Tax Questions

Old Sep 5th 2008, 12:20 am
  #1  
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Default Tax Questions

Hi All,

Really sorry to post tax related questions, but I need to get my head round something when it comes to landing. I’ve had a wade through the Wiki and couldn’t find an answer to these questions, and after reading a lot of tax related posts my head started to hurt. So here goes. When we get round to landing, we will more than likely land, stay for a holiday and then head back to the UK to tie up all the loose ends. So my questions are:-

1) Do we automatically become tax residents when we land?
2) Whilst back in the UK (and we could be back here for 12-18 months before returning to Canada), do we have to submit Canadian tax returns?

I suppose what I’m trying to say (in a roundabout way) is, are we subject to Canadian taxes whilst we’re back in the UK sorting stuff out? Or can we land, go back to the UK and forget about this side of things until we return to Canada?

Oh and whilst I think on. I’m sure I read somewhere that if you put your UK house on the market before you land in Canada, you won’t be subject to Canadian tax on any profit you make on it once sold. Is that correct?

Cheers All

Glassy
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Old Sep 5th 2008, 12:40 am
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Default Re: Tax Questions

Hi there Glassy,

sorry I can't help - but I'd really love to know the answers too, we land oct 10th!
so much to do befor then

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Old Sep 5th 2008, 1:10 am
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Default Re: Tax Questions

Originally Posted by Glassy
1) Do we automatically become tax residents when we land?
2) Whilst back in the UK (and we could be back here for 12-18 months before returning to Canada), do we have to submit Canadian tax returns?
Nope, on both accounts.

But if you own real estate in Canada or even have an interest bearing bank account here then you will be subject to Canadian taxes.
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Old Sep 5th 2008, 1:32 am
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Default Re: Tax Questions

Andrew, what about the other question by Glassy -
"Oh and whilst I think on. I’m sure I read somewhere that if you put your UK house on the market before you land in Canada, you won’t be subject to Canadian tax on any profit you make on it once sold. Is that correct?"
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Old Sep 5th 2008, 2:20 am
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Default Re: Tax Questions

Originally Posted by Andrew Miller
Nope, on both accounts.

But if you own real estate in Canada or even have an interest bearing bank account here then you will be subject to Canadian taxes.

Thanks for responding Andrew. So if we have either of the above, then we automatically become a Tax Resident when we land, correct?

If we don't then when does "Tax Residency" kick in ?

Thanks Again

Glassy
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Old Sep 5th 2008, 3:01 am
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Default Re: Tax Questions

Originally Posted by Glassy

1) Do we automatically become tax residents when we land?
No.

2) Whilst back in the UK (and we could be back here for 12-18 months before returning to Canada), do we have to submit Canadian tax returns?
No.

I suppose what I’m trying to say (in a roundabout way) is, are we subject to Canadian taxes whilst we’re back in the UK sorting stuff out?
No.

Or can we land, go back to the UK and forget about this side of things until we return to Canada?
Yes.

Oh and whilst I think on. I’m sure I read somewhere that if you put your UK house on the market before you land in Canada, you won’t be subject to Canadian tax on any profit you make on it once sold. Is that correct?
Not necessarily. As noted above, you do not automatically become tax resident in Canada when you "land" for immigration purposes. You become tax resident in Canada when you set up your main home in Canada. It is more complex but this is the basic test.

If you complete the sale of your house before you become tax resident in Canada then there is no Canadian tax payable.

If you sell your UK house after you become tax resident in Canada there is a potential capital gain between the value of your home (in Canadian dollars) at the date you become tax resident and the price (again converted into Canadian dollars) you get when you eventually sell it.

Having said this, if your house is on the market at a realistic price on the day you land and/or become tax resident, it is extremely unlikely that you will subsequently sell it for more than the asking price. So it is also extremely unlikely there will be a capital gain that is taxable in Canada.
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Old Sep 5th 2008, 3:10 am
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Default Re: Tax Questions

Originally Posted by Andrew Miller
But if you own real estate in Canada or even have an interest bearing bank account here then you will be subject to Canadian taxes.
You will be subject to Canadian taxes on Canadian source income only until you become tax resident here. The rates are 25% of the net profit derived from real estate rentals and 10% of interest earned.
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Old Sep 5th 2008, 3:27 am
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Default Re: Tax Questions

Originally Posted by JonboyE
You will be subject to Canadian taxes on Canadian source income only until you become tax resident here. The rates are 25% of the net profit derived from real estate rentals and 10% of interest earned.
You're a star.

Cheers JonboyE.

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