tax residency, Roth conversion, filing a one time treaty election

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Jonhello
Posts: 48
Joined: Sat Oct 05, 2013 1:28 am

tax residency, Roth conversion, filing a one time treaty election

Post by Jonhello »

I am a US citizen who has applied through my Canadian wife to become a permanent Canadian residency. Right now I live most of the year outside of Canada and receive my wages from a US organization.

From this forum, I understood that I could become a permanent Canadian resident and sometime later become a Canadian resident for tax purposes. I was planning to officially move my tax home to Canada when I joined a Canadian organization probably 2 years later than when I receive my permanent residency status. This would give me time to leave my organization, move my 403b and Roth 403b to an IRA and ROTH IRA with a different brokerage, convert the IRA portion to a ROTH IRA, before starting work at the Canadian organization and making official tax residency to Canada.

However, in the instructions to file a one-time treaty election for one's IRA and Roth IRA, the following is mentioned that needs to be recorded:
"6. The date you became a resident of Canada
7. The balance of the Roth IRA as of the date you became a resident of Canada"

I assume I can write the official date when I start to work for the new organization (making that the date when I became a resident for tax purposes), correct? Or do I need to write down when I received my permanent residency through the CIC? In that case, I won't be able to the conversions in a timely fashion....
nelsona
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Re: tax residency, Roth conversion, filing a one time treaty election

Post by nelsona »

This question refers only to TAX residency, which has nothing to do with getting permanent residency in Canada (unlike US).
When you MOVE to (not when you start working in canada) will be your residency starting date.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
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Jonhello
Posts: 48
Joined: Sat Oct 05, 2013 1:28 am

Re: tax residency, Roth conversion, filing a one time treaty election

Post by Jonhello »

[quote=nelsona post_id=525629 time=1618533890 user_id=30]
This question refers only to TAX residency, which has nothing to do with getting permanent residency in Canada (unlike US).
When you MOVE to (not when you start working in canada) will be your residency starting date.
[/quote]

Thank you, Nelson.

From what I have understood, I can determine when I officially MOVE to Canada as I am going back and forth between Canada and Europe for quite some time (my assets are in the States, employed by US company, work in Europe and we own our home in both Canada and Europe).

So hypothetically I can determine that I am MOVING sometime before I receive my CAD residency, OR when I receive my CAD residency, OR when I start working for a Canadian employer OR some years later than that. Am I understanding this correctly?
Jonhello
Posts: 48
Joined: Sat Oct 05, 2013 1:28 am

Re: tax residency, Roth conversion, filing a one time treaty election

Post by Jonhello »

I reread an earlier post.

What I understand is that it is when we start living longer in Canada than elsewhere, that is the time that we will have officially moved.

I think this clarifies things. I will write to the CRA at that point (we are planning on spending more than 6 months in 2-3 years from now and refer to the date that we moved to Canada.
nelsona
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Re: tax residency, Roth conversion, filing a one time treaty election

Post by nelsona »

Be careful. if you are not living in US, you cannot necessarily relay on the Canada/US treaty to determine that you are not a Cdn tax resident. You would need to rely on the tax treaty between canada and the other country you have a home in. This may force you into Cdn residency sooner than it would under the US treaty, especially if you fail to meet that other country's residency requirements, including the payment of income tax there. And where your spouse spends most of her time will also carry weight as to residency determination.

In any event, there will be some point when you will need to live in canada permanently on order to preserve your PR card. At that ttime, you will need to stop funding any Roth, The method of telling your arrival in canada is by filing a resident tax return with an arrival date. With that return you will file the required statement regarding Roth IRA.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
Jonhello
Posts: 48
Joined: Sat Oct 05, 2013 1:28 am

Re: tax residency, Roth conversion, filing a one time treaty election

Post by Jonhello »

Thank you, Nelson. This info helps me make an informed decision.
Jonhello
Posts: 48
Joined: Sat Oct 05, 2013 1:28 am

Re: tax residency, Roth conversion, filing a one time treaty election

Post by Jonhello »

nelsona wrote:
> Be careful. if you are not living in US, you cannot necessarily relay on
> the Canada/US treaty to determine that you are not a Cdn tax resident. You
> would need to rely on the tax treaty between canada and the other country
> you have a home in. This may force you into Cdn residency sooner than it
> would under the US treaty, especially if you fail to meet that other
> country's residency requirements, including the payment of income tax
> there. And where your spouse spends most of her time will also carry weight
> as to residency determination.

I have been under the impression that I am not a resident for tax purposes but now see that as a grey area. Could the CRA in the future deem me a resident for tax purposes for past years then? Would they then back-tax me? What would happen to my Roth that I have contributed to during these years?
nelsona
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Re: tax residency, Roth conversion, filing a one time treaty election

Post by nelsona »

Yes, they can. And then Roth contributions would be considered "Canadian contributions" making your Roth internal income taxable in Canada year-by-year.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
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