Working abroad for 1-2 years - tax question

[TaxGuy]

You would be liable for tax in Canada if you were to remain a resident and whether you are resident here is a question of fact. If you leave Canada, have few if any ties here (house, bank accounts etc.) and you have residential status elsewhere, you may be off the hook for Canada tax. You may have to pay an exit tax on the gains of most assets (other than RRSP’s & TFSAs) that can be undone when you return.

It is possible you may still be liable for tax in both countries and in that case, there may be treaty tie breaker rules.

Canada taxes residents on worldwide income and citizenship has no relationship to Canadian taxation. Canadian citizens can easily be non-residents of Canada and non-citizens can be residents of Canada. The Income Tax Act is clear about the issue.

[MoneyGal]

Good post from TaxGuy. I should never have used the word "citizen" in my earlier post.

Here's the basic page on residency on the CRA site: http://www.cra-arc.gc.ca/tx/nnrsdnts...sdncy-eng.html

Includes a link to the interpretation bulletin on residency.

[indexxx]

You would be liable for tax in Canada if you were to remain a resident and whether you are resident here is a question of fact. If you leave Canada, have few if any ties here (house, bank accounts etc.) and you have residential status elsewhere, you may be off the hook for Canada tax. You may have to pay an exit tax on the gains of most assets (other than RRSP’s & TFSAs) that can be undone when you return.

It is possible you may still be liable for tax in both countries and in that case, there may be treaty tie breaker rules.

Canada taxes residents on worldwide income and citizenship has no relationship to Canadian taxation. Canadian citizens can easily be non-residents of Canada and non-citizens can be residents of Canada. The Income Tax Act is clear about the issue.

You can, in fact, retain bank accounts. I did so and would wire money home into them once a month, at a rate of almost 2:1 Cayman to Canadian dollars at that time.

[MoneyGal]

Hence, from the page I linked, "A determination of residence status can only be made after all the factors have been considered. Your circumstances have to be reviewed in their entirety to get an accurate picture of your residence status."

One factor or one bank account won't be the determining factor.

[TaxGuy]

You can retain bank accounts, credit cards, TFSA, RRSP etc. But the more you have in Canada the more it looks like you've not left.

Ideally, I advise clients to limit their connections to their TFSA/RRSP. If you retain a credit card, then a bank account is fine (to facilitate payment of the credit card).

[Saniokca]

Thanks everyone! That line with RRSP/TFSA/bank accounts is not too reassuring but if you say that it might still be ok there is hope

[indexxx]

You can retain bank accounts, credit cards, TFSA, RRSP etc. But the more you have in Canada the more it looks like you've not left.

Ideally, I advise clients to limit their connections to their TFSA/RRSP. If you retain a credit card, then a bank account is fine (to facilitate payment of the credit card).

...Keeping in mind that AFAIK, if you claim non-residency for tax purposes, you cannot contribute to your tax-sheltered investments, only hold them as they were when you left.

[HaroldCrump]

...Keeping in mind that AFAIK, if you claim non-residency for tax purposes, you cannot contribute to your tax-sheltered investments, only hold them as they were when you left.

I also wonder if you are working abroad in a country that has no tax treaty with Canada, will the income/returns earned inside the TFSA or RRSP become taxable in that country.

[indexxx]

I also wonder if you are working abroad in a country that has no tax treaty with Canada, will the income/returns earned inside the TFSA or RRSP become taxable in that country.

I would think so- if you've claimed residency in that country and given up your Canadian residency. Income is income. Just dispense with the whole magilla and move to a tax-free country! Of course, when I did eventually move back to Canada and filed my first return after reclaiming Canadian residency, I was on the hook for six years of investment gains earned in my Canadian holdings while I was away. But everything I made in the Caymans was untouchable, including a small pension I still have there.