Hi,
I moved to the USA on June 15, 2010 (it will be greater then 183 days by now since I was visiting earlier in the year on vacation) to take up employment on a TN Visa. I have maintained several Canadian residency ties - RRSPs, bank accounts, credit cards, two rental properties. My driver's license, cars and personal possessions have moved with me to the USA. (The car importation as a matter of necessity to qualify for insurance and the USA drivers license for identification). I have a US bank account so I can pay bills and deposit my pay cheques.
I understand from a CRA point of view, I may or may not be considered a resident still - especially if my intent is to return to Canada next year.
We live close to the Canadian border, and my wife receives EI right now as she is looking for work in Canada. She renewed all of her licenses to work in Ontario for her profession.
I'm thinking it would have been better off to live in Canada rather than the USA, and am afraid of being slapped with a large departure tax for my two rental properties (Canada's housing bubble came at the wrong time).
I am debating using Tax Treaty status and filing as a non-resident in the USA for 2010, but it is not really clear cut. I am renting right now in the USA, and one of my rental properties back in Canada seems to be more of a permanent home that I can live in the future. But I am not sure who makes the final call on this.
I am debating moving back to Canada ASAP, before year end, (but retaining my USA job) in order to avoid these tax hassles...
Any suggestions?
Thanks
Canadian Citizen in USA on TN - Residency Questions
Moderator: Mark T Serbinski CA CPA
Hi,
I did a bit more research on this, and it appears the departure tax does not apply real estate owned in Canada - good news.
I also found a CRA bulletin that describes the Tax Treaty interpretation a bit more in depth. Essentially - since my rental property is rented to a third party, I cannot count it as a permanent home.
Therefore, from a Tax Treaty point of view, even if CRA still views me as a resident, I would be a deemed non-resident in my current situation.
However, this is a bit tricky, because this was not the case for the whole year. I had a permanent home in Canada until August 1st, 2010, and from then on a permanent home in the USA ( I lived in a hotel the first month).
So in theory it sounds like I am a deemed non-resident of Canada (and US resident) from August 1st on, a Canadian resident/US non-resident before that.
And if I were to move back to Canada before year end, things get really messy since my status would only be for 4-5 months and then switch back. I think in that case, it would be safe to just be a US non-resident the whole time?
I did a bit more research on this, and it appears the departure tax does not apply real estate owned in Canada - good news.
I also found a CRA bulletin that describes the Tax Treaty interpretation a bit more in depth. Essentially - since my rental property is rented to a third party, I cannot count it as a permanent home.
Therefore, from a Tax Treaty point of view, even if CRA still views me as a resident, I would be a deemed non-resident in my current situation.
However, this is a bit tricky, because this was not the case for the whole year. I had a permanent home in Canada until August 1st, 2010, and from then on a permanent home in the USA ( I lived in a hotel the first month).
So in theory it sounds like I am a deemed non-resident of Canada (and US resident) from August 1st on, a Canadian resident/US non-resident before that.
And if I were to move back to Canada before year end, things get really messy since my status would only be for 4-5 months and then switch back. I think in that case, it would be safe to just be a US non-resident the whole time?
On your status, the moment you moved to live and work in US, you met the treaty definition of US resident, so I wouldn't belabour the point. Rental property quite simply is not a principal residncy tie.
Cdn real estate is not automatically subject to deemed departure tax. You need to have part of your rental income sent directly to CRA each month however.
Your "final" residency decision really only needs to be made in the spring when you file your departure return, with an august departure date.
You really have no choice in the matter, as if you fake Cdn residedncy now (for no good reason) you will at some point wnat to break it, but with no triggering event to point to.
I'm not too comfortable with your wife's position of living in US with a phoney Cdn adress to collect EI. How is she going to reconcile that on her taxes, since I assume she partly-owns the rental units, eh?
Cdn real estate is not automatically subject to deemed departure tax. You need to have part of your rental income sent directly to CRA each month however.
Your "final" residency decision really only needs to be made in the spring when you file your departure return, with an august departure date.
You really have no choice in the matter, as if you fake Cdn residedncy now (for no good reason) you will at some point wnat to break it, but with no triggering event to point to.
I'm not too comfortable with your wife's position of living in US with a phoney Cdn adress to collect EI. How is she going to reconcile that on her taxes, since I assume she partly-owns the rental units, eh?
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thanks for your reply.
First I'll point out that my wife's EI is legal and she is using a US address. We live close enough to the border that she can work. She is also on a TD , so working in the US is not an option.
What do you mean by final residency decision?
I was legitimately thinking of moving back to Canada this year - and commuting , so I dong think that is faking it. However, there doesn't seem to be a provision for moving in and out in one year
First I'll point out that my wife's EI is legal and she is using a US address. We live close enough to the border that she can work. She is also on a TD , so working in the US is not an option.
What do you mean by final residency decision?
I was legitimately thinking of moving back to Canada this year - and commuting , so I dong think that is faking it. However, there doesn't seem to be a provision for moving in and out in one year
I'm glad to here you are legal on the EI. I misunderstood her "licenses" to be drivers license etc. That is what lead me to think she was phaking a Cdn address. My apologies. Whether a non-resident of OPntario can hold professional licenses in Ontario is a matter for the guild/society/order to determine.
The reason I say that you are currently faking Cdn tax residency, is because I'm pretty sure that you have not been remitting your rental income withholding to CRA every month, and have not advised your RRSP and bank that you are no longer resident in canada. So, to your payors, you are acting like a resident. But, you are indeed no longer resident in canada by the simple fact that you don't live there and live in another country. That is a simple fact.
On top of that, the treaty, since you have now spent the required time in US ALSO determines that you are a TAX resident of US now, and thus a deemed non-resident in canada even if you did have major ties in canada -- which you don't. The duration of your non-residency (and even the intent) is really secondary. The IT you read applies to those moving to non-treaty countries, so is not particulary important to moves to the US, other than lead you to the correct conclusion that , at best, you are deemd dnon-resident, which is currently treated exactly the same as a non-resident.
The point I'm making is that you are already non-resident and should be consitently acting like that. You can point to a specific action (the day you moved to US) as a triggering event. On your 2010 Cdn return, you will be declaring whether you left or you didn't: by filling in a departure date or not. that is what I mean by "final".If you decide to stay longer, what will you be able to point to as the triggering event that made you non-resident?
Of course, if you decide to move back before even having spenrt six months abroad, you will not be considered to have ever left. Again, by the time you file your return, you should know. CRA does allow some leeway on the rental withholding in the first year for cases just like this.
The reason I say that you are currently faking Cdn tax residency, is because I'm pretty sure that you have not been remitting your rental income withholding to CRA every month, and have not advised your RRSP and bank that you are no longer resident in canada. So, to your payors, you are acting like a resident. But, you are indeed no longer resident in canada by the simple fact that you don't live there and live in another country. That is a simple fact.
On top of that, the treaty, since you have now spent the required time in US ALSO determines that you are a TAX resident of US now, and thus a deemed non-resident in canada even if you did have major ties in canada -- which you don't. The duration of your non-residency (and even the intent) is really secondary. The IT you read applies to those moving to non-treaty countries, so is not particulary important to moves to the US, other than lead you to the correct conclusion that , at best, you are deemd dnon-resident, which is currently treated exactly the same as a non-resident.
The point I'm making is that you are already non-resident and should be consitently acting like that. You can point to a specific action (the day you moved to US) as a triggering event. On your 2010 Cdn return, you will be declaring whether you left or you didn't: by filling in a departure date or not. that is what I mean by "final".If you decide to stay longer, what will you be able to point to as the triggering event that made you non-resident?
Of course, if you decide to move back before even having spenrt six months abroad, you will not be considered to have ever left. Again, by the time you file your return, you should know. CRA does allow some leeway on the rental withholding in the first year for cases just like this.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best