How to still be a Cdn resident while living in States?

xmarcus · Post by **xmarcus** » Mon Jan 16, 2006 1:04 pm

Hello,

I moved to the States recently and spend 99% of my time in the States. Do I have the option whether I want to become a Cdn non resident or does the fact that I am in the States 99% of the time automatically make me a Cdn non-res?

Thanks

nelsona · Post by **nelsona** » Mon Jan 16, 2006 5:19 pm

Most people who ask this type of question are to trying to maintain some form of Cdn benefit (OHIP, CCTB, GST, etc) or trying to avoid a departure tax.

In neither case does 'faking' Cdn residency benefit you: you are no longer entitled to any of the benefits I listed if you don't live in Canada. Filing a Cdn tax return does not help you. Physical presence is hat matters.

An if you are trying to avoid departure tax, the Cdn Govt as modifiesd the tax laws so as to be able to 'push' you out of Canada, thus getting their tax.

So, no, there is no valid method or useful reason to keep Cdn tax residency when overwhelmiingly living in another tax treaty jurisdiction.

by the way, even for immigration purposes, Cdn tax residency means little, as PRESENCE is what counts, and on can be absent from Canada for stretches of 3 years with no adverse affect on their Cdn immig status.

xmarcus · Post by **xmarcus** » Mon Jan 16, 2006 5:24 pm

Thanks Nelson. Actually the ONLY thing I am interested in is being able to maintain and CONTINUE to invest in my mutual fund portfolio in my Cdn brokerage while I'm in the States. Benefits and paying the tax aren't an issue to me.

You may think I should just invest my $ in the States but I have reasons to want to invest in CA (namely I feel there will be much better returns).

Any thoughts?

Thanks

nelsona · Post by **nelsona** » Mon Jan 16, 2006 5:51 pm

It is illegal for your broker to allow you to manage a brokerage account (non-RRSP) while physically the US. This would be true if you went down for the weekend, much more if you actually live in US.

nelsona · Post by **nelsona** » Mon Jan 16, 2006 5:52 pm

It is illegal for your broker to allow you, knowingly or unknowingly to manage a brokerage account (non-RRSP) while physically the US. This would be true if you went down for a week's vacation , never mind if you actually live in US.

Rickerbucks · Post by **Rickerbucks** » Mon Jan 16, 2006 5:54 pm

Candidly I don't think that is a 'good' reason to place yourself in the cross border quagmire of immigration and taxs. I'm sure nelsona would agree that you place yourself in a lot of risk.

You should be able to hold your mutual funds after you move to the US. Then, for additional capital, consider opening a $CDN investment account at TD Waterhouse Discount in the US. You won't be able to buy $CDN mutual funds although you can buy index shares. there are also a wide range of closed ended mutial funds that you can buy on the market as well. Of course you should also be able to buy CDN invested 'US based' funds as an option.

Finally, if you have over $250k CDN there are some investment consellor firms I know that will open a US resident account.

Good luck but I think you need to re-think your solution to your problem.

xmarcus · Post by **xmarcus** » Mon Jan 16, 2006 6:04 pm

Thanks Riverbucks. Could you tell me what a "US Resident Account" is? How would that address my issue?

Marcus.

xmarcus · Post by **xmarcus** » Mon Jan 16, 2006 6:08 pm

Thanks Nelson. Are you saying that if I'm in America for 90% of the time, and in CA for 10% of the time, it's all right for me to invest in Cdn mutual funds at my Cdn brokerage when I'm in Canada (for that 10% of the year)?

Marcus.

nelsona · Post by **nelsona** » Mon Jan 16, 2006 6:19 pm

Don't twist my words.

As a resident of your particular state you must at all times abide by the laws of that state, which forbids you having an active relationship with a broker not licensesd to sell/deal mutual funds in that state. Your broker would be violating the regs of both his province and your state

No, you would not be allowed to do this on trips to Canada.

Either leave your account alone, or close it. In either case, pay your departure tax and move on.

Rickerbucks · Post by **Rickerbucks** » Mon Jan 16, 2006 8:36 pm

The issue with respect to investments surrounds "residancy". Although there appears to be grey areas, the investment industry of North America demands that the firm, the advisor and the investment have to be registered in the state / province in which you are a resident. This is SEC and state / provincial law. Nothing to do was taxation or immigration.

Thus a financial institution will ask you where you are residant. Although there are the odd grey area, for us the defining question is, where did you (or do you plan) to file your taxes and what address did you use.

if you attempt to make your investing life simpler by "pretending" to live in Canada then you expose yourself to much greater grief from the tax and immigration depts. You do NOT want that I assure you. Even if you use a 'friends' Canada address to appear to live in Canada for purposes of your investment accounts, the firm will code you as a residant and thus the tax authorities can get confused if you say you are a non-resident on your tax form yet the investment firm has you a resident. Again, a mess you do not want to address.

The fundamental issue is, that securities law states, that at the time the investment decision to purchase is made, the person making the decision has to deal with a firm / advisor licensed in the jurisdiction where that trade was approved AND where the client lives.

If you live in CA and in fact went on holiday to WA, technically even when you are on holiday, the firm / advisor must be licensed in both CA and WA.

However, if you have an investment counsellor relationship, which is a DISCRETIONARY account, then the person making the decision may in fact be a person sitting in Toronto at the time of the purchase decision. I know of an investment counsellor company that will open accounts for US residents on a discretionary basis and it falls within the rules.

Fundamentally you have to decide what your short / medium and long-term plans are and what you want from your investment portfolio. If you have medium or long-term plans to stay in the US and you are comfortable allowing a profession manager to have discretion on your account (and don't let that worry you, we are talking high level professional management here from large money management firms) then it might be an option to consider.

If you do a search on this board there are some threads that discuss this whole issue.