# Keeping Canadian Tax Residency



## gocanada (Jan 3, 2014)

Hi all,

I've found lots of posts looking for advice on how to give up Canadian tax residency when leaving the country - I'm looking to do the opposite, so hoping someone has experience / knowledge and can assist.

The issue I face (as I understand it) is that if one gives up Canadian tax residency, they have to pay "Exit Tax" on any assets they have in Canada, as if they sold them all at fair market value on the day they left. I would like to spend some years outside of Canada for work, but do not want to trigger this event. It's particularly bad as I hold some shares in a private corporation where I would not be able to get liquidity, but would still have to pay the tax!

Any advice or direction you can point me in would be much appreciated!!!


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## Eclectic12 (Oct 20, 2010)

Google is your friend ...

It seems a home, spouse and/or dependants are a help. Personal property, bank accounts, driver's license & passport are also factored in.
http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html

http://www.ehow.com/how_8169031_maintain-canadian-residency.html


Is there a company you are planning to work for, which can also provide assistance/advice?


Cheers


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## gocanada (Jan 3, 2014)

Thanks for that link. I had found through Google as well as some other sites that have similar information. The problem is that none of the information is black and white. In my case, I could keep bank accounts, driver's license, and passport. I could also keep my car in Canada, but would prefer to not have to continue renting only to leave it empty while paying. My spouse would be with me overseas. I don't have company that I'd be working for lined up just yet.

I'm hoping that someone has been through this before and so has some experience on how the CRA treats these situations. Or, perhaps someone knows a lawyer or accountant that might have expertise in this area (my accountant doesn't). I would obviously hate to get hit with a tax bill that I haven't planned for. 

Thanks again!


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## cougar (Oct 15, 2014)

My brother in law just worked in Germany for 1.5 years and arrived back last month. He has his own consulting company and they maintained their home, bank accounts, vehicles, passports etc while they were away-when they came back from time to time to visit, my sister even worked a few hrs at her casual job. His accountant strongly advised him not to work out of the country for more than 2 years in order to maintain his residence status in Canada for tax purposes. He may go overseas again in the future but for now he is here. I don't know that there is an exact amount of time you "can" be away but this is what he was advised. Perhaps you can contact another accountant or even phone Rev Canada.


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## Guban (Jul 5, 2011)

It sounds like you will become a non resident if you carry through with the details you have provided. I understand that you want to remain a resident, but you are describing a situation where you will have no physical residence in Canada. Plus your spouse is going with you. Residency determination can be grey, but you are describing something that is pretty black and white to me!


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## Eclectic12 (Oct 20, 2010)

gocanada said:


> Thanks for that link. I had found through Google as well as some other sites that have similar information. The problem is that none of the information is black and white.


It seems black and white that you won't have any of the three "significant" ties so it is likely to boil down to the combination of secondary ties plus the other country ties established.

In this situation, I'd be calling CRA to see what they can tell you as well as looking for a specialist.

CMF is great to have ideas but I'm not sure I'd trust solely on it.


Cheers


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## WiseOwl (Jan 1, 2015)

Like many things in tax, residency is generally a question of fact. You're not going to find a bright line residency test that is described in black or white (other than the 183 day test where the deeming provisions would apply). That said, some other posters have highlighted some of the keys considerations which have come about through common law. In practice, you take a filing position and ensure you document your support for it in the event it is ever questioned.


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## kcowan (Jul 1, 2010)

The 25% tax only applies to assets that you remove from Canada. Check the tax treaty between the two countries. I think worst case is that you will have to file in both countries every year.


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## Guban (Jul 5, 2011)

^ What assets are you referring to Keith? 

As I understand it, the exit tax does not apply to real property such as a rental, but does apply to stocks. I assume that shares in private equity would be similar.


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## Eclectic12 (Oct 20, 2010)

I'm not sure that "things left in Canada" are exempt ... I seem to recall several of the notes discussing being classed as a non-resident alien in the US by staying too long indicating that the first problem would be the US taxes and the second problem would be that if CRA decided one had given up their Canadian tax residency, the departure tax *would* apply. I can't imagine that someone in this situation is removing significant assets from Canada.


I also wonder about the "... you will have to file in both countries every year" ... shouldn't it be one final Canadian tax return and then non-resident withholding taxes will be taken by CRA automatically, without a tax return?

CRA says:


> ... Generally, Canadian income received by a non-resident is subject to Part XIII tax or Part I tax ...
> If you receive Canadian income that is subject to Part XIII tax:
> ... Part XIII tax is not refundable.
> Therefore, *do not file a Canadian tax return * to report the income unless you elect to file a return because you receive either:
> ...


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


Cheers


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## OhGreatGuru (May 24, 2009)

You do realize that if you are a "deemed resident" you may be subject to Canadian taxation on your worldwide income?

_An individual who is deemed resident in Canada in a particular year will be subject to Canadian income tax on his or her worldwide income throughout that year. _

So, unless there is a tax treaty that would allow you to deduct your foreign taxes, this could potentially be expensive.


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## james4beach (Nov 15, 2012)

I'm in this situation -- I _want_ to maintain Canadian tax residency even though I'm working in the US and spending 90% of my time here. Which country are you dealing with? It may also depend on whether the two have a tax treaty. US and Canada do, and it has a specific section dealing with handling tax residency.

Talking with my accountant, a few things seem to make my Canadian tax residency possible: (1) I still have a permanent home in Canada that I can return to in an instant, (2) I'm a Canadian citizen, (3) my vital interests are in Canada: bank accounts, investments, physical belongings, social networks


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## james4beach (Nov 15, 2012)

And I'll echo the other advice that you will need a permanent home in Canada to continue being a Canadian tax resident. The term is "resident" after all -- it requires a Canadian home.


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## kcowan (Jul 1, 2010)

That home can be rented as long as it is available on short notice (30 days?) for your return.

In our case we sublet our rental place but it is still our mailing destination of record. Plus we make no income in Mexico.


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## OhGreatGuru (May 24, 2009)

james4beach said:


> ...The term is "resident" after all -- it requires a Canadian home.


No, that's a gross oversimplification of the rules. If you have sufficient other residential ties (other than a home in Canada) you may be classified as a "deemed resident" for tax purposes, even though you are not "ordinarily resident" in Canada.


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## Guban (Jul 5, 2011)

OhGreatGuru said:


> No, that's a gross oversimplification of the rules. If you have sufficient other residential ties (other than a home in Canada) you may be classified as a "deemed resident" for tax purposes, even though you are not "ordinarily resident" in Canada.


The OP has two "significant residential ties" that point to being resident abroad. Are you saying that the secondary ties can over ride the location where he and his spouse live? I would have thought that James is correct.

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


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