US, Canada, and Asia - where do I reside?

[bigboy101]

Hi,

I am doing tax planning for next year and would like some advice. Here is my situation:

- Canadian citizen
- I currently work for a US company on H1B and I'm paid on W-2 as an employee
- I live in the US (California) and have filed as US resident for the past 6 years
- I dont own a house
- I am not a resident of Canada and filed my last return during the year that I left.
- I average about 275 days per year in the US. The rest of the time, I'm usually in Canada on business trips or just vacation.

The company that I work for has an opportunity for me next year to travel to Asia to work. I will be traveling back and forth and probabaly split the time between Asia, Canada, and USA. I dont have a house and I will most likely move out my apartment so when I visit the US next year, I will probably stay in our corporate apartment or hotel.

My questions are:
1. Where do I reside in terms of tax purposes? (I'm aware of the 183 day rule for Canada and USA has the 1/3+1/6 rule) I will spend a lot of time in Asia, with less than 183 days in Canada and probably some time in the US. If I plan it correctly, there is a good chance that I will not pass the US 'substantial presence' test next year.

2. If I dont pass the substantial presence test for US next year, do I need to continue filing a US tax return at the end of the year?

3. I think I will still be paid on a W-2 but if I'm not a resident of Canada or US, I guess I would be filing tax to Asia?

Thanks.

[nelsona]

If you are still a US resident at the end of this year (or more technically, january 1 of 2007), you will be assumed to be a resident for the entire year of 2007 unless and until you establish a tax home somewhere else (the substantial presence test doesn't apply so much once you are resident).

So, depending on what the taxc rules are in your Asian country, you may be better off establishing a home there, and being paid and taxed only there, otherwise, you will likley be on the hook for both US and 'Asian' tax.

By previously breaking Cdn residncy, you are unlikely to re-establish it unless you take positivesteps to move back.

[bigboy101]

Thanks for the reply.

Will it be a problem if the company I work for continues to pay me on a W-2 while I am overseas being a road warrior? And will I still receive US benefits, contribute to 401K etc...? The majority of the time I will be in Hong Kong and several other cities in China.

[nelsona]

It would probably OK, but would make you taxable in Us.

Those asian counries probabaly don't have socila security regs that require local payrol (like Canada does).

As I said, this arrangement would likely make you taxable in both jurisdictions: US and (where there i income tax) local country.

A lot depends on their taxregimes.