Want2Move

I heard that US citizens are required to pay the US tax for the income that is earned in a foreign country. Is there same rule for Canadian citizens too? Do they pay taxes in Canada and the country where they are living and working? Thanks.

Japonica

I guess it depends on if you're deemed a resident or not and what kind of income is involved. Here's the link to the CCRA site...

http://www.cra-arc.gc.ca/tx/nnrsdnts.../nnrs-eng.html

Aviator

If you are deemed a tax resident you are required to report your world income, if and what tax you pay is determined by your personal circumstances.. If you pay tax in the country you earned the income and there is a tax treaty in existence you should be able to claim a tax credit. You are also required to report certain assets valued at over $100,000. These alone are not taxable, they maybe however if you dispose of them and make a gain or earn income from them.

You may be best to consult an accountant for specific answers to your circumstances.

JonboyE

If you are tax resident in Canada then you pay tax in Canada on your world-wide income (though you can generally deduct the tax you pay in other countries from the tax you owe in Canada).

Once you become a factual tax resident of Canada then it is quite hard to lose this status. You only cease to be tax resident when you permanently leave Canada to live in another country.

There is a difference between the USA and Canada. In the USA every citizen must file a tax return, wherever in the world they live. In Canada only tax residents (and non-residents with Canadian source income) must file a return. You can be non-resident in Canada for tax purposes yet maintain your Canadian citizenship. Note that it is very difficult to maintain PR if you go non-resident.

JAJ

That is not true. Maintaining tax residence is not a relevant criteria for maintaining PR status.

JonboyE

OK, well put it round the other way, it is very hard to maintain that you have gone non-resident for tax purposes if you claim to be meeting the 2 years out of 5 PR requirement.

Going non-resident for tax (claiming you have permanently left the country) is not compatible with permanent residence in the country.

JAJ

Once again. If you go non-resident you do not lose your PR status provided that you return in sufficient time to fulfil the 2 year in 5 resident requirement.

Also, there are exceptions to the 2/5 rule. For example, spouses of Canadian citizens.

JonboyE

And once again, if you return to Canada in order to meet the PR requirements you are going to have a very hard time convincing the CRA that your original intention was to permanently leave, or sever all residential ties with, the country.

Fair enough. Though if the spouse is working for the Government or certain international agencies they will be deemed residents in any case.

JAJ

If a Canadian citizen/PR leaves Canada permanently, obtaining non-resident status, and then changes mind 1-2 years later, is it normal (and even legal) for CRA to revoke the determination?

JonboyE

The CRA have to determine the state of mind of the person at the time they left Canada. If they determine that the intention was to genuinely sever all residential ties with the country then, in the circumstances you describe, they would allow the period of non-residency, and the PR would subsequently be able to meet the 2 out of 5 requirement.

However, if they determine that there was no genuine intention to permanently sever all residential ties with Canada then they can, and will, go back and reassess prior years' returns.

As the question of residency is fact based, it is entirely up to the CRA's interpretation of the facts as they see them. Of course, a taxpayer can appeal their decision all they way to the Supreme court. That said, with the disparity of tax rates north and south of the border, they are very thorough in ensuring tax payers do not avoid Canadian taxes by claiming a residence of convenience.

Looking back at what I wrote, I should have said that it is very difficult to maintain status as a non-resident for tax purposes while being a PR, rather than the other way around.

Want2Move

Thank you all for taking the time to answer my question. I really appreciate that. Reading from the information I have seen so far, I have a lot to learn on this area OR consult an Accountant.