OK, I spent an hour or two going through the CRA website, publications, and tax guides.
Sorry about the length of this post, but CRA is never concise, and this is an important issue for all PRs landing in Canada part-way through the year, and wanting to know what to report in their first Canadian tax return.
First, Haver's advice to multiply by 3 the $6000 of income earned after landing in Canada, then divide by 3, does not make sense to me. After all the arithmetic, one would end up at the starting point, at $6000, no?
Second, I never encountered this suggestion in any of the CRA publications or guides, so again, Haver, please tell us where you got this idea. It might have unexpected implications we'd want to consider further.
The CRA advice on the subject seems to be: the taxpayer simply declares in his tax return any income earned in Canada and abroad after he becomes a Canadian resident.
(Comment: that is, what happened before he became a resident does not concern Canada. It is true that the Canadian taxpayer must declare his worldwide income in the Canadian tax return, but this is only to calculate how many federal tax credits he is entitled to, not to tax that worldwide income while he was a non-resident.)
Here’s what the tax guide says. (Note: Employment income is Part I tax.)
Part I tax - definition
The payer usually deducts Part I tax from the types of income listed below. However, if you carry on a business in Canada, or sell or dispose of taxable Canadian property, you may be subject to tax.
Even if the payer deducts tax from your income or you pay an amount of tax during the year, you may also have to file a Canadian income tax return to calculate your final tax obligation to Canada on:
• income from employment in Canada or from a business carried on in Canada; ( Comment: the taxpayer earned $6000 – which Quicktax calculates to attract NO tax.)
• employment income from a Canadian resident for your employment in another country, if the terms of a tax treaty between Canada and your country of residence make the income exempt from tax in your country of residence. (Comment: if this is the case, then the foreign income, earned before the PR landed in Canada, would be taxable in his Canadian tax return for 2009; this needs to be checked out. But this is a very special, rare case, and probably does not apply.)
• certain income from employment outside Canada if you were a resident of Canada when the duties were performed. (Comment: this does not apply, since the foreign income was earned before the PR landed in Canada in June 2009.)
One of the information bulletins on residents and non-residents has this to say: (Note: To see the entire text, go to: http://www.cra-arc.gc.ca/E/pub/tg/5013-g/5013-g-01-09e.html#detstatut.)
Were you a non-resident of Canada in 2009?
You are a non-resident of Canada for tax purposes throughout any period in which you do not have significant residential ties (as defined in the following section) in Canada and you are not a deemed resident of Canada. (Comment: before landing in June 2009, the taxpayer was a non-resident, and this is how CRA tells him to treat his income earned before landing, while a non-resident.)
What income should you report? - Report your income from Canadian sources (my emphasis) such as the taxable part of your scholarships, fellowships, bursaries, net research grants, income from a business that does not have a permanent establishment in Canada, net partnership income (limited or non-active partners only), and taxable capital gains from disposing of taxable Canadian property, as indicated under the income lines applicable to non-residents of Canada in the guide.
Interest income for both non-residents and deemed non-residents must be entered on Schedule A, Statement of World Income. If your Canadian payer has withheld non-resident tax at an incorrect rate or for more information on non-resident tax withholding, contact the International Tax Services Office.
Conclusion: In brief, before landing, report only income sourced in Canada (if any) After landing, report all income..
