Residency Status

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nonresident2015
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Residency Status

Post by nonresident2015 »

I have an inquiry regarding residency status for tax purposes in Canada. My situation is the following

I left Canada in Aug 1st 2014 to work in the US until Aug 8th 2015, from there I moved to work to a country that does not have a tax treaty with Canada and have not returned to Canada since. My family (spouse and children) have moved with me and I do not have primary ties in Canada (property, furniture, car etc). The last tax return I filled was for 2014 (was a joint US / Canadian return).

I still have a bank account and a credit card in Canada and I have an active medical license (that I need to renew yearly) in addition to being a member of the royal college of physicians to allow me to keep my license. I also have a disability insurance that I kept as it covers me world wide.

I do not have an intention to return to Canada, but I have kept my license active as reinstating it would be a paperwork nightmare plus I need to demonstrate that I am engaging in continuous medical education. I only kept my bank account as I need it to pay the annual dues for my license / disability insurance.

I should also mention that I have not filled an exit T1 tax return but I do not have any investments, properties,tax free accounts etc.

Would you kindly shed light on whether my ties are considered "severed" enough to be deemed a non-resident. I find the interpretation of the status is somewhat in the eye of the beholder and hence may not be very objective.

Any insight is much appreciated
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Re: Residency Status

Post by Phil D »

My knowledge of all this is a little rusty since I became a non resident nearly five years ago, so please regard the following just as areas for you to confirm if necessary.

I don't quite know what you mean by a ' joint US / Canadian ' 2014 return. Presumably you filed a partial year Canadian return and a partial year US return. If you filed a Canadian return in 2014 then that was your ' exit' return because there are questions on the first page of the general return which ask if and when you left the country. For a last year return there are some specific forms, T1243 and T1161, which list property on emigration for a deemed disposition. Possibly you did not need to complete those if you had no assets although I am not sure of the requirements.

CRA have a form NR73 which you can complete and return to them for them to give an opinion about your residency. Many tax advisors advise against going through this process. Other than that, however, residency is a matter for the tax courts to weigh up the residential ties. You can see from the NR73 which factors they look at. A good Canadian tax advisor will be able to give you a strong opinion based on you completing the form without returning it to CRA.

The first chapter of ' Canadians Resident Abroad " by Garry Duncan addresses most of this and may guide you in deciding if you should seek a Canadian tax advisor's opinion.

The IRS are even tougher to get rid of than CRA. If you lived and worked in the US and then moved to a low or no tax country you may want to ensure that you are clearly outside the IRS's net as well.
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AltaRed
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Re: Residency Status

Post by AltaRed »

I agree the partial 2014 T1 return would have been the 'exit' return for Canada. There are no significant ties left to Canada. A similar thing should apply for the USA with the filing of a 1040 (maybe even a NR1040 with an exit date on it). What kind of US filing did the OP's accountant do for 2015?

Given the OP presumably did not have any more ties with the USA other than that brief mid-2014 to mid-2015 stint, there should be nothing left to do vis-a-vis the USA.... as long as a final NR1040 was filed.
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Re: Residency Status

Post by OhGreatGuru »

I think you need to talk directly to CRA, if not a tax lawyer. The meaning of "residential ties" by CRA can be quite subjective.

There is no such thing as a joint Canada/Us tax return.

If you have not not filed an Exit Return, you need to get that corrected. Otherwise CRA may assume you are still a deemed resident, and may be waiting to audit you on your world-wide income as soon as they can track you down.

The fact that you have a Canadian bank account, credit card, and are a registered professional in Canada may have a bearing on "residential ties" as well.
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Re: Residency Status

Post by AltaRed »

OhGreatGuru wrote: 01 May 2017 21:09 The fact that you have a Canadian bank account, credit card, and are a registered professional in Canada may have a bearing on "residential ties" as well.
A person can also have brokerage accounts and investment property in Canada without causing concerns. Lots of ex-pats have those things and more without fear of tax residency. The key 'residence' criteria are things like where one's family is, having ownership/lease of a home elsewhere, health insurance, club memberships, driver's license, etc. Those are way more important than things listed.

The OP does need to tell us if his 2014 tax return had a date of departure on it. That is important.
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zeno
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Re: Residency Status

Post by zeno »

AltaRed wrote: 01 May 2017 21:29
The key 'residence' criteria are things like where one's family is, having ownership/lease of a home elsewhere, health insurance, club memberships, driver's license, etc. Those are way more important than things listed.
Indeed, CRA can be pretty picky about these ties to Canada. I have a colleague whose claim to have severed ties was rejected because he still had a membership at the local video rental store (remember those!?). I have no idea if that's typical. Based on his experience I'd be ditching my CAA membership, my Shoppers Optimum card and Tim Hortons frequent donut card. Maybe burn all my Canadian Tire money just to be safe.
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Re: Residency Status

Post by AltaRed »

Was your colleague single or married? family? Because those 'membership' things you mention are way.....picky.
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Re: Residency Status

Post by scorpionman »

I'm not sure that a driver's license is more important than a bank account or credit card if that are your only secondary ties, or even medical insurance.
MSP runs off after 2 years abroad and the driver license after 5 years. Can one argue they are just waiting for them to run off naturally? Or is one a resident until they do?

Another question I have in the final T1, what address do you put? Is it the Canadian address you had at the time you left or must you include a foreign mailing address for them to send the assessment? If you want your new location to be anonymous, you might have to use a friend's address or something. Of course if you owe anything I don't think you can pay cash to them but you may be able to settle via a cashier's check?

I think it makes sense that a canadian bank account is not a residential tie in itself because how do you pay your final obligations like even the CRA tax owing if you close it before you leave?
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Re: Residency Status

Post by AltaRed »

Maintaining a Cdn domiciled bank account or credit car is in itself not sufficient to deem residential ties. Permanent non-residents can actually hold these.

Things like a DL or a Health Insurance cards are a different matter because merely holding them ARE residency based.

Once you leave Canada, you are obliged to get a DL from your place of residency and while I am not aware of what they do ex-North America, I know that US states used to take your Cdn DL off you when you get a DL for the state of residency. IOW, you cannot have more than one DL at a time (International driving permit excepted). It is up to you to request cancelllation of your DL in your former jurisdiction.

As for a health card, it is again up to you to inform your former jurisdiction that you are no longer a resident. The mere fact of providing them with a new out-of-province residential postal address will effectively do that. In the case of MSP, asking them to stop sending payment notices is part of the process.

When filing your final T1, you always include your new postal address. You need to do that in any event when you are telling them what day you left Canada.
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Re: Residency Status

Post by kcowan »

scorpionman wrote: 12 Jun 2017 04:38Another question I have in the final T1, what address do you put? Is it the Canadian address you had at the time you left or must you include a foreign mailing address for them to send the assessment? If you want your new location to be anonymous, you might have to use a friend's address or something. Of course if you owe anything I don't think you can pay cash to them but you may be able to settle via a cashier's check?

I think it makes sense that a canadian bank account is not a residential tie in itself because how do you pay your final obligations like even the CRA tax owing if you close it before you leave?
I think you need some professional advice. CRA is known to question residency and it is not clear why they rule and are sometimes overruled in court. It is not something you can rely on from our forum.
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Re: Residency Status

Post by scorpionman »

I think it's no business of Canada where you are after you leave. At most a mailing address to receive your mail, like a final assessment. You may even move from there at a later date. And since I've read it can take one year for CRA to process final returns it would seem a bit inconvenient . Can you not put th address of a relative in Canada (not a tie , like parents ) to receive these final documents and have them forwarded on to you ?
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Re: Residency Status

Post by AltaRed »

I've never known a NOA from a T1 (even a 'last' T1 for someone going non-resident) taking a year, unless it is an Estate Final T1...and even then, only a matter of months. Re-assessments take longer because they are down in the queue.

Really have no idea what your adversity is to CRA having your ex-Canada mailing address...unless you are part of a super secret security organization or engaged in sketchy activity. If you reside in the USA, IRS shares info with CRA and vice versa anyway.

Added: There is no issue with a Canadian mailing address. Just be sure to use the 'c/o' or 'care of' terminology in the mailing address....to indicate this is NOT your personal mailing address.
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Re: Residency Status

Post by scorpionman »

I have no problem with a Canadian mailing address just wondering if it looks weird to use it as a final return as it sort of looks you are in Canada. I guess you could use a foreign address and a Canadian co mailing address?
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Re: Residency Status

Post by AltaRed »

scorpionman wrote: 12 Jun 2017 12:11 I have no problem with a Canadian mailing address just wondering if it looks weird to use it as a final return as it sort of looks you are in Canada. I guess you could use a foreign address and a Canadian co mailing address?
As I mentioned.... use "c/o" in the address line, e.g. c/o 3255 Main St., Any Town, ON

"Care of" is a well known method of sending mail to an address that is not your address personally.
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