returning to canada- residency

hi all

i am a 10 year canadian non resident who will be repatriating soon. the country i was in has a tax treaty with canada, meaning i must declare my world income on my tax returns while in the foreign country. not having done so, i'm wondering if anyone knows the srutiny or the process that occurs when one repatriates to canada.

As long as you filed a T1 every year and declared all your income, Canada doesn't care.

ummm.what if you haven't?

Yeah, I just arrived in England and am wondering the same thing. I was under the understanding that after two years of working outside of Canada you were free of taxes in Canada. That is what friends who taught elsewhere in the world told me. Will I have to claim my earnings to Canada?

Thing is, I left Canada in 1993 but have only been working since 2004.

If you were working in Canada and then left, you must file a T1 for the year that you left, and you must declare on your T1 that you are no longer resident with the date that you left.

Canada has about the toughest residency rules for tax in the world because they don't want people to move to the US.

If you have any residential tie to Canada, such as a driver's licence, OHIP card, etc. (basically anything only a resident could get), caselaw is that you are resident for tax purposes and must pay tax in Canada.

You can have a house (although that's very tricky if you've just left, especially if it's not rented out) and you can have a bank account, providing you've declared your non-resident status to the bank so they can withhold Part XIII non-resident tax.

In addition, you can be assessed the exit tax, which is basically a capital gains tax on your assets if you lived in Canada for at least 5 years before leaving. Generally speaking most people only get hit with this if they sold their house and realised a profit on it, or have other significant investments that have increased in value.

Check the CRA non-resident website.

My personal advice is to sever all residential ties as fast as possible when you leave (unless for immigration purposes this is difficult, say you are on some sort of visitor's visa or work permit that requires proof of residency abroad). Change your DL, etc. ASAP.

The key is "residential tie". Being physically present in Canada for 90 days in a year is also a residential tie, although there are legal ways around that one by claiming a tax home abroad via a tax treaty.

The court case the CRA and every accountant will quote you is the one where some guy moved to Dubai and put his household effects in storage. He still had a valid Ontario DL and was deemed by the CRA to be resident in Canada for tax purposes, as he had "residential ties". This was upheld on appeal.

Usually where it gets sticky is where people forget to tell the CRA that they have left, what happens then is the CRA wants to know why you haven't filed a T1. Best case scenario you're looking at a late filing fee for the year that you left.

Worst case scenario you lived somewhere with no income tax, the CRA deems you resident all the years you were there, and you have to pay income tax in Canada for all those years because you had some ties to Canada still that you forgot about (valid DL, forgot to tell the bank you were overseas and they filed a T5 every year with the CRA). Plus penalties for late payment.

If for some reason you cannot sever residential ties, make sure you claim the tax treaty exemption so you only pay tax in Canada. Otherwise you could face dual taxation.

Seems that I am OK then as I never worked in Canada.

If you were working in Canada and then left, you must file a T1 for the year that you left, and you must declare on your T1 that you are no longer resident with the date that you left.

Canada has about the toughest residency rules for tax in the world because they don't want people to move to the US.

If you have any residential tie to Canada, such as a driver's licence, OHIP card, etc. (basically anything only a resident could get), caselaw is that you are resident for tax purposes and must pay tax in Canada.

You can have a house (although that's very tricky if you've just left, especially if it's not rented out) and you can have a bank account, providing you've declared your non-resident status to the bank so they can withhold Part XIII non-resident tax.

In addition, you can be assessed the exit tax, which is basically a capital gains tax on your assets if you lived in Canada for at least 5 years before leaving. Generally speaking most people only get hit with this if they sold their house and realised a profit on it, or have other significant investments that have increased in value.

Check the CRA non-resident website.

My personal advice is to sever all residential ties as fast as possible when you leave (unless for immigration purposes this is difficult, say you are on some sort of visitor's visa or work permit that requires proof of residency abroad). Change your DL, etc. ASAP.

The key is "residential tie". Being physically present in Canada for 90 days in a year is also a residential tie, although there are legal ways around that one by claiming a tax home abroad via a tax treaty.

The court case the CRA and every accountant will quote you is the one where some guy moved to Dubai and put his household effects in storage. He still had a valid Ontario DL and was deemed by the CRA to be resident in Canada for tax purposes, as he had "residential ties". This was upheld on appeal.

Usually where it gets sticky is where people forget to tell the CRA that they have left, what happens then is the CRA wants to know why you haven't filed a T1. Best case scenario you're looking at a late filing fee for the year that you left.

Worst case scenario you lived somewhere with no income tax, the CRA deems you resident all the years you were there, and you have to pay income tax in Canada for all those years because you had some ties to Canada still that you forgot about (valid DL, forgot to tell the bank you were overseas and they filed a T5 every year with the CRA). Plus penalties for late payment.

If for some reason you cannot sever residential ties, make sure you claim the tax treaty exemption so you only pay tax in Canada. Otherwise you could face dual taxation.

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Steven

You recommend keeping a Canada tax base only for people moving temporarily to the US then, as you have done a few times ?

Because as per your post above, you suggest that for a move to Dubai, it may be well worth severing ties etc.

The taxes are so low in Dubai that it makes more sense to move your tax home I would think under most circumstances.

The US is a special case because they really don't like people moving their tax home into the US and then moving it out again, especially if at some future point you want to move it back to the US again. Plus there is an enormous amount of paperwork involved. And if you become a US citizen you actually can't avoid having the US as your tax home short of renouncing citizenship.

But generally speaking with the exception of the US, you would want to move your tax home unless there is a tax advantage keeping it in Canada (and there often can be, for example if you work abroad for a Canadian company, you can carry on paying CPP instead of the local equivalent which is usually much more expensive, provided Canada has a totalization agreement with that country).

Hi!
I am a Canadian living in the UK. I moved here in Jan 2008 and married my husband ( who is English) in December 2008. I do not have a canadian income, however i did work in Canada for the first 2 weeks of Jan 2008.

I've been told that I need to file a non-residency form to avoid paying taxes in both countries. Is this true even if I am not earning a canadian income? I'm not sure if it makes a difference, but my income is £24000.

The only reason that I am reluctant to become a non-resident is that my husband and I are planning to move back to Canada in about 10 years (I'm planning ahead!). Will this move be more more difficult ( for both myself and my husband) if I move back as a non-resident?

ANY help you could provide would be much appreciated as I have no idea what to do!

Thanks everyone!

Michele