Determining Resident status prior to our Move

[francob]

Hi,

We are moving to Belize in a month, including my wife and 2 kids. I have not yet determined what my status will be after I leave and hope someone can help me based on the following conditions.

- Canada does not have a tax treaty with Belize
- I own a Canadian home and will be renting it out
- I have a bank account and several credit cards which I plan on retaining
- I will be working part time for a company in Canada while in Belize

Based on that,

1. I am probably considered a resident for tax purposes right?
2. If that is the case, do I need to file any kind of form/return when I leave the country or just keep reporting my world income on my annual return?
3. Staying as a resident for tax purposes could possibly benefit me or not?
4. I understand that child tax benefits apply if you are a 'resident for tax purposes'. If I'm paying all the proper taxes I imagine I would still qualify for that.
5. Do I have to do anything different when it comes to renting out my canadian home?

Income in Belize will be very small, and that coupled with the exchange rate factor will result in a low income compared to Canada's standards. Therefore I don't see paying taxes on my world income as a big issue.

[agnelson]

1. Yes. No one thing you list is major in tying you to canada. But -- for a non-treaty country -- all of these except perhaps the rental and bank account would have to go. For US and most other treaty countries, none of the ties you mention are sufficient for Cdn tax residency so long as you outweigh them in your new tax home. But in the context of your situation, where it may be pointless to try to divest yourself of everything, the ties you have listed are more than sufficient to keep you resident.


2. No. You may be eligible for the overseas employment tax credit, since you will have some Cdn employment income earned abroad, but that can be decided later. For all intent and purposes, you aren't moving at all.

3. Given that you will have Cdn wages and income, which will be taxable in canada anyways, there doesn't appear to be any need to break residency.

4. For CCTB you must be 'resident' in canada. This may or may not mean 'tax resident'. It would appear that tax residency is sufficient, but I cannot guarantee that, especially since you wil not have a true address in Canada. So, while I don't see a definite need to cancel CCTB, I would be prepared to repay it if they ask.

5. No. You are still tax resident, so rent collection and payment of tax thereon is the same as any other Cdn.

As you probably already know, only your Belize wages will be taxable in Belize, and that tax can always be used on your Cdn return as well.

[francob]

Thank you for your quick response! I much appreciate it. Would you suggest I still fill out the NR73 and have them determine whether I am a resident or not, or should I just keep filing my income tax (including Belize income) as if I am a resident and not let CRA know we are actually out of the country? I know the renters who will rent our house and will be keeping this as my mailing address as well.

I never knew this was so complicated. Almost makes me change my mind about moving!

Thanks again for your help!

[agnelson]

No point filing NR73. You don't have a hope to be non-resident without a treaty,

But I do not suggest using a fake address for any reason.

[dannykool]

[quote="agnelson"]No point filing NR73. You don't have a hope to be non-resident without a treaty,

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interesting discussion point.

1. IF someone moves from a treaty e.g. USA to a non treaty country e.g. belize, what is the status then ?

[agnelson]

You would probably be fine, although one would really want to reduce the ties more significantly. It would depend on how much you were relying on the treaty to be treated as non-resident.

There is a principal that one cannot be considered a Cdn tax non-resident unless and until one establishes tax residency elsewhere. The intervening move to US could be that step.

Of course, once no longer a US resident (especially if one were nota GC or citizen) the protection of the treaty is lost, and CRA could then re-establish their hold on you.

The CRA determination made thru filing one or more NR73 at various times, even if one of these would result in a determination of either non-residency or especially deemed (treaty) non-residency, is only valid until ones situation changes.

The situation is analoguous to those who decide they are going to "sail the world". They never set up residsnce anywhere, thus remain Cdn residents. If they move first, establishe residency elsewhere, and then start sailing, they are usually fine.

[dannykool]

You would probably be fine, although one would really want to reduce the ties more significantly. It would depend on how much you were relying on the treaty to be treated as non-resident.
There is a principal that one cannot be considered a Cdn tax non-resident unless and until one establishes tax residency elsewhere. The intervening move to US could be that step.
The situation is analoguous to those who decide they are going to "sail the world". They never set up residsnce anywhere, thus remain Cdn residents. If they move first, establishe residency elsewhere, and then start sailing, they are usually fine.

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So the intervening move could be the key step. Coming back to the original post where there is no such step (non treaty) and it is not sailing really in that the person is resident and has a lot of ties in a non treaty country, then you suggest it could be ties which determine. This would apply to people who move to Dubai etc. There has been very little knowledge on what the exact definitions are when one moves to a non treaty country. Someone posted (can't find it) that they worked in Asia etc for many years and could not get the non residency.

[agnelson]

I know for a fact that if one moves to any of the middle east non-treaty countries that ALL Cdn ties need to be broken (even RRSP) in order to achieve Cdn non-residency.

Even worse, the treaty countries down there aren't any better, because treaty tax residency is not granted to non-citizens, so only nationals can become Cdn non-residents unless they divest everything Cdn.

The Tesky case illustrates how easy it is to be considered resident when no treaty exists.