Factual resident or Deemed non resident

[brforeign]

Hi everyone,

Having a PR, living most of the year with spouse and two babies in Canada, originally from Brazil. Both me and the wife don't own a house in Canada, own a house in Brazil.

From Income Tax Folio S5-F1-C1, 250-5:
https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html#p1.40

And the tax treaty:
http://www.treaty-accord.gc.ca/text-texte.aspx?lang=eng&id=102239

It looks like we are considered factual residents, but then deemed non resident:
", an individual will be deemed to be a non-resident of Canada at a particular time if, at that time, although otherwise resident in Canada (either factual or deemed), the individual is considered to be resident in another country under an income tax treaty between Canada and that other country"

Does it make sense?

Regards

 

[pie_vancouver]

Your Canadian residency status doesn’t affect whether or not you have to submit an income tax return.
However, it does affect how you file your taxes, what income you need to report, and the availability of certain credits or deductions. If you meet the CRA’s criteria, you have to submit a return regardless of your residency status.

Are you required to file?
Read: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/you-have-file-a-return.html
Not required to file, but want to claim the refund or GST/HST credit and/or CCB, then you should file.

 

[Rob_TO]

Hi everyone,

Having a PR, living most of the year with spouse and two babies in Canada, originally from Brazil. Both me and the wife don't own a house in Canada, own a house in Brazil.

From Income Tax Folio S5-F1-C1, 250-5:
https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html#p1.40

And the tax treaty:
http://www.treaty-accord.gc.ca/text-texte.aspx?lang=eng&id=102239

It looks like we are considered factual residents, but then deemed non resident:
", an individual will be deemed to be a non-resident of Canada at a particular time if, at that time, although otherwise resident in Canada (either factual or deemed), the individual is considered to be resident in another country under an income tax treaty between Canada and that other country"

Does it make sense?

Regards

If you're a PR and your family is living in Canada, then you are most likely a resident for tax purposes regardless of how much time you actually spend in Canada. This means you'll need to file a Canadian tax return and pay Canadian tax on all income you earn in Brazil, with tax credit provided for the Brazil taxes you'll pay first (as per the tax treaty).

 

[brforeign]

If you're a PR and your family is living in Canada, then you are most likely a resident for tax purposes regardless of how much time you actually spend in Canada. This means you'll need to file a Canadian tax return and pay Canadian tax on all income you earn in Brazil, with tax credit provided for the Brazil taxes you'll pay first (as per the tax treaty).

Thanks Rob. Even if the tax treaty article 4 says that I am considered a Brazilian resident and should not be considered a Canadian one? (as I understood the tax treaty):

1. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
   1. he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal economic relations are closest (centre of vital interests);
   2. if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
   3. if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
   4. if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

Since both Canada and Brazil consider me a resident (1), (1.1) comes into place... we own a home in Brazil, not in Canada. Then again we are brazilians national (1.3).

None of us work in Canada, in fact we have no Canada income, so no Canadian taxes, only Brazilian income.

 

[Rob_TO]

It doesn't matter if you have no Canadian income or own a home in Canada, you may still be considered a resident of Canada for tax purposes depending on your ties to Canada. A major tie is family (as per the folio link you posted above), so if your wife and kids live in Canada while you are in Brazil, that would be a major tie to Canada so you may be expected to file a Canadian tax return and pay Canadian taxes on your foreign income.

I'm not familiar with tax treaty for Brazil so you may want to talk to an accountant experienced with this specific situation.

 

[steaky]

If you're a PR and your family is living in Canada, then you are most likely a resident for tax purposes regardless of how much time you actually spend in Canada. This means you'll need to file a Canadian tax return and pay Canadian tax on all income you earn in Brazil, with tax credit provided for the Brazil taxes you'll pay first (as per the tax treaty).

There's always exception. I know a person who is a PR declared himself non resident while his wife and child lives in Canada. As long as CRA is ok, then he remains non resident for tax purposes and Canadian tax on his Canadian income only.

 

[Rob_TO]

There's always exception. I know a person who is a PR declared himself non resident while his wife and child lives in Canada. As long as CRA is ok, then he remains non resident for tax purposes and Canadian tax on his Canadian income only.

That is the risky part, making sure CRA is really ok with it. If you are ever audited in the future and CRA digs deeper into your tax residency situation, they may claim later you should have claimed residency for those years and do re-assessments accordingly.

 

[brforeign]

It seems an accountant is the best option since we are residents in two countries and it depends on the interpretation of the tax treaty. CRA allows us to fill a form and ask their opinion on our situation before filing for taxes, I might do so too. Thanks

 

[pie_vancouver]

That is the risky part, making sure CRA is really ok with it. If you are ever audited in the future and CRA digs deeper into your tax residency situation, they may claim later you should have claimed residency for those years and do re-assessments accordingly.

Even if you were deemed resident for tax purposes, you can argue with CRA, this is just an example and considering all tax deductions- "based on my computation of income tax for my worldwide income of $xx, which was zero, I was NOT REQUIRED to file". But if you owed taxes you should have filed, it is wise to compute first and know the income tax.