deemed non-resident, officially departing

[Serendipity]

I've been officially established in another country since Jan 2017 (with intention to return to Canada!) and filed an income tax return in both countries for 2017, and received a tax credit from Canada.

I am now deciding to depart Canada permanently, and will do so in Sep 2018. But if I declare that, and proceed with the deemed disposition and departure tax and all that, I will have to say that I initially left Canada in Jan 2017. Does this mean that I will be forced to pay back a remaining balance on a Home Buyers Plan from a mortgage going back to Jan 2017… and remit money to the govt for the rent I was collecting on a rental unit? Or will it be okay if I do that starting 2018?

[nelsona]

Your case illustrates why it is unwise to pretend that you have not left Canada. You left in Jan 2017, and that should have been your departure date. "Intent" is no longer part of residency determination, for over a decade now.

The problem you have now is what "event" are you going to use to declare your departure date?

What country did you move to, and why do you think you were/are "deemed" non-resident rather than simply non-resident. "deemed" has specific definition.

[Serendipity]

My "event" will be the fact that I will be in Canada for two months to take care of business and wrap things up, among other things.

The reason I think I would qualify as a deemed non-resident is that I filed a return in that other country and got a foreign tax credit from the CRA.

[nelsona]

"Deemed non-resident" is treated for tax purposes exactly like a non-resident, ie. departure date, and departure tax, and no reporting of foreign income. So, I'm thinking you simply call yourself deemed non-resident (you don't have the requisite residential ties in Canada) , but if you filed a provincial full-year return, that was not correct. What you describe is filing as a resident. The fact that you got a tax credit means you also paid Cdn tax on your US income, which was unnecessary.

What are you "wrapping up" that you did not do in January 2017?

[nelsona]

... and you reported your renatl income in US as well, right? Since you were resident in US since Jan 2017.

[Serendipity]

It's not the US... it's Germany (sorry I'm just now realizing this is a "US" forum" ... ). And yes, I did a complete return there, on my world income. But since taxes are higher in Germany, all I had to pay in Canada was the CPP etc.

My accountant had urged me to sever ties officially at the end of 2017... but because I told him I intended to return to live in Canada in 2018, he considered it okay to go this route until then.

It seemed too laborious to sever ties seeing that I was going to be back within 6 months or so.

So, if I declare Jan 2017 as my date of departure (which it seems I can hardly get around), is there a good chance that the CRA will simply accept that without requiring that I live up to my withholding tax, HBP obligations retroactively ? I.e., not charge penalties or interest ?

[nelsona]

No, they would hammer you.

So, you might as well declare the next time you leave as your departure date and hope they accept it. At that time you will pay back your HBP and next April you will take care of your exit return.

[nelsona]

... and set up your rental withholding now too.

[Serendipity]

Good to know! Thank you so much!