Sorry to be barging on y’all. Hopefully this post manages to catch the eye of someone who was in a similar situation as I am (I’m sure I’m not the first!!!)… and I know this may be off topic, but I feel ‘at home’ here since there are probably many others like me lurking here!
Background:
Current Taiwanese Canadian 36yr old male who holds a Taiwanese ROC passport and a Canadian passport. Never lived in Taiwan (if you don’t count the first 8 months of my life). With an Aircraft Engineer for a dad, my family used to move all over the world and finally settled in Vancouver, Canada -where most of my formative years were developed (11yrs old and onward). <-- how’s that for a quick and dirty summary?
Anyway, fast forward to current. Back in 2006, my company (US owned) closed down the Canadian office and asked me to move down to their office in Tennessee. They made me an offer that I couldn’t refuse. As I was single at the time, I thought - why not? Man, was I naive. I’m currently living/working here in Tennessee (about 1hr driving distance from Nashville, TN) on a L1a Visa. As some of you may know, work visas tend to tie an individual to a company (you’re their slave as you can’t work for anyone else, unless the other company is willing to sponsor you with a new visa).
So, last year (2007) when I had to file for my 2006 tax year, the company offered to hire Deloitte and Touche to do my taxes for Canada and US as I moved down in October 2006. Even though I had told the accountant (Canadian branch) that I still have my driver’s license from Vancouver, my bank accounts, my RSP accounts, etc - he still went ahead and sever ties with Canada (for tax purposes so that I don’t have to report world income) on my return. So, for 2007 tax year, I decided not to use them and wanted to do the taxes myself to get a feel for the US returns/filing experience (plus I don’t feel like personally paying their exorbitant fees this year (didn’t have to pay as company had paid for it last year).
Herein lies my problem:
Because of the process of severing ties (on Canadian tax return), I do not have to report my US income on the Canadian returns; however, I still receive tax slips from my Canadian bank accounts, investment accounts (TD Waterhouse), etc so I’m still required to file Canadian taxes. My dilemma is - should I still report my US income even though Deloitte and Touche had sever ties for the 2006 tax return year (in anticipating that I would not pass the audit (if there is one) and would be fined) or shall i carry on as planned to minimize my current tax payment and hope that 7 yrs has passed before an audit inquiry would come to light? (Canadian Revenue Agency - equivalent to the IRS requires that all tax payers keep receipts for 7yrs).
Anybody in similar situation before and how did you handle it?
There are several people here who have filed for non-residence in Canada; I’m one of them.
The short answer to your question is that, as a non-res, you are not liable for taxes on income earned outside of Canada, but all of your other income (interest and investment accounts, etc) are taxable at a flat rate of 25%. At least, that was the rate when I filled for non-residency years ago. This is really only a problem if you are earning income from your investements that is greater than what your personal deduductions would be, should you decide to file. Otherwise, I don’t think Rev Can will take much interest in you, since you wouldn’t be paying anything anyway.
It’s a slippery slope, because in its information regarding non-residency, the Canadian Government mentions that some of the conditions for non-residency in Canada, aside from not being physically present in the country, includes severing financial ties. This includes not owning property, holding bank accounts, even holding credit cards. The information given to me,however, suggested that as long as you have demonstrable proof that you are not living and working in Canada, you will be fine.
One thing to consider is that by severing ties with Canada to avoid Canadian tax on your income, you are also giving up your rights to Canadian healthcare and social prorams (even that Vancouver driver’s license in your pocket is ‘technically’ not valid if you haven’t resided in BC for the past 6 months); you will have to reside in Canada for up to six months without these priviledges before you can acquire them again.
Anyway, a lot of the information above is at least 5 or 6 years old, so if anyone else has more current information for the OP, please go ahead and post it.
Reasons why I haven’t closed down my bank accounts, investment accounts, rrsps, driver’s license (though I did cancel my Medicare with my province), etc are:
since I have a 3yr renewable work visa and not sure how stable my work here is I may have to move back to Canada and don’t want to go to the trouble of re-opening everything again
stupid Tennessee state law says that any foreigner who is here who does not have permanent residence papers cannot get a Tennessee Driver’s License! They will only issue a “Certificate of Driving” even though I need to go through the same procedure as getting a “real” license! So I’m kinda stuck. I have to keep my Canadian driver’s license.
also, the house that used to be on my name has been transferred to my parents’ but some of the utilities are still under my name and is a pain in the ass to transfer so I kept it under my name.
These are the reasons why I think I may not pass the “non-Canadian residence” test if Canadian Revenue Agency decides to audit me in the future. Hopefully they’ve changed the rules to what you mentioned (as long as I can prove that I’ve been living abroad - in the States!).
It’s hard to find someone who has a good understanding of US and Canadian tax laws here in Tennessee! :fume:
These are the reasons why I think I may not pass the “non-Canadian residence” test if Canadian Revenue Agency decides to audit me in the future. Hopefully they’ve changed the rules to what you mentioned (as long as I can prove that I’ve been living abroad - in the States!).
[/quote]They haven’t changed the rules. Sometimes there is leeway in how they apply them, but from what you’ve posted you are still a resident of Canada for tax purposes and would be fined if caught. You’ve canceled your Canadian health coverage, though, so perhaps could successfully plead ignorance if audited.