groovy_moose

I'm sorry if this has been asked before, but i was just wondering whether anyone can help me.

I was in Canada last year on a Bunac/IEC visa. I'm filing my return as a non-resident. I was just wondering whether you are supposed to put your british income for the year in BOTH the 'Foreign income' and the Statement of World income bits, or just the latter part.

I've been using Turbo Tax, and have got the impression that i shouldn't fill in the foreign income part because a) it seems to relate to a T- slip that obviously i wouldn't have, having been working in the UK, and b) if i fill in both, it seems to come out that my total income is more than it actually was - the foreign income gets counted twice.

Just wanted to check that i'm doing this right because if i don't fill in the Foreign Income box, the amount i get refunded goes up a fair bit, and i don't want to accidently end up over-claiming or owing canada money...

Thanks

exenglishman

I was advised the foreign income was only if you earnt that money while in Canada. example: you rent property in the UK and received income for it while in Canada. The first return I filed was pro-rated as I only worked part of the year having entered Canada in August, you will probably find the same.

You might want to try somewhere you can walk in and do it for your first return as opposed to online. I was told there was alot more I could claim than I thought, mainly due to be being uneducated in the system. This resulted in a higher return than Turbo Tax would of got me (I started using it too to begin with)

Steve_

No, because if you're filing as a non-resident you only report Canadian-source income. Not sure what you're on about with "world income", sounds like you're using tax prep software.

Can't comment on Turbotax, but basically the CRA assumes if you've been in Canada for more than 183 days you are resident for tax purposes, so if you want to file as a non-resident you have to convince them otherwise.

Anyway, the principal is that you are only reporting your Canadian-source income, and you point out on the return that it is a non-resident return. From the sounds of it the software is asking questions to assist in the completion of T2209, T2036 and T1135 - none of which are relevant to you.

I'm assuming all you have is a T4 and maybe a T5 or NR4 from the bank - you only have to put that down as income on the T1. If you're single it should be simple to do it on paper, personally I wouldn't bother with software, it appears to be confusing you.

The key point of course it to make it clear on the return that it is a non-resident return.

At the end of the day if you truly are non-resident and you've paid taxes on your Canadian-source income, it's pretty hard for the CRA to come after you as they no clue what your foreign earnings were, so I'd just print off a T1 General and follow the instructions for non-residents in the general guide if I were you.

Bear in mind there is a difference between being non-resident for tax purposes and being non-resident while being in Canada, which is basically a classification only used by oil rig workers.

JonboyE

The first question is when did you arrive in Canada and when did you leave?

groovy_moose

What, in order to determine my residency status? Hmm, good question.

So I was already in Canada at the start of 2011 (arrived October 2010), and left North America on 28th September 2011, which was when my working visa was taken out my passport, so also presumably when i should count for tax residency. During that time I was working from the beginning of January until about the end of March, and then from 6th May until 15th August. All my other time in Canada was traveling there (and also in the states). I did and still do have a Canadian bank account and for 4 months of that i was living in an apartment in Vancouver.
Having tried filling in both resident and non-resident forms, i have also established that 90.5% of my world-wide income was from Canada in 2011 - if that makes any difference.

NB: Having found another thread somewhere, i'm thinking that i should file as a 'resident', but only up until the date i left, and if i do that, as long as everything is pro-rated, there's no need for me to involve any income i may subsequently have earned in the UK after i left Canada?

If any one is in a position to clarify this, it would be enormously helpful. I've tried calling the help line number thingy and it seems to be permanently engaged...

JonboyE

You've got it. You file as a resident up to September 28th, note on the tax return that you ceased to be resident as of the 28th, and there is no need to mention UK earnings after this date.

Steve_

Yes you can do that, we had this conversation in the other thread because people in your situation are rarely earning much from abroad, other than a bit of bank interest. If you have no non-Canadian income (or any that needs to be reported at any rate) you can just file as a resident and pro-rate it, otherwise you get into a discussion with the CRA about your resident status which requires filling in NR-73 or 74 as the case may be.

canmoreskier

As far as HMRC is concerned, a UK resident working abroad for 1 year and then returning to the UK would be regarded as a UK tax resident throughout that period. The original poster was in the UK at some point in both the 2010 and 2011 UK tax years. As I read it, the application of the Canada-UK tax treaty means that the person cannot be simultaneously tax resident of both countries and CRA would consider the person a deemed non-resident. If the poster files in Canada as a Canadian tax resident, at some point in the future it is likely that HMRC will start asking questions.

JonboyE

Deemed non-resident status is not that common and typically applies to military or diplomatic personnel who live in Canada but, because of their employment by HMG, remain tax resident in the UK (as Canadian military serving overseas remain tax-resident in Canada).

As you say, you cannot be resident for tax purposes in both countries at the same time. In cases where a person could be resident in either country the tax treaty has tie-breaker rules. These are where the person's permanent home, centre of vital and economic interests, and habitual abode are. A "permanent home" is a dwelling you use on a day-to-day basis so most people on an IEC visa will acquire a "permanent home" in Canada. As in all fact based determinations there is as element of subjectivity.

The way I see it work in practice is that the CRA don't really care what HMRC thinks - they apply their rules as they see fit. If they consider a person to be tax-resident in Canada then, under the treaty, that person cannot also be resident in the UK.

If a person on an IEC visa arrives in Canada, stays less than 183 days and leaves they are taxed as factual non-residents. If they arrive in a year and are still here at the end of the year they are taxed as factual residents. The following year they are taxed as factual residents up to the date they leave.

There are practical reasons for this. A non-resident (whether factual or deemed) is not entitled to federal personal tax credits in Canada unless their Canadian income is 90% or more of their world-wide income. They are not entitled to provincial credits. Also, if they are not factual residents then in any year that they stayed in Canada for more than 183 they would become deemed residents and their worldwide income for the year will be subject to Canadian tax. This is a nonsense and clearly not the intention.

This is my interpretation and the basis on which I have been filing returns for quite a while now. However, a lot of this is interpretation and if you have any references to the CRA treating IEC visa holders as deemed non-residents I will be interested to see them.

canmoreskier

My main contention here is the first tie-breaker that states:

An individual will be considered resident in the country where they have a permanent home available to them.

It is difficult to conceive that somebody on a one year temporary visa could have a permanent home available to them in Canada, whilst it is much more likely that they would not have severed all ties, including a place of residence, in their home country.

Having said that, if the CRA wants to tax them as resident, and has been doing so for many years, they might as well just carry on. No questions asked.

JonboyE

The CRA interpret "permanent home" as a dwelling place. See IT221 where they state:

Where an individual ... keeps a dwelling place in Canada (whether owned or leased), available for his or her occupation, that dwelling place will be considered to be a significant residential tie with Canada

Later they say:

The residence status of an individual is always a question of fact to be determined by taking into account all of the circumstances of the individual. The most important factor in determining whether or not an individual entering Canada becomes resident in Canada for tax purposes is whether or not the individual establishes residential ties with Canada. Generally, the comments found in ¶s 5 to 9 with respect to the residential ties of individuals leaving Canada are equally applicable to individuals entering Canada. As discussed in ¶ 5, an individual's spouse or common-law partner, dependants, and dwelling place, if located in Canada, will almost always constitute significant ties with Canada.