GIC Taxation for returning resident

[goldstone]

This question is regarding a 5 year compounding Canadian GIC. Such a GIC accrues interest annually and pays out all interest at maturity. My understanding is that if a Canadian resident buys such a GIC then he is issued a T slip each year for the accrued interest even though it is not paid out to him.

If a non Canadian resident were to buy such a GIC then there is no Canadian withholding tax on the GIC interest but he would report the GIC income per the tax rules of the country he is resident in.

My question concerns what the Canadian taxation would be if he returned to Canada during the life of the GIC. Let's say he returned to Canada in the 4th year of the GIC. He would receive a T slip for the interest earned in the 4th year and then another a year later for the interest earned in the 5th year.

My bank have told me that the T slip for the 4th year would include all interest earned and accrued in the first 3 years as well. This seems strange because then CRA would be taxing interest earned while the individual was a non resident.

Would anyone know if my bank's advice is corerct ?

[nelsona]

You would only report the interest earned AFTER your arrival date, regardless on what any T or NR slip might say. The money earned before your return is not taxable in Canada for US residents. And this is regardless of how you reported the income in US (cash or accrued)

Your bank should probably be issuing you an NR slip every year you are non-resident, so they would have no reason to double up in some future year.

In any event, you know the rules, just follow them.

[goldstone]

Thanks Nelsona.

I agree with your interpretation. I'm going to pursue with the bank to try to stop them issuing erroneous T slips which will probbaly cause issues with CRA...

[nelsona]

You can, but I wouldn't worry about it.