# Leaving Canada



## sensitivesoul (Oct 26, 2011)

Hi Everyone,
Was just hoping if someone could give me some advice on what I'll have to do with my taxes. 

I'm moving to the UK next year and am wondering what it intails taxation wise to do so. From what I've read the UK has some sort of treaty for taxes but I'm not sure how it works. I've heard that I'll have to fill out a nr73- 11 form but that's about all I know.

Would anyone recommend a professional to talk to about this, preferably somewhere close to or in Guelph Ontario? Thanks alot in advance .


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## indexxx (Oct 31, 2011)

*taxation*

Hi SS-

Are you moving permanently or short-term? If less than two years to the day, you'll have to claim your foreign earnings to Revenue Canada. But if you stay longer than two years, you are only subject to the tax laws of your adopted country of residence. There is a form claiming non-residency of Canada for this eventuality. At least, that's how it was several years ago when I moved to the Caymans for five years- I did not have to pay taxes on any of my foreign earnings.

EDIT- Yes, I had to satisfy certain non-residence criteria, like not having provincial healthcare, no local address, etc. You have to satisfy them that you are not riding both sides; you can't claim non-residency yet still reap benefits of Canadian residency.


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## Causalien (Apr 4, 2009)

An accountant would know what to do with this.

If I remember correctly, it's basically either continue to file your income with Canada and ask for foreign credit back(double taxed) or you go ahead and become a non-resident (giving property and your TFSA contribution).

The non resident thing is tricky if you come back. Since filing taxes does not mean you are a resident again, you'll have to call up a special place to have them switch you back to a resident again in their computer system. I had a run in with this glitch 10 years after I moved back.


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## MoneyGal (Apr 24, 2009)

You might want to search on this forum - I think we've discussed this before. 

You can be deemed to be a [tax] resident of Canada even if you are not actually living here. 

Depending on your situation (including whether you are coming back or not), you can either maintain ties to Canada or sever them completely. 

Canada taxes residents [deemed and actual] on worldwide income, so sometimes people sever ties completely in order to avoid any taxation by Canada. 

Whether or not you are a tax resident of Canada is not completely in your hands - it is a case of fact and the criteria are laid out here: http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html

Note that you can be deemed a resident for tax purposes even if you live all 365 days of the year in another country - but you maintain "residential ties" to Canada.


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## Square Root (Jan 30, 2010)

If you become a resident of another country for tax purposes, you will also need to consider the deemed sale of investments(with any tax paid before you leave) the deemed collapse of any tax deferred accounts(like RSP). May not be an issue for you but could be for retirees.


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## sensitivesoul (Oct 26, 2011)

Wow, didn't expect so many replies so fast . If all goes according to plan then I will be moving there permanently.

The only thing that I really have that ties me I think is my provincial health card, job and bank accounts. I don't have any investments or even a house of my own (living with parents at the moment). So I don't know if me just saying that I'm planning on closing my bank accounts once I get over there, ending my provincial health insurance, and getting all my money is transferred over to a UK bank account is enough.

Would I also have to fill out a tax return before I go (though I don't really know the exact date yet hopefully before next march)? Is there a professional in guelph or around Guelph that can help me out with it? Thanks alot for your help btw  it's really appreciated!


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## kcowan (Jul 1, 2010)

Here is a place to start:
UK Tax Treaty
and here are the offices of Miller-Thomson
Guelph


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## wideopensky (Jul 5, 2018)

*deemed or actual resident for tax purposes*

Hi MoneyGal, 

I realize I'm responding to a real old thread ... however, I'm trying to wrap my head around this issue.

I'm in Germany, where we pay more taxes than in Canada. Last year I filed two returns, and filed the foreign tax credit for Germany, and that was fine by me (I had to pay some money to Canada ... most mostly into the pension plan, which is fine by me since that's essentially my money).

My accountant is now putting pressure on me to declare that I'm a non-resident. Question: But if I'm okay to file two returns, is it illegitimate to continue with business as usual?

I am maintaining some secondary ties to Canada which I'd rather not sever (furnished condo that I'm renting out at arm's length; bank accounts), but I am most definitely in Germany for at least 10 months of the year and am registered there in every which way. 

Thanks in advance.


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## Eclectic12 (Oct 20, 2010)

Not sure why you didn't open a separate threat ... with a title that indicates it is Germany.

Regardless, my understanding is how the ties all add up.
https://www.canada.ca/en/revenue-ag...-moved/determining-your-residency-status.html


Though I understand that those like snow birds who winter in the US who technically should be filing a US tax return, have a treaty option to file paperwork to show they have a closer connection to Canada so that they don't have to file a US tax return.

http://www.mnp.ca/en/posts/the-closer-connection-form-why-is-it-important



As to whether it is legit to stay a Canadian tax resident - some on this forum work most of the time in the US but have maintained their Canadian residential ties so that they stay a Canadian tax resident that has to file a US tax return for their US sourced income. I would speak to an expert who can guide you as to what to maintain as well as what it means on the German side of things.


Cheers


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## Nononymous (Jun 10, 2015)

I don't think it's a problem to stay a tax resident of Canada even if you could qualify to be non-resident. Normally those rules are in place for people wanting to prove non-residence when they move to a lower-tax jurisdiction. But if you are in a high-tax jurisdiction and the only cost to you for Canadian filing is paperwork plus a small amount of money, then that's your choice. But I can see your accountant's point, if you are planning on staying in Germany permanently there's no real reason to continue paying Canadian taxes. You can certainly keep your bank accounts and rental property after declaring non-residency, you are not forced to liquidate everything, though there might be an exit tax to consider on certain assets. It's worth at least exploring. (But then you might still need to file a Canadian return for the rental income - check this with your accountant I suppose.) 

Many years ago I declared non-residency when moving to Europe just to reduce paperwork, even though we weren't sure how long we'd stay or if we'd go to the US after. It was very simple to do and saved bothering with Canadian returns for a few years.


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## wideopensky (Jul 5, 2018)

Thanks Nononymous. 

I called an agent from the CRA and he said it doesn't work that way. If you're a resident of another country you are automatically a non-resident for tax purposes of Canada, and need to comply with everything that that status entails (deemed disposition, and especially if you own property, as I do, etc.). I think they give you a grace year where you can be a hybrid of sorts. (And it seems that the tax treaty is exactly for those kinds of people who are transitioning.) 

It wouldn't surprise me if a lot accountants just let you file as a resident over and over again (if that's what you want). But in the end the CRA could come around and ask questions and possibly make things difficult ... That's my understanding ... maybe I'm wrong.


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## Nononymous (Jun 10, 2015)

I think your CRA person is confused. I would get a second opinion. There are a number of people on this forum who live and work in the US (on visas not green cards) and pay US taxes (i.e. they are US tax residents) but maintain Canadian tax residency for whatever reason (investments and plans to return). I also know of a couple who maintained Canadian tax residency, at some cost, so they could qualify to obtain Canadian citizenship while quasi-temporarily living and working in the US (yes this was totally legal and legit, to my great surprise). 

Basically once you settle and start working in another country, you are tax resident there. For some Canadians it makes sense to become non-resident, but for others the deemed disposition etc. would make the exit tax very expensive, so they remain tax resident. You have the choice.


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## Numbersman61 (Jan 26, 2015)

Wideopensky indicated that he filed as a resident of Germany. Canada has a tax treaty with Germany and so if he is a resident of Germany, he is a non resident of Canada. This is to prevent double taxation of income since if he was also a resident of Canada, he would be subject to Canadian tax on his world wide income. 
https://www.canada.ca/content/dam/cra-arc/formspubs/pub/t4058/t4058-17e.pdf
Here is the link to the treaty. https://www.fin.gc.ca/treaties-conventions/germany_-eng.asp


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## Nononymous (Jun 10, 2015)

The tax treaty is used to determine who taxes what in situations where there is income from both countries. It does not mandate that a Canadian moving to Germany automatically becomes non-resident from a tax perspective. That would imply that a Canadian going to work in Germany for a few years, paying German taxes and being a German tax resident during this period, would be forced to pay capital gains on a deemed disposition of all their Canadian assets, which is what one does to become non-resident for tax purposes under Canadian rules. That doesn't make much sense, and it doesn't happen.


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## Numbersman61 (Jan 26, 2015)

Nononymous said:


> The tax treaty is used to determine who taxes what in situations where there is income from both countries. It does not mandate that a Canadian moving to Germany automatically becomes non-resident from a tax perspective. That would imply that a Canadian going to work in Germany for a few years, paying German taxes and being a German tax resident during this period, would be forced to pay capital gains on a deemed disposition of all their Canadian assets, which is what one does to become non-resident for tax purposes under Canadian rules. That doesn't make much sense, and it doesn't happen.


Pure nonsense. Before commenting, I suggest you read the documents in the links I provided. The treaty determines in which country the individual is a resident. You can only be a resident in Canada or Germany - not both. When wideopensky became a resident of Germany, he became a non resident of Canada with the resulting tax consequences. By the way, I’m a retired CPA.


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## Jimmy (May 19, 2017)

From my reading, you don't have a house here so no strong ties once you leave. You would thus be a resident of Germany for tax purposes starting the later of the day day you left Canada or arrived there and will file a return there for their tax year.



> When you leave Canada to settle in another country, you usually become a non-resident for income tax purposes on the latest of:
> 
> the date you leave Canada;
> the date your spouse or common-law partner and/or dependants leave Canada; or
> the date you become a resident of the country you settle in.


https://www.canada.ca/en/revenue-ag...a-non-residents/leaving-canada-emigrants.html

If you had Canadian income in the year you left you have to file a return here too. If not but any of these apply, also file the Canadian return. If you have any Canadian Part X111 ( investment income) or part 1 (business) tax after you leave , you will still have to file a Canadian return too

https://www.canada.ca/en/revenue-ag...t-your-tax-return/you-have-file-a-return.html

https://www.canada.ca/en/revenue-ag...anada-non-residents/non-residents-canada.html

You will have a deemed disposition for some of your property, mainly stocks, investments etc and any related capital gains/losses to declare on your Canadian return as you leave too. Here is a list of what is and isn't included.

https://www.canada.ca/en/revenue-ag...nada-non-residents/dispositions-property.html


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## Nononymous (Jun 10, 2015)

Numbersman61 said:


> Pure nonsense. Before commenting, I suggest you read the documents in the links I provided. The treaty determines in which country the individual is a resident. You can only be a resident in Canada or Germany - not both. When wideopensky became a resident of Germany, he became a non resident of Canada with the resulting tax consequences. By the way, I’m a retired CPA.


So you are suggesting that if I move to Germany, work and pay taxes there, but plan to return to Canada in a few years, the moment the CRA sees a German address it will *force* me to pay capital gains on a deemed disposition of eligible assets? Not my understanding of how it works. My understanding is that declaring Canadian non-residence is optional, and that it is possible to have more than one tax residence.

Exhibit A - the new CRS tax residency form: https://www.canada.ca/content/dam/cra-arc/formspubs/pbg/rc518/rc518-17e.pdf

Note that you have check boxes for three options: Canadian tax residency, US tax residency, other tax residency. These are AND not OR check boxes. Ergo, one may have multiple tax residencies. (US citizenship always counts as US tax residency, which is a whole separate can of worms; dual citizens in Canada who choose to comply with US tax obligations by definition have both tax residencies.)

As I said, there are few folks on this forum who have lived and worked in the US for years but who maintain Canadian tax residency.


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## AltaRed (Jun 8, 2009)

Except for the year of physical presence change, you can only be a resident for tax purposes in one country at a time. It is a matter of the tiebreaking rules of the specific tax treaty.

For those who work with short term work visas, and maintain close ties to Canada it is possible to work ex- Canada and remain a tax resident of Canada. J4B does this. I did this about 18 years ago by working single status and leaving my family in Canada.


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## Nononymous (Jun 10, 2015)

So let's assume that a person owns no real estate in Canada and leaves no family behind (so has no tie or claim to residency under the standard criteria for defining non-residency) but has a bunch of money invested in mutual funds that are not in RRSPs. If they move to Germany for five years with the intent to return, by your logic they are forced to pay the capital gains on a deemed disposition of the mutual funds after the first year abroad. 

What then happens if they file Canadian returns from a German address without the full non-residency declaration, which is a separate form?

That doesn't fit with the language on the CRS tax residency form, particularly the notes on the second page:



> Generally, an individual will be a tax resident of a jurisdiction if, under the laws of that jurisdiction, they pay or should be paying tax there because of their domicile, residence, or a similar criterion. Individuals who are tax residents in more than one jurisdiction can rely on the tie–breaker rules in tax conventions (when they apply) to resolve cases of dual tax residence.


That's my understanding of tax treaties: they are used to sort out who gets what when there are multiple tax residencies and/or income sources from multiple countries, hopefully in a way that reduces or eliminates dual taxation.


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## Jimmy (May 19, 2017)

Nononymous said:


> So let's assume that a person owns no real estate in Canada and leaves no family behind (so has no tie or claim to residency under the standard criteria for defining non-residency) but has a bunch of money invested in mutual funds that are not in RRSPs. If they move to Germany for five years with the intent to return, by your logic they are forced to pay the capital gains on a deemed disposition of the mutual funds after the first year abroad.
> 
> What then happens if they file Canadian returns from a German address without the full non-residency declaration, which is a separate form?
> 
> ...


When you leave Canada you have a deemed disposition of, in your example, the mutual funds and then reacquire them at FMV and yes you have to declare any capital gains/losses. You can still keep the mutual funds if you want to but you must file a Canadian return and will continue to pay Canadian tax on their dividends and other investment income accordingly.

If you later return to Canada, you can elect to unwind some of this capital gain from the year you left.

https://www.canada.ca/en/revenue-ag...nts/dispositions-property.html#ReturnToCanada


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## Nononymous (Jun 10, 2015)

I still maintain that you can elect to file for non-residency or not - it's not mandatory. Again, the example I gave: if I move to Germany and begin filing regular Canadian returns from my German address (declaring worldwide income but taking a foreign tax credit for German taxes paid, so nothing owing) but do not make the non-residency declaration (which is a separate form) then what happens?


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## Jimmy (May 19, 2017)

Nononymous said:


> I still maintain that you can elect to file for non-residency or not - it's not mandatory. Again, the example I gave: if I move to Germany and begin filing regular Canadian returns from my German address (declaring worldwide income but taking a foreign tax credit for German taxes paid, so nothing owing) but do not make the non-residency declaration (which is a separate form) then what happens?


Doesn't work that way. You file German taxes on German income if you have residency there - the CRA rules are pretty clear. You may include your Canadian investment income on the German return and get a foreign tax credit if you also file a Canadian return and have paid Canadian tax. That form you posted had nothing to do w personal taxes actually. It was for Canadian firms who pay out income to foreign non financial institutions.


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## Nononymous (Jun 10, 2015)

I realize the form I posted has nothing to do with personal taxes. It's a form you give to your bank to self-certify tax residency to comply with FATCA or CRS rules (banks may have their own forms that are very similar). The reason I posted it is that it states quite explicitly that an individual can have multiple tax residencies.

To the point I'd made earlier: nothing in your statement above disagrees with what I've said. If living in Germany, you would file German and Canadian returns and foreign tax credits would essentially cancel things out so that you aren't taxed twice on the same income (from employment in Germany and investment in Canada, in this example). 

My question, rather, was what happens when you file your Canadian return, with German income and all that, but you do not submit the declaration of non-residency. Does CRA just assume that because you've got a German address that you must be non-resident, so you're suddenly on the hook for capital gains on deemed disposition of assets? I think not. I think that the non-residence declaration is optional.


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## Jimmy (May 19, 2017)

Nononymous said:


> I realize the form I posted has nothing to do with personal taxes. It's a form you give to your bank to self-certify tax residency to comply with FATCA or CRS rules (banks may have their own forms that are very similar). The reason I posted it is that it states quite explicitly that an individual can have multiple tax residencies.
> 
> To the point I'd made earlier: nothing in your statement above disagrees with what I've said. If living in Germany, you would file German and Canadian returns and foreign tax credits would essentially cancel things out so that you aren't taxed twice on the same income (from employment in Germany and investment in Canada, in this example).
> 
> My question, rather, was what happens when you file your Canadian return, with German income and all that, but you do not submit the declaration of non-residency. Does CRA just assume that because you've got a German address that you must be non-resident, so you're suddenly on the hook for capital gains on deemed disposition of assets? I think not. I think that the non-residence declaration is optional.


 You have one tax residence in Germany. You will pay Canadian taxes on any income you earn from sources still in Canada though - they will be wheld or you can file a Canadian return. I have posted the CRA rules regarding assets already when you emigrate and become a non resident. They are quite clear. You have to sell them and reacquire them at FMV and declare the capital gain. Not sure where you are getting this idea there is some form to waive this requirement but there isn't. 

Maybe you are thinking of Form 217. This form allows you to file a Canadian return and pay Canadian tax on these capital gains first or other income sources otherwise they are withheld and that is your final Canadian tax obligation. It may be better to file if the tax will be less than what will be withheld. 

What is a section 217 election?
Canadian payers have to withhold non-resident tax on
certain types of income they paid or credited to you as a
non-resident of Canada. The tax withheld is usually your
final tax obligation to Canada on this income and you do
not have to file a Canadian tax return to report it.

However, you can choose to file a Canadian return and
report the types of Canadian-source income listed in the
next section. You are then “electing under section 217 of the
Income Tax Act.” By doing this, you may pay tax on this
income using an alternative method and may receive a
refund of some or all of the non-resident tax withheld.

Your final capital gains are listed as one source of income for this option. 

https://www.canada.ca/en/revenue-ag...tax-benefit-package/non-residents/5013-g.html


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## Nononymous (Jun 10, 2015)

To me at any rate it's quite clear that CRA recognizes multiple tax residencies - that is explicit in the Common Reporting Standard declarations. Any dual US-Canadian citizen in Canada automatically has US tax residency (whether they comply with US tax obligations is another matter).

But again, nobody is answering my original question. You are only explaining the mechanism for expatriation, and claiming that it is required in all cases. Here is the scenario and question, once more:

You move to Germany for a job, with the intention of returning in five years. You have a bunch of Canadian mutual funds, but no house or family or other ties. You have employment income from Germany, and investment income from Canada. You file German and Canadian returns from your German address, declaring worldwide income on both but using foreign tax credits to eliminate double taxation. All well and good. You do NOT file the non-residency declaration for Canada. What happens next? Does the CRA determine that you've become non-resident and stick you with a bill for capital gains on deemed disposition of the mutual funds? Or does the CRA just accept the return because you have not elected to declare non-residency?

I agree that the CRA documentation is worded to make it sound automatic or involuntary. In my past experience doing this, they want you to prove your non-residency because they assume you're going off to a lower-tax jurisdiction and you want to save money by not paying Canadian taxes. As opposed to wanting to remain resident if you are going to a higher-tax jurisdiction and don't want to deal with the capital gains business.


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## Jimmy (May 19, 2017)

Nononymous said:


> To me at any rate it's quite clear that CRA recognizes multiple tax residencies - that is explicit in the Common Reporting Standard declarations. Any dual US-Canadian citizen in Canada automatically has US tax residency (whether they comply with US tax obligations is another matter).
> 
> But again, nobody is answering my original question. You are only explaining the mechanism for expatriation, and claiming that it is required in all cases. Here is the scenario and question, once more:
> 
> ...


The CRA doesn't recognize several 'residencies' You are a non resident period. You still file a Canadian return if you have any remaining Canadian income and has nothing to do w residency. Your question has been answered several times. You are deemed a non resident due to your residency in Germany period. I can't find any requirement anywhere for this ' non residency ' declaration and not sure where you got that from. For the last time you pay capital gains on your Canadian assets as a deemed disposition when you become non-resident. Not sure why you are arguing and obfuscating this or can't just accept the CRA rules but either way we'll leave it at that.


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## Nononymous (Jun 10, 2015)

You are telling me what *should* happen if I go through the process to file as a non-resident. But that's not my question. What happens in the scenario I've given - does CRA come back and say "hey there, you owe us a heap of capital gains" and send me a bill?


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## Nononymous (Jun 10, 2015)

Found it: Form NR73 Determination of Residency Status. 

To repeat, what happens if you leave Canada, decide that you don't want to become non-resident, and file your returns from a foreign address without having done the capital gains business, and without having filed an NR73 form?


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## Jimmy (May 19, 2017)

Nononymous said:


> Found it: Form NR73 Determination of Residency Status.
> 
> To repeat, what happens if you leave Canada, decide that you don't want to become non-resident, and file your returns from a foreign address without having filed an NR73 form?


In his example it was pretty clear he was becoming a non resident. You don't get to decide where you want to be a resident. That form is for the CRA to decide where your residency will be based on their residency rules. ie questions on if you own a house still here, other ties etc, member of forces and deemed Canadian resident etc etc.

Maybe your question is you don't know where your residency will be. So you send the CRA that form and they tell you. Then based on if your residency is still in Canada or not you may or may not have to sell your assets. 

If you want to know the penalties or the actions the CRA will take for you not filing your capital gains properly when you are a non resident and had to they are on the CRA site too.


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## twa2w (Mar 5, 2016)

Nononymous, the answer to your question is that you decalare the capital gain but can elect to defer payment of taxes until such property is sold. There is a form for this.
If you subsequently return to Canada, you can unwind the capital gain. Again, more paperwork.
You may have to provide security if you elect to defer payment.

However, you can be a dual resident under a tax treaty. 

The tie-breaker rules in tax treaties
An individual who is a resident of Canada for purposes of the Act is also considered a resident of Canada for purposes of paragraph 1...... . Such an individual may also be a resident of the other country for purposes of the same paragraph in the same treaty (a dual resident). Whether an individual is considered resident in a country for purposes of paragraph 1 of the Residence article of a particular tax treaty between Canada and another country generally depends on whether the individual is liable to tax in that country within the meaning of the particular treaty.

The tax act and tax treaties are complex with lots of exceptions. I have friends that are high level CPAs that specialize in cross border situations and have worked around the world, London, Brussels, New York Toronto etc. They are extremely well paid simply because these situations are not cut and dried. 
One of them says she spends most of her time fixing situations that regular CPAs f... Up because they don't understand or interpret incorrectly the sections that may apply to even the most simple situations.


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## Eclectic12 (Oct 20, 2010)

Nononymous said:


> To me at any rate it's quite clear that CRA recognizes multiple tax residencies ... Any dual US-Canadian citizen in Canada automatically has US tax residency (whether they comply with US tax obligations is another matter) ...


What you seem to be ignoring is that the US is a special situation as they have three ways of being a tax resident, where only one is based on residence (i.e. the substantive presence test).
Germany and Canada don't use the other types such as citizenship or being a US person (ex. keep one's green card) so it all boils down to where is one is a resident.




Nononymous said:


> ... But again, nobody is answering my original question. You are only explaining the mechanism for expatriation, and claiming that it is required in all cases.


Actually your question has been answered ... you seem to be trying to apply the US situation to the rest of the world.




Nononymous said:


> ... Here is the scenario and question, once more:
> 
> You move to Germany for a job, with the intention of returning in five years. You have a bunch of Canadian mutual funds, but no house or family or other ties. You have employment income from Germany, and investment income from Canada. You file German and Canadian returns from your German address, declaring worldwide income on both but using foreign tax credits to eliminate double taxation. All well and good.


This is the area of disagreement.

Where one has no ties to Canada, routinely lives in another country (Germany) - what is keeping you a tax resident of Canada?
CRA says:


> If you established ties in a country that Canada has a tax treaty with and you are considered a resident of that country, but you are otherwise a factual resident of Canada, meaning you maintain significant residential ties with Canada, you may be considered a deemed non-resident of Canada. The same rules apply to deemed non-residents as non-residents of Canada.


https://www.canada.ca/en/revenue-ag...-moved/determining-your-residency-status.html

Germany has a tax treaty with Canada, residency makes one a German tax resident - having Canadian residential ties is not enough to keep one's Canadian tax residency.
Why do you think that it is a choice?




Nononymous said:


> ... You do NOT file the non-residency declaration for Canada.


What non-residency declaration?

The parts I have read about are filling out the "date of departure" on the final Canadian tax return being filed.
There's also filing an NR73 - Determination of Residency Status (Leaving Canada), should you be unsure or want to document with CRA which you are.





Nononymous said:


> ... What happens next? Does the CRA determine that you've become non-resident and stick you with a bill for capital gains on deemed disposition of the mutual funds? Or does the CRA just accept the return because you have not elected to declare non-residency?


I expect it would be the same as when CRA does not follow up for missed tax returns then asks for them to be filed and if not satisfied, they run the numbers they have and issue a bill.

CRA has a list of exceptions who are allowed to routinely live in other countries without giving up tax residency such as armed forces personnel, clergy etc. So when they eventual follow up, it may be along the lines of asking for proof that one is an exception.




Nononymous said:


> ... I agree that the CRA documentation is worded to make it sound automatic or involuntary. In my past experience doing this, they want you to prove your non-residency because they assume you're going off to a lower-tax jurisdiction and you want to save money by not paying Canadian taxes. As opposed to wanting to remain resident if you are going to a higher-tax jurisdiction and don't want to deal with the capital gains business.


What capital gains business from emigrating?

Perhaps you missed that one can elect to defer the departure taxes to when one sells the assets?
See the *Deferring the tax owing* in the link later on.

Where one returns to Canada to resume being a Canadian tax resident, there is also the *What if you return to Canada? Unwinding a deemed disposition*

Link .... https://www.canada.ca/en/revenue-ag...nada-non-residents/dispositions-property.html


Cheers


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## Nononymous (Jun 10, 2015)

Thank you. I agree it's hideously complex. But you do confirm that dual or multiple tax residency is possible. 

My own experiences living abroad were fairly straightforward. 1. Student in the US with a taxable Canadian government scholarship so could not be non-resident even though I was also tax resident in the US due to employment (so dual tax resident). 2. Non-residency declaration upon leaving for indeterminate period, and did pay capital gains on some shares (but highly advantageous to do so).

What to me fails the common-sense test is that any Canadian moving abroad for a few years with plans to return is somehow flagged and forced to pay capital gains after departure.


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## Nononymous (Jun 10, 2015)

Okay, I am willing to concede that Canadian non-residency is not an "optional" declaration, strictly speaking. I wasn't aware of the deferral option on the capital gains (not something currently on my radar). However, dual or multiple tax residence is clearly possible, depending on the situation. And in practical terms a person leaving for a couple of years can probably keep it simple by entering a date of departure but doing nothing further - particularly in a situation where they wouldn't need to deal with the capital gains (i.e. savings in RRSP or TFSA or whatever) so wouldn't have to defer or pay.


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## Eclectic12 (Oct 20, 2010)

Not sure what is complex about Germany and Canada use residency to determine tax residency. AFAICT, German residency + almost no Canadian tax residential ties = German tax resident, Canadian NR where leaving Canada triggered the departure tax.

Again ... your examples of dual tax residency are the US, which is not typical and probably not a good idea to assume other countries have a similar setup. 


Not sure why "common sense" means anything. My co-worker assumed that because he wasn't getting notices from CRA asking him to file his outstanding tax returns, he could keep doing so indefinitely. He then didn't pay attention when at year eight, CRA asked him to file. He paid attention when CRA at year ten issued him a rather large bill by based on the forms/info they had without any of the deductions/credits he planned to file for.


Either way - where one plans to return to Canada anyway, why risk any future issues by making assumptions on what CRA will notice and will do versus what one is required to do?
It seems a lot more hassle than it's worth ... especially where one can defer/unwind the departure CG.


Cheers


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## Jimmy (May 19, 2017)

The CRA makes the asset disposition and CG departure rules for emigrants for a reason. They don't want people moving away then selling their Canadian investments and evading capital gains taxes.


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## Nononymous (Jun 10, 2015)

(Edited) Yes the point is well understood - you leave Canada for good, you square up the capital gains, now or later. But if you moved away without calling yourself non-resident you'd still owe the capital gains upon selling the assets - since you'd still be tax resident.


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## AltaRed (Jun 8, 2009)

Not sure why this German resident for tax purposes is being so stubborn. He cannot file a Canadian T1 General as a tax resident of Germany, and he is indeed a tax resident of Germany having broken ties with Canada except for investment accounts. 

If the German authorities have not caught on they most likely eventually will, and they will apply the tie breaking rules to extract their pound of flesh. Now, unless the taxpayer wants to pay double taxes, he will then need to contact CRA to essentially retract those T1 returns and file Part XIII taxes instead. And they will want all those unpaid cap gains taxes for deemed dispositions, plus penalties and interest.

The trigger to this individual getting his balls in a vice is when the Germans come calling. Just because he has been filing Canadian T1 Generals means nothing. CRA is happy enough to let the taxpayer keep sending money for now.

For what it is worth, form NR73 is pretty meaningless. It is the tax treaty that governs here. Not some determination by a CRA grunt.

Also for what it is worth, unless the taxpayer is one of those listed exclusions, it is time for the taxpayer to get serious about his situation. At this point, he would be well advised to engage an International tax accountant to advise on how to straighten this out. Depending on the size of the deemed cap gains bill, the taxpayer may be able to post security equal to the tax bill but I think that is very messy and cumbersome.

I know that the 3 times I went ex-pat, the last being 2003, I simply paid the deemed disposition tax Bill's.


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## Nononymous (Jun 10, 2015)

Indeed, as you say, "CRA is happy enough to let the taxpayer keep sending money for now." If there are capital gains to be paid, they'll get them eventually, one way or another. The bigger problem may well be the Germans. If the Canadian investments aren't being reported properly, the Finanzamt may one day discover them (via CRS possibly) and develop an appetite for a share of that income.


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## twa2w (Mar 5, 2016)

My understanding from the 'recent' OP's first post is that 2017 was his first year in Germany and he is declaring all his income in Germany, paying the appropriate German tax, then filing a Canadian tax return, again declaring all his income but using the foreign tax credit for the tax he paid in Germany. Thus paying little Canadian tax
I assume this meant he is declaring his worldwide income on both returns but perhaps I am reading this wrong.

In Germany, if all your income is from one employer, there is no need to actually file a tax return. ( but some do to take advantage of special deductions etc) Given that he did file a return, I assumed he declared other income.


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## AltaRed (Jun 8, 2009)

Key issue. He cannot do income splitting, being cute by filing as if a tax resident of each country counting only the income for each country and potentially taking personal deductions in both.

2017 would indeed be a split year if 2017 was year of re-location, but that won't work for 2018.


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## twa2w (Mar 5, 2016)

True. My post wasn't clear. When I stated I thought he is declaring all his income in Germany I meant his worldwide income, not just his German income. ( and same for Canada).
I was just trying to clarify what the OP actually did. 
From the original post I assumed he declared all his world wide income in both Germany and Canada but wanted to confirm as it wasn't really clear. It also wasn't clear when he moved. 
If it was in 2017, he could declare only German income in Germany and Cdn Income in Canada as you say but not in 2018.

It also made it seem like he may have paid into CPP and wanted to keep doing so to maintain his pension ( and perhaps his OAS eligibility years) but that was not clear. 

The OP has only replied once to the thread saying he got advice from CRA to become non- resident following the proper protocol so hopefully he takes this advice.

There is nothing in the OP s comments to indicate he would be an exception to any rules.


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## Nononymous (Jun 10, 2015)

twa2w said:


> There is nothing in the OP s comments to indicate he would be an exception to any rules.


If he decided it was advantageous to retain Canadian tax residency he could try to make the case that his condo is a primary residence that he's temporarily renting but plans to move into one day. Might work. But without more info we're now getting into unproductive speculation.

Friends of mine, for acquisition of citizenship reasons, maintained tax residency in Canada after moving to the US despite owning no property and having no family in the country. Literally their only ties were a magazine subscription delivered to our house and a cell number, plus keeping a local address for their bank accounts. This was all run through a lawyer and accountant and - apparently - was completely legal. The point being that I don't think it's super difficult to maintain residency - the CRA is happy to have you pay a top-up beyond your US tax (particularly if you'd just defer capital gains anyway).


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## Numbersman61 (Jan 26, 2015)

Nononymous said:


> If he decided it was advantageous to retain Canadian tax residency he could try to make the case that his condo is a primary residence that he's temporarily renting but plans to move into one day. Might work. But without more info we're now getting into unproductive speculation.
> 
> Friends of mine, for acquisition of citizenship reasons, maintained tax residency in Canada after moving to the US despite owning no property and having no family in the country. Literally their only ties were a magazine subscription delivered to our house and a cell number, plus keeping a local address for their bank accounts. This was all run through a lawyer and accountant and - apparently - was completely legal. The point being that I don't think it's super difficult to maintain residency - the CRA is happy to have you pay a top-up beyond your US tax (particularly if you'd just defer capital gains anyway).


So let me understand this most recent post. Your friend is maintaining tax residency in Canada for citizenship purposes even though he does not reside in Canada. It appears what he is doing is considered fraud in order to obtain Canadian citizenship. Before one can become a Canadian citizen they must physically spend a certain number of days in Canada. Perhaps you can clarify how you reconcile your friend’s actions. Why is he maintaining Tax residency in Canada for citizenship purposes unless it is to commit fraud?


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## wideopensky (Jul 5, 2018)

*Thank you all*

Thank you all for your responses. I didn't mean to keep you guessing ... but simply missed a couple of pages of the discussion!

I filed two returns, Canada and Germany, both on my world income. Since Germany is a higher-taxing country, I don't mind this scenario so much, given that this is less paper work than severing ties. 

I'm self-employed and will continue to have clients in Canada (among other countries) and rental property, so even if and when I sever ties there will be paper work to do... therefore I may as well do the whole return.

My question was and is essentially what Nonomymous was trying to get at: 

Suppose I sever ties this October and tell my banks I have a new address, pay back the home buyers plan, do a deemed dispostion, comply with rental withholding tax. Then in my exit tax return for 2018 I state October 2018 as a departure date. 

Is that doable and legitimate considering that the CRA was supposedly deeming me to be a non-resident anyways since Jan. 2017. Meaning, would they make me retroactively accountable for not having lived up to the obligations of a non-resident (paying back a home buyers plan, remitting a witholding tax from tenants to the govt, the deemed disposition) starting Jan 2017 ???


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## AltaRed (Jun 8, 2009)

Why are you not asking your tax accountant these questions? Surely you had a detailed discussion BEFORE you left Canada to fully understand the various tax complexities?


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## wideopensky (Jul 5, 2018)

Thanks. I was suspecting my tax accountant is not always up to par, even though he does have experience with people who move to different countires. ... In any event... I did get my answer in the meantime, from another source. Evidently the CRA would NOT look back and try to unravel things retroactively. So all is good.


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## Numbersman61 (Jan 26, 2015)

wideopensky said:


> Thanks. I was suspecting my tax accountant is not always up to par, even though he does have experience with people who move to different countires. ... In any event... I did get my answer in the meantime, from another source. Evidently the CRA would NOT look back and try to unravel things retroactively. So all is good.


Yes, you asked the same question on the Serbinski Tax forum using the alias Serendipity and received a response from Nelsona.


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## Nononymous (Jun 10, 2015)

Numbersman61 said:


> So let me understand this most recent post. Your friend is maintaining tax residency in Canada for citizenship purposes even though he does not reside in Canada. It appears what he is doing is considered fraud in order to obtain Canadian citizenship. Before one can become a Canadian citizen they must physically spend a certain number of days in Canada. Perhaps you can clarify how you reconcile your friend’s actions. Why is he maintaining Tax residency in Canada for citizenship purposes unless it is to commit fraud?


Belated reply, sorry. I didn't fully understand the scheme but it was managed through a citizenship lawyer so presumably legit. The gist of it being that if you leave Canada for a period of time but with intent to return, and maintain tax residency, you are still counting days towards the total required for citizenship. Whatever it was, it worked, and apparently it was not fraudulent. Now that I think of it there was a significant tie - one of them took long-term leave of absence from a permanent job in Canada rather than formally resign. That was probably the key.


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## Nononymous (Jun 10, 2015)

wideopensky said:


> Thanks. I was suspecting my tax accountant is not always up to par, even though he does have experience with people who move to different countires. ... In any event... I did get my answer in the meantime, from another source. Evidently the CRA would NOT look back and try to unravel things retroactively. So all is good.


That was my sense, you could be a bit flexible about the if/when on declaring yourself non-resident.

Also, not everyone has or needs a tax accountant, and certainly not everyone has the time or even the idea to check in advance before moving overseas - sometimes it all happens very quickly and you need to deal with it after the dust has settled.


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## AltaRed (Jun 8, 2009)

Nononymous said:


> Also, not everyone has or needs a tax accountant, and certainly not everyone has the time or even the idea to check in advance before moving overseas - sometimes it all happens very quickly and you need to deal with it after the dust has settled.


Nonsense. An appointment can be obtained with any of a number of International tax consultants in a matter of days. Any of the big 5 or so are more than willing to assist. The real problem is 2 fold: 1) lack of sufficient knowledge to know this is an important issue due to tax complexity, and 2) being penny wise and pound foolish...IOW, cheap.


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## kcowan (Jul 1, 2010)

Anyone who goes to work in the US these days needs professional advice. While it seems to be easy, it is much more expensive to put it right after the fact. I have a friend who thought he was smart enough to figure it out. He paid big time for that mistake.


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## Nononymous (Jun 10, 2015)

kcowan said:


> Anyone who goes to work in the US these days needs professional advice. While it seems to be easy, it is much more expensive to put it right after the fact. I have a friend who thought he was smart enough to figure it out. He paid big time for that mistake.


That is probably true. A green card can bite you in the *** years later when you leave, so worth avoiding. Your US assets or income are at risk if the IRS discovers that you forgot (or never knew) to file FBARs for Canadian accounts. Many pitfalls if you have investments in Canada. 

Avoiding the place is also an option, and possibly a desirable one depending on where politics takes it.

(Standard boilerplate speech at this point that if you are a US-Canada dual citizen with no interest in moving to the US, stay the hell out of the US tax system. Compliance will only cost you time and possibly money, and there is no chance of being punished in Canada. It's increasingly clear that staying off the radar is the best plan going forward.)


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## Numbersman61 (Jan 26, 2015)

Nononymous said:


> That is probably true. A green card can bite you in the *** years later when you leave, so worth avoiding. Your US assets or income are at risk if the IRS discovers that you forgot (or never knew) to file FBARs for Canadian accounts. Many pitfalls if you have investments in Canada.
> 
> Avoiding the place is also an option, and possibly a desirable one depending on where politics takes it.
> 
> (Standard boilerplate speech at this point that if you are a US-Canada dual citizen with no interest in moving to the US, stay the hell out of the US tax system. Compliance will only cost you time and possibly money, and there is no chance of being punished in Canada. It's increasingly clear that staying off the radar is the best plan going forward.)


I disagree with the advice regarding US-Canada dual citizens. If you are a US citizen, you have filing obligations in the US. Not filing may be considered a criminal offense and there is always a chance of getting caught when visiting the US even for a short trip. 
I know some disagree and say “take a chance” but my advice is to comply with the law.


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## Nononymous (Jun 10, 2015)

Numbersman61 said:


> I disagree with the advice regarding US-Canada dual citizens. If you are a US citizen, you have filing obligations in the US. Not filing may be considered a criminal offense and there is always a chance of getting caught when visiting the US even for a short trip.
> I know some disagree and say “take a chance” but my advice is to comply with the law.


Not to start that debate again but complying with US tax law can be a bad, expensive advice: 

http://www.cbc.ca/news/politics/transition-tax-trump-corporations-1.4639020

Ms. Herman certainly regrets meeting her obligations. There is zero chance of being "caught" for non-filing on a trip to the US; in the unlikely event that one is identified by the IRS and penalties assessed, they are not collectible in Canada. 

See Isaac Brock Society for more details. Key point is, don't listen to lawyers and accountants (especially not Moodys Gartner) and do lots and lots of research before making the decision to come into compliance. It's also possible to renounce US citizenship without US tax compliance. Anyone who tells you otherwise is wrong or wants your business. However, given that Canadian banks do not enforce FATCA (i.e. they only require self-certification that you are not a US tax resident and do not validate your answer) and do not discriminate against US citizens, there's not a lot to be gained by renouncing except moral satisfaction in exchange for your US$2350.


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## Numbersman61 (Jan 26, 2015)

Nononymous said:


> Not to start that debate again but complying with US tax law can be a bad, expensive advice:
> 
> http://www.cbc.ca/news/politics/transition-tax-trump-corporations-1.4639020
> 
> ...


I am well aware of the views of the Isaac Brock Society. I just think they’re wrong. However, if you are a US citizen and want to take the chance that you won’t be caught when you visit the US - go for it. It is now very easy for the US government to identify US citizens who were born in the US since they have a copy of your passport which indicates place of birth.


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## Nononymous (Jun 10, 2015)

Numbersman61 said:


> I am well aware of the views of the Isaac Brock Society. I just think they’re wrong. However, if you are a US citizen and want to take the chance that you won’t be caught when you visit the US - go for it. It is now very easy for the US government to identify US citizens who were born in the US since they have a copy of your passport which indicates place of birth.


We will agree to disagree.

If you enter the US on a Canadian passport with US birthplace the pleasant folks at the border may identify you as a US citizen and tell you to get a US passport. (It's illegal for a US citizen to enter the US with a non-US passport, but there is no defined penalty for doing so. I have used a Canadian passport exclusively for the last 20 years and only once have they noticed my US birthplace and asked about citizenship.) 

US customs & immigration have no access to IRS data so cannot check tax status. Furthermore the lack of returns being filed is not in and of itself evidence of wrongdoing - many individuals are not obliged to file because their income is below the threshold at which filing is required. For the IRS to determine that you should have been filing they would need access to income data, and since Canadian T-4s are not shipped across the border, they have no such data. Currently there is no evidence that account balances reported under FATCA (for any Canadians who declared US citizenship or tax residency when asked by their banks to self-certify - which one should not do) have lead to inquiries from the IRS. 

A great many bad things would need to happen before a non-compliant dual citizen would be stopped at the border. The IRS would need to have already initiated criminal proceedings, which presumably that person would have caught wind of. You cannot in fact be detained for an outstanding tax debt. Do a little research on the TECS system. If the authorities are attempting to collect tax penalties and you enter the US, all the border folks are allowed to do is ask for a contact address in the US so the IRS might have a chat with you during your visit.

Of course, it's best not to put yourself in a situation where the IRS is trying to collect and you need to enter the US (and the best way to avoid this situation is to ensure that the IRS never learns of your existence). An ordinary non-compliant dual citizen will never be questioned or detained at the border. Over the many years of Isaac Brock and the various US expat Facebook groups tracking this issue, there are no records of it ever having happened. While the US authorities are utterly impotent in terms collection from non-resident dual citizens without US assets, it's also wise not put yourself in their crosshairs by attempting to come into compliance, because if nothing else you'll have a lot of mail to throw in the recycling bin.

Generally speaking, the only victims thus far have been those who've attempted to meet their obligations under US law. Those who ignore their obligations are in a much better position.


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## kcowan (Jul 1, 2010)

Nononymous said:


> Generally speaking, the only victims thus far have been those who've attempted to meet their obligations under US law. Those who ignore their obligations are in a much better position.


Yes that is the real irony. A friend was born in Virginia, got married to a Canadian and moved to Vancouver. Never worked in the US. But to renounce, she had to report her worldwide earnings to the IRS for 5 years (owing to the amnesty period). A combination of earnings from teaching, pension and B&B earnings. She is finally free and clear.


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## ian (Jun 18, 2016)

I have a friend who renounced his US citizenship. He had lived in Canada for 25 years. Two reasons. He got tired of being hassled at the border every time he drove down to visit his parents. It was the same grilling every time...why do you have a Canadian passport and not a US.

The other impetus was tax. This was his primary reason for renouncing. In order to so he had to attend several meeting the the US consulate in Toronto. He told me that the meeting room was 'packed' with people doing the same as him. Part of the process was getting a clearance letter from the IRS. He also took advantage of the recent IRS amnesty program.. Only when he had the IRS clearance letter was he allowed to continue the process of renouncing his US citizenship. 

Another friend of DW's in Calgary is considering doing the same. She is getting tired of paying an accountant to do her US taxes. The final straw was a 100K lottery win. No tax in Canada but she did pay incremental US tax. She has lived in Canada for 20 plus years.


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## Nononymous (Jun 10, 2015)

kcowan said:


> Yes that is the real irony. A friend was born in Virginia, got married to a Canadian and moved to Vancouver. Never worked in the US. But to renounce, she had to report her worldwide earnings to the IRS for 5 years (owing to the amnesty period). A combination of earnings from teaching, pension and B&B earnings. She is finally free and clear.


She could have renounced without any tax compliance - it's a separate process than exiting the tax system. But in some cases it's worth the trouble, particularly if there is nothing owing and there are strong ties to the US. 

The woman in the CBC article is a particularly bad case. She came into compliance at some cost (fees and taxes owing) then sold a primary residence in the Vancouver area and was hit with capital gains tax (which the US does but Canada does not). Obedience cost her over $100k. She still chose not to renounce, and now the transition tax will hit her very hard because of the way she and her husband have structured their business. If she had simply stayed off the radar she would be in much better shape today.


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## Nononymous (Jun 10, 2015)

ian said:


> The other impetus was tax. This was his primary reason for renouncing. In order to so he had to attend several meeting the the US consulate in Toronto. He told me that the meeting room was 'packed' with people doing the same as him. Part of the process was getting a clearance letter from the IRS. He also took advantage of the recent IRS amnesty program.. Only when he had the IRS clearance letter was he allowed to continue the process of renouncing his US citizenship.


It is not necessary to have any form of clearance from the IRS before you renounce. Even the expensive legal help at Moodys will tell you to renounce before a taxable event (such as sale of a home) because that ends any future obligations; you then have 12-18 months to get into compliance and do all the paperwork, should you choose to make a clean exit from the US tax system, which may or may not be advisable.

Either your friend was misinformed or something has changed in the telling of the tale. If the Toronto consulate was requiring proof of tax compliance, that would be a huge deal and would have been all over Isaac Brock. What year was this?

It's a common misconception that compliance is necessary before one renounces, and to confuse renunciation with exiting the US tax system. Two separate processes, two different US government departments.


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## ian (Jun 18, 2016)

He renounced his US citizenship in 2009. At the time he definitely told me that he had to produce an IRS clearance letter before he could renounce. He was had not planned on bothering with the IRS but he gave me the impression that this was a requirement....so he went through that process.


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## Nononymous (Jun 10, 2015)

ian said:


> He renounced his US citizenship in 2009. At the time he definitely told me that he had to produce an IRS clearance letter before he could renounce. He was had not planned on bothering with the IRS but he gave me the impression that this was a requirement....so he went through that process.


Interesting. That was well before the **** hit the fan after FATCA, when renunciations spiked and Brock started to get organized circa 2011. There have definitely been reports of consulates defining their own requirements. Certainly no legal basis, then or now, for requiring proof of tax compliance before you renounce.


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## kcowan (Jul 1, 2010)

Nononymous said:


> She could have renounced without any tax compliance - it's a separate process than exiting the tax system. But in some cases it's worth the trouble, particularly if there is nothing owing and there are strong ties to the US...


Yes she has a home in the Arbutus neighborhood up for sale for $3.8 million and she owns half. They have a Nexus pass so hopefully she avoids the US border scrutiny.


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## Nononymous (Jun 10, 2015)

kcowan said:


> Yes she has a home in the Arbutus neighborhood up for sale for $3.8 million and she owns half. They have a Nexus pass so hopefully she avoids the US border scrutiny.


She was wise. Any homeowner in Vancouver or Toronto with any US exposure should either renounce prior to sale or plan for perpetual non-compliance (both are viable options).

There is no border scrutiny of tax status period, but if she's renounced, there's nothing to scrutinize anyway. Reports of ex-citizens being hassled on entry simply for having renounced are extremely rare.


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