with the normal start of a link, meaning the http and www parts)

Hi, I'm planning to enter the US on a TN-visa and was looking into tax implications. One thing I notice is every discussion centers on "breaking residential ties" to become a "factual non-resident". This is problematic because it may be a pain and also could hurt with proving you don't plan to stay in the US for good (for a TN at least).

What I'm wondering is why no one uses deemed non-resident instead. In particular, am I understanding something wrong? Here's how I understand deemed non-residency:

According to STARTLINK.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html, if you are a resident of another country according to a tax treaty with Canada, you are declared a deemed non-resident and considered a non-resident (even if you still have residential ties I believe).

According to the IRS (STARTLINK.irs.gov/businesses/small/international/article/0,,id=96352,00.html, you will be a US resident for tax purposes if you meet the substantial presence test, which basically means 31 days during the current year and 183 days in the past 3 years (including current year).

According to the Canada-US tax treaty (STARTLINK.garygauvin.com/WebDocs/Canada-US%20Consolidated%20Tax%20Treaty.pdf), if you're considered a resident of both countries, you basically will be a resident for tax purposes of the one with stronger ties (which if you're on a TN visa, is almost guaranteed to be the USA).

So now consider this situation: You go to the USA in August 2009 on a 3-year TN visa, of course in 2009 you are a resident of Canada for tax purposes and have to do two sets of taxes. Now let's say you work all 2010 in the USA, but haven't broken off enough of your Canadian ties. If I understand the "deemed non-resident" clause correctly, for tax purposes you can claim you are not a resident of Canada regardless of ties?

Is there something I'm missing here, because it seems like this is a way smoother method than breaking off ties, yet all the discussions I've seen on here and other sites are about "factual non-residents". Even one thread titled "deemed non-resident" actually seemed to be discussing factual non-residents.

Any comments?
Graeme

If you go to live and work in a treaty country, like US, you will at worst be a demmed non-ressident, which for Cdn tax purposes is exactly like a non-resident.

The importance of breaking all major ties is when you are moving to a a non-treaty counrty (like middle east and carib), or a country whose treaty residential crieria cannot be met by non-citizens (some arba countries).

So for US, you really just need to legally live and work there. In effect, canada deems you (or "pushes" you) into non-redsidence.

You file a departure return using the emigrants guide, with departure date the day you first both lived and worked in US.

Can you tell me if there are any challenges when repatriating to Canada after being declared a non-resident for a number of years? I am wondering specifically about long-term consequences such as accessing pension. When I retire, would my pension be reduced or effected because I had been away for a few years (i.e. not contributing)? Thanks!

CPP is always based on your contributions, so, yes, not contributing reduces your CPP. But so does being unemployed.

Presumably, when out of canada, you will be building pension in that foreign country...


OAS is simply based on years living in Canada. You will get a reduced OAS if you do not live in canada for a full 40 years after age 18.