tax residency more than one year after PR - significant ties

[JonnyBoy15]

My wife is a Canadian/US citizen. She is employed by a Canadian organization. My wife pays taxes in Canada, has an RRSP and a couple of Canadian bank accounts.

I am an American citizen and work for an American organization. We both have lived in Europe for the past 28 years and have a home there, car, driver license, bank account, etc... My assets which count for 80% of our total assets are almost all in the US, including 401k, Roth, etc...

We have a house in Canada that we live in while in Canada which is 3-5 months out of the year. During the rest of the time the house is rented out to others. We have a daughter who goes to school in Canada while in Canada and in Europe while in Europe.

I have applied for permanent residency in December of 2020 and have already been contacted about getting a medical for the PR and to pay for biometrics.

I was planning on making the official move to Canada for tax purpose in 2023 when we will be in Canada for more than 6 months and from that point on we will be staying longer in Canada in general (5-7 months out of the year). In that year, I would also be employed by a Canadian company and apply for provincial health, set up bank accounts, brokerage, etc....

My question is whether it would be OK to have February or March 2023 as my move to Canada as a tax resident; though it appears I will get my permanent residence status at the end of 2021 or more likely the middle of 2022. Do you see concerns with this plan?

 

[jclarke99]

I suspect that you will be deemed a Canadian resident for tax purposes when you make your PR status official. While only CRA can determine your tax residency status, the fact that you have a daughter that goes to school in Canada and a you have a home in Canada are reasons why I suspect that you won't be able to delay tax residency status until you officially move there.

 

[Naheulbeuck]

She is employed by a Canadian organization. My wife pays taxes in Canada, has an RRSP and a couple of Canadian bank accounts.

I assume your wife is a Canadian resident for tax purposes.

We have a house in Canada that we live in while in Canada which is 3-5 months out of the year. During the rest of the time the house is rented out to others. We have a daughter who goes to school in Canada while in Canada and in Europe while in Europe.

Those are all primary or secondary ties to Canada for tax purposes. The date you become PR does not really impact the determination of your tax status but you could very well already be considered a resident for tax purposes, unfortunately this is a case by case test that depends on your ties, not only whether you live in Canada for 6 months.

You already have ALL the primary ties:

Step 1: Determine if you have residential ties with Canada
The most important thing to consider when determining your residency status in Canada for income tax purposes is whether or not you maintain, or you establish, residential ties with Canada.

Significant residential ties with Canada include:

• a home in Canada
• a spouse or common-law partner in Canada
• dependants in Canada

You most likely also have some of the secondary ties:

Secondary residential ties that may be relevant include:

• personal property in Canada, such as a car or furniture
• social ties in Canada, such as memberships in Canadian recreational or religious organizations
• economic ties in Canada, such as Canadian bank accounts or credit cards
• a Canadian driver's licence
• a Canadian passport
• health insurance with a Canadian province or territory

Unfortunately, the 6 months ONLY comes in consideration if you DO NOT have significant residential ties, which in my opinion, you have.

I would recommend contacting CRA (should be easier now that T1 season is done) to make sure you determine it as early as possible, it is possible that you are not yet a resident for tax purposes, but you do own a residence and must only be doing short term rentals to keep it available to yourself when you come stay in Canada, your spouse is most likely a resident of Canada for tax purposes and your child also goes to school in Canada for at least some part of the year. Again it is not black or white for ties, they may consider none of you are tax residents but we've seen people deemed resident of canada with in my opinion weaker ties than yours.

Sorting out whether you are a resident now is best as you will very likely be reassessed later if you are a resident and it is much better to deal with it proactively (will also give you peace of mind for now and for the near future as PR should not be the determining factor, i.e. IF they deem you non resident now, I don't believe acquiring PR but not actually changing the way you live (not other stronger ties) would change your status for tax purposes (you can ask as well).

If once you become PR you acquire other ties though that would change, again, the most important factor is your ties, not so much the time you spend here or your immigration status per say (mainly secondary).

 

[JonnyBoy15]

Thank you, JClark99 and Naheulbeuk, for the advice.

 

[Jo Bell]

Don't forget about car taxes. Environmental regulations in Canada are constantly changing and car owners should consider this when buying a car.