taxed on worldwide income while a non-resident?

[toby]

SOmewhere in the Tax Act there is the proviso that -- even if you are a permanent resident of Canada -- if you are not residing in Canada for (say) half the year, you are taxed only on income sourced in Canada during that period out of Canada.

Has anyone experience with this type of situation?

[taxguy]

Actually its the reverse. If you are in Canada for 183 days you are taxed on word wide income because you are a deemed resident.

Leaving Canada for more than 183 days is not sufficient to avoid Canadian income tax. You must sever residency properly by selling your home, closing bank accounts, moving your dependent children and your spouse, canceling drivers licenses etc. This causes a deemed sale of all your property and you pay an exit tax!

[toby]

Taxguy said:
"Actually its the reverse. If you are in Canada for 183 days you are taxed on word wide income because you are a deemed resident.

Leaving Canada for more than 183 days is not sufficient to avoid Canadian income tax. You must sever residency properly by selling your home, closing bank accounts, moving your dependent children and your spouse, canceling drivers licenses etc. This causes a deemed sale of all your property and you pay an exit tax."

I say:
Not quite. You can rent your house to an arm's-length person; you don;t have to sell it.You are right that you must sever residency properly, but one doesn't have cut as many financial ties as you say.

We all probably know that one can maintain permanent residency by staying in Canada an average of 146 days per year. IT-221R3 (one of CRA's tax bulletins) says that a permanent resident who (1) stays in Canada  less than 183 days, (2) who has no permanent residence in Canada, nor (3) spouse or dependent children in Canada, is not liable for tax on worldwide income while outside the country, only liable for in-Canada income. Note that the person is a permanent resident yet not taxable on worldwide income.

Let me repeat a complex point, for clarity. The permanent resident is taxable on income sourced in Canada while outside the country, and taxable on worldwide income while staying inside Canada. So, if you had capital gains to trigger, you'd be wise to avoid staying in Canada for more 183+ days, and sell the asset while you are out of the country.

The other ties to Canada (driver's licence, bank accounts, etc etc) are only secondary ties,  and having a few of them does not necessarily deem one a full-time taxpayer. Perhaps if one had a lot of the secondary ties, he might be deemed a full-time taxpayer, but only CRA can advise him of his status, and there is a form to fill out to get an official verdict from CRA.

CRA even envisages a situation where a permanent resident (staying less than 183 days, ) could even have a seasonal residence in Canada – but must have his centre of activity including principal residence outside Canada.

[kleinermuk]

I am a Canadian citizen, but have a business in the USA. So if I prove to CRA that I reside for more than 183 days in the Bahamas and severed ties with Canada I will pay no tax on my worldwide income, including that in the US?

[toby]

Yes.