Do I need to pay income tax to Canada?

Dudly · Post by **Dudly** » Tue Jul 19, 2005 2:45 pm

Hi! Everybody, I am a canadian citizen working in the States on H1B. I bought a house in Toronto and closing will be in 2 months. I don't have any other ties to canada as of now. And I don't plan to move back to canada until next year. Please advise me whether I have to pay income tax to canada this year. thanks.

nelsona · Post by **nelsona** » Tue Jul 19, 2005 3:48 pm

Much will depend on what you do with that house.

If you leave it for your own use, CRA will likley aggressively try to say that you are resident, whereupon you will invoke the tax treaty to avoid having to pay Cdn tax on your US-source income.

They could also say, since you 'plan to move back', that the house was you first step in that plan, and thus you are resident on the day you take possession.

But, otherwise, any income that that house genarates, like rent and eventual cap gains, will be taxable in canada regardless of where you live, and taxable in US if you live there, too.

nelsona non grata... and non pro

Dudly · Post by **Dudly** » Tue Jul 19, 2005 3:58 pm

Thanks very much for your reply, nelsona. Could you suggest a way for me to avoid paying personal income tax in Canada? I guess I can "rent" it to my girl friend and pay tax on the rental income only? will this work? Thanks again for your advice.

nelsona · Post by **nelsona** » Tue Jul 19, 2005 5:07 pm

This would work, as long as your girlfriend does not meet the rather easily attainable 'partner' criteria, and as long as she does live there and you do not.

Otherwise, this would be seen as an end-run around residency.

Another point that would be in your favour would be having a house in US during this time. That, and only occasional vists to canada during the intervening time between now and moving back should keep CRA from sniffing around.

nelsona non grata... and non pro

danny · Post by **danny** » Wed Jul 20, 2005 11:14 am

ya as the US house would offset the Cdn one in terms of primary resid ties.

Dudly · Post by **Dudly** » Thu Jul 21, 2005 2:09 pm

Thanks, Nelsona and Danny. Do I actaully need to own a house in the states or is it ok to just rent an apartment/house in US? How does CRA "sniff around" to get people?

nelsona · Post by **nelsona** » Thu Jul 21, 2005 3:46 pm

You need to have sufficient ties in US to be able to demonstrate that your main life is in US and that you aren't alternative between US and Canada weekly/daily/monthly.

nelsona non grata... and non pro

danny · Post by **danny** » Fri Jul 22, 2005 11:29 am

thats right so make ties in non canada location be it US or whichever and break as many ties as possible in Canada.

dont know about the sniffing part

Dudly · Post by **Dudly** » Fri Jul 22, 2005 2:12 pm

I guess if I "rent out" mu house to my girlfreind, I should report the "rental income" and pay tax on this income, right?

nelsona · Post by **nelsona** » Sat Jul 23, 2005 6:59 am

Yes. And the 25% tax would have to be remitted by an 'agent' or the tenent to CRA monthly.

nelsona non grata... and non pro