What does somebody have to do to cut ties with Canada for the purpose of being a non-resident and not having to pay taxes in Canada?
Other than the obvious things like not owning a home, how about bank accounts? Can I still keep a savings account in a Canadian bank? Do I need to cash in my RRSPs? How about credit cards? Can I have a life insurance policy with a Canadian life insurance company? Just what are the rules?
I don't imagine for one minute that the rules are straightforward!!
Cutting Ties With Canada
Moderator: Mark T Serbinski CA CPA
I'm sure you have looked over NR73 from CRA.
It lists al the things that CRTA consideres ties, bith major and minor.
If yo uare moving to a treaty country (like US), 'house and spouse' are the only two things that should not remain in Canada.
Bank accounts, RRSPs, even a job, are secondary ties, and would only go to 'intent' to remain abroad.
<i>nelsona non grata... and non pro</i>
It lists al the things that CRTA consideres ties, bith major and minor.
If yo uare moving to a treaty country (like US), 'house and spouse' are the only two things that should not remain in Canada.
Bank accounts, RRSPs, even a job, are secondary ties, and would only go to 'intent' to remain abroad.
<i>nelsona non grata... and non pro</i>
Anyone that is not a direct relative is fine, and it must be at market value, and must be consistently rented
Typically, if you rent it out, consider your self non-resident, until CRA comes looking for you, then you present lease.
The important thing is when you rent you MUST <b>MUST </b> be having 25% tax withheld (or a CRA deterrmined reduced rate) and sent monthly to CRA. This is the surest way that CRA will accept that you are non-resident if you have Cdn property.
<i>nelsona non grata... and non pro</i>
Typically, if you rent it out, consider your self non-resident, until CRA comes looking for you, then you present lease.
The important thing is when you rent you MUST <b>MUST </b> be having 25% tax withheld (or a CRA deterrmined reduced rate) and sent monthly to CRA. This is the surest way that CRA will accept that you are non-resident if you have Cdn property.
<i>nelsona non grata... and non pro</i>
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davidyulca
- Posts: 11
- Joined: Wed Feb 23, 2005 11:46 am
Leaving the house unoccupied is insufficent to break res ties.
Leaving it -- even renting it -- to one's children is not sufficient.
That is not to say that one moving to US would not avoid Cdn taxation on his US income. In such a case the treaty provisions on residence would override, and one would be classified a DEEMED NON-RESIDENT.
But, if leaving for a non-treaty country, like Saudi, or many of the West Indies, this arrangent would be as if the person never left.
Look at IT-221 from CRA on residency, keeping in mind that US has a treaty.
<i>nelsona non grata... and non pro</i>
Leaving it -- even renting it -- to one's children is not sufficient.
That is not to say that one moving to US would not avoid Cdn taxation on his US income. In such a case the treaty provisions on residence would override, and one would be classified a DEEMED NON-RESIDENT.
But, if leaving for a non-treaty country, like Saudi, or many of the West Indies, this arrangent would be as if the person never left.
Look at IT-221 from CRA on residency, keeping in mind that US has a treaty.
<i>nelsona non grata... and non pro</i>
Let's be clear (and you should be looking at the CRA definitions for all these statuses).
If you keep a place to live in Canada, while <b>also </b> at the same time living and working in US, you will be a 'deemed non-resident' which means you report ALL world income to CRA, but then deduct your US income before calculating your Cdn tax. You are subject to all the other non-resident tax regimes, like NR tax on rent, interest, RRSP withdrawals, etc.
So you report and then deduct, which, unless you have third-country income is exactly like being considered a factual non-resident.
To be a factual non-resident, you would need to rent out your house continually, in a non-arm's length arrangement, which means non-family and market rate, 12 months a year.
As I said, the distinction becomes important if you move to a country that doesn't have a treaty with Canada.
The DNR status comes as a result of the ultra-rich who were maintaining flimsy Cdn residential ties in order to avoid demeed disposition in the mid-90's.
Feds enacted changes to the tax code that allowed such fence-sitters to be 'pushed' out of Cdn residency because of their obvious ties in other countries, most notably US.
A side advantgae, especially now that huge cap gains wndfalls are a thing of the past, is that one can, with little changes in their Cdn living arragements, become a DNR, simply by outweighing their Cdn presence with a presence in another country.
In a unutshell, when one moves to a treaty country, one's focus should be less on CUTTING Cdn ties, but more on ESTABLISHING ties in the new country.
<i>nelsona non grata... and non pro</i>
If you keep a place to live in Canada, while <b>also </b> at the same time living and working in US, you will be a 'deemed non-resident' which means you report ALL world income to CRA, but then deduct your US income before calculating your Cdn tax. You are subject to all the other non-resident tax regimes, like NR tax on rent, interest, RRSP withdrawals, etc.
So you report and then deduct, which, unless you have third-country income is exactly like being considered a factual non-resident.
To be a factual non-resident, you would need to rent out your house continually, in a non-arm's length arrangement, which means non-family and market rate, 12 months a year.
As I said, the distinction becomes important if you move to a country that doesn't have a treaty with Canada.
The DNR status comes as a result of the ultra-rich who were maintaining flimsy Cdn residential ties in order to avoid demeed disposition in the mid-90's.
Feds enacted changes to the tax code that allowed such fence-sitters to be 'pushed' out of Cdn residency because of their obvious ties in other countries, most notably US.
A side advantgae, especially now that huge cap gains wndfalls are a thing of the past, is that one can, with little changes in their Cdn living arragements, become a DNR, simply by outweighing their Cdn presence with a presence in another country.
In a unutshell, when one moves to a treaty country, one's focus should be less on CUTTING Cdn ties, but more on ESTABLISHING ties in the new country.
<i>nelsona non grata... and non pro</i>
Nelsona, you mentioned "The important thing is when you rent you MUST MUST be having 25% tax withheld (or a CRA deterrmined reduced rate) and sent monthly to CRA. This is the surest way that CRA will accept that you are non-resident if you have Cdn property." How would I have 25% tax withheld and send monthly to CRA? Should I send them a check? Besides, can I send USD since I will get rental payment in USD? Thanks.
A Cdn agent (not you) is supposed to collect the rent and remit the withholding to CRA. It can be a relative, it can even be the renter himself.
But, bottom line is that every month, 25% (or less if pre-arranged with CRA) must be withheld and sent directly to CRA. Its not supposed to go thru your hands, just like any other NR withholding.
Please read the CRA information on this topic. It is quite clear.
<i>nelsona non grata... and non pro</i>
But, bottom line is that every month, 25% (or less if pre-arranged with CRA) must be withheld and sent directly to CRA. Its not supposed to go thru your hands, just like any other NR withholding.
Please read the CRA information on this topic. It is quite clear.
<i>nelsona non grata... and non pro</i>