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Tax time: resident or non-resident for tax purposes

Nutshell

Full Member
Aug 7, 2015
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Hi,
I got PR at the beginning of 2017 and I left Canada in September to work in Spain. In the summer I'm moving to England for a year and then planning on returning to Canada in September 2019. I don't have significant ties to Canada (no house, spouse, dependents). I just had a couple of questions:

1. I still have my Canadian driving license and bank account (but with less than $4000) in it. Does that make me a resident for tax purposes?
2. If I declare myself to be a non-resident for tax purposes, could this affect my PR in any way when I return?

If anyone has any links to official sites with answers to these (I've searched and can't find any), that would be fantastic!

Thank you,

Mihaila
 

torontosm

Champion Member
Apr 3, 2013
1,645
253
Nutshell said:
Hi,
I got PR at the beginning of 2017 and I left Canada in September to work in Spain. In the summer I'm moving to England for a year and then planning on returning to Canada in September 2019. I don't have significant ties to Canada (no house, spouse, dependents). I just had a couple of questions:

1. I still have my Canadian driving license and bank account (but with less than $4000) in it. Does that make me a resident for tax purposes?
2. If I declare myself to be a non-resident for tax purposes, could this affect my PR in any way when I return?

If anyone has any links to official sites with answers to these (I've searched and can't find any), that would be fantastic!

Thank you,

Mihaila
1. No
2. No
 

Nutshell

Full Member
Aug 7, 2015
20
0
torontosm said:
1. No
2. No
Hi Torontosm,

Thank you for your reply. I appreciate your response. I just wanted to add that since I posted, my tax specialist has emailed me to say that she thinks that I would lose my PR if I become a non-resident for tax purposes as it is in effect cutting my ties with Canada. She has based this on the final sentence in the "What permanent residents can do" section on this page:

http://www.cic.gc.ca/english/newcomers/about-pr.asp

I personally believe that this is very ambiguous and as it doesn't mention not becoming a non-resident for tax purposes under the "Losing your permanent resident status" section, it seems to me that I wouldn't lose it.

Do you have a link by any chance to somewhere that gives more information. Or do you know from personal experience? Sorry for all the questions, I am just receiving conflicting information and am not in a place that is easy to contact the tax office nor immigration office directly.

Thanks so much.
 

HamiltonApplicant

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Or do you know from personal experience?

From personal experience I can say that you don't lose your PR if you don't retain your Tax residency. I was not a Canadian tax resident for two years that followed my landing! I did not lose my PR.

Also the following statement is a bit confusing "I got PR at the beginning of 2017 and I left Canada in September to work in Spain".
 

Nutshell

Full Member
Aug 7, 2015
20
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HamiltonApplicant said:
Or do you know from personal experience?

From personal experience I can say that you don't lose your PR if you don't retain your Tax residency. I was not a Canadian tax resident for two years that followed my landing! I did not lose my PR.

Also the following statement is a bit confusing "I got PR at the beginning of 2017 and I left Canada in September to work in Spain".
Ok great. I'll let her know what you have said. Sorry, I meant 2016 :)
Thanks for your response - I really appreciate it!
 

torontosm

Champion Member
Apr 3, 2013
1,645
253
Nutshell said:
Hi Torontosm,

Thank you for your reply. I appreciate your response. I just wanted to add that since I posted, my tax specialist has emailed me to say that she thinks that I would lose my PR if I become a non-resident for tax purposes as it is in effect cutting my ties with Canada. She has based this on the final sentence in the "What permanent residents can do" section on this page:

http://www.cic.gc.ca/english/newcomers/about-pr.asp

I personally believe that this is very ambiguous and as it doesn't mention not becoming a non-resident for tax purposes under the "Losing your permanent resident status" section, it seems to me that I wouldn't lose it.

Do you have a link by any chance to somewhere that gives more information. Or do you know from personal experience? Sorry for all the questions, I am just receiving conflicting information and am not in a place that is easy to contact the tax office nor immigration office directly.

Thanks so much.
I will try to find a link, but I am positive that residency for immigration purposes is not linked with residency for tax purposes. You could easily meet the residency requirements to retain your PR status even if you lived outside Canada (and were a tax non-resident) for three year straight.
 

Nutshell

Full Member
Aug 7, 2015
20
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torontosm said:
I will try to find a link, but I am positive that residency for immigration purposes is not linked with residency for tax purposes. You could easily meet the residency requirements to retain your PR status even if you lived outside Canada (and were a tax non-resident) for three year straight.
But then there is the argument on this thread:
http://www.canadavisa.com/canada-immigration-discussion-board/canadian-pr-holder-living-and-working-in-us-needs-to-file-tax-to-canada-t471853.0.html
... which is basically what my tax advisor is saying.

So confusing! I wish there was a straightforward answer on the CIC site but there just doesn't appear to be.
 

HamiltonApplicant

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There are two agencies here: CIC and CRA
1)CIC does not require you to file any tax returns to maintain PR
2)CRA, on the other hand, might require you to file tax returns based their own criteria

Your tax consultant, I am sure, is well versed with CRA related questions; but not CIC related. The problem with your tax consultant is mixing CIC with CRA. From CRA standpoint, you do have a secondary residential tie with Canada; Namely, you Canadian bank account.

If it the peace of mind that your seeking, follow your Tax consultant's advice and file Tax return to CRA.

Thanks...

P.S. I writing is in PS to avoid confusion. As of today, you will have to file 4 tax returns and declare your intention to live Canada while applying for the citizenship. However, there a new bill C-6 to reduce tax returns to 3 and do away the declaration to live in Canada.
 

Nutshell

Full Member
Aug 7, 2015
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HamiltonApplicant said:
There are two agencies here: CIC and CRA
1)CIC does not require you to file any tax returns to maintain PR
2)CRA, on the other hand, might require you to file tax returns based their own criteria

Your tax consultant, I am sure, is well versed with CRA related questions; but not CIC related. The problem with your tax consultant is mixing CIC with CRA. From CRA standpoint, you do have a secondary residential tie with Canada; Namely, you Canadian bank account.

If it the peace of mind that your seeking, follow your Tax consultant's advice and file Tax return to CRA.

Thanks...

P.S. I writing is in PS to avoid confusion. As of today, you will have to file 4 tax returns and declare your intention to live Canada while applying for the citizenship. However, there a new bill C-6 to reduce tax returns to 3 and do away the declaration to live in Canada.
Hi!
Thanks for your response. I am a little confused by what you are saying, though. I know that I have to do a tax return. My issue is whether I would lose residency if I say that I am a non-resident for tax purposes. Also, just one or two secondary ties aren't necessarily enough to mean that you are a resident for tax purposes.

And I'm super confused by your final sentences in the postscript... Do you have an official link so I can read up on what you mean? Thanks!
 

HamiltonApplicant

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Nutshell said:
Hi!
Thanks for your response. I am a little confused by what you are saying, though. I know that I have to do a tax return. My issue is whether I would lose residency if I say that I am a non-resident for tax purposes. Also, just one or two secondary ties aren't necessarily enough to mean that you are a resident for tax purposes.

And I'm super confused by your final sentences in the postscript... Do you have an official link so I can read up on what you mean? Thanks!
You will not lose you residency if I you say that you are a non-resident for tax purposes.
 

Rob_TO

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Nutshell said:
But then there is the argument on this thread:
http://www.canadavisa.com/canada-immigration-discussion-board/canadian-pr-holder-living-and-working-in-us-needs-to-file-tax-to-canada-t471853.0.html
... which is basically what my tax advisor is saying.

So confusing! I wish there was a straightforward answer on the CIC site but there just doesn't appear to be.
That thread is not saying you will lose your PR status by declaring yourself a non-resident. It's saying it could complicate a future PR renewal or possible future appeal in case you go outside the residency obligation days.

Here is the PR card renewal guide: http://www.cic.gc.ca/english/information/applications/guides/5445ETOC.asp
-----
Section F – Statement of Consent
Question 24
Check “Yes” and provide your Social Insurance Number (SIN) if you authorize IRCC to ask for your income tax and residency information for any taxation years needed to help the department determine if you meet the residency obligation as set out in Section 28 of the Immigration and Refugee Protection Act.

If you check ‘No’:

you may need to ask for your income tax and residency information directly from the CRA, or
your application may be sent to a local office for further review.
Either outcome may result in processing delays.

-----

As I said, it could complicate things. This does not mean you will have your PR renewal rejected, it means that if you are very close to the minimum days required to meet RO when you apply to renew your card, you could see delayed processing if you had declared as a non-resident for tax purposes. However if you meet the days, in the end your PR card should eventually be renewed.

Declaring non-resident status is telling Canada you intend to permanently sever ties. If you intend to return to Canada in the future, you are not supposed to declare as a non-resident (although many people do). If something happens that causes you to violate your RO and you end up being reported and need to go through appeals, your having claimed non-residency status shows you intended to sever ties so may be a very negative factor for you. However hopefully you never get into this situation.

Also to CRA, if you were ever audited they could hypothetically claim that you should never have qualified for non-residency status since you obviously intended to keep your PR status active.

I would advise for any PR to keep filing their Canadian taxes after they become residents even if they later move out of Canada temporarily, simply to avoid risk in the future. Obviously many have successfully declared non-resident status and it ended up ok, however each person's situation is different.
 

HamiltonApplicant

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Rob_TO said:
Declaring non-resident status is telling Canada you intend to permanently sever ties.
Not according to CRA website! CRA website says "If you determine that you do not have to file a return, you should let the CRA know the date you left Canada as soon as possible." Declaring tax non residency does not, therefore, mean severing ties permanently

Here are conclusions for nutshell:

  • nutshell should file tax return for the year 2016
    If nutshell feels that he need not file the tax return, he should inform CRA the date he left Canada
    If nutshell decides to file the tax return anyway, he need not declare explicitly that he is a non resident. CRA can infer that information.

Thx
 

Rob_TO

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HamiltonApplicant said:
Not according to CRA website! CRA website says "If you determine that you do not have to file a return, you should let the CRA know the date you left Canada as soon as possible." Declaring tax non residency does not, therefore, mean severing ties permanently

Here are conclusions for nutshell:

  • nutshell should file tax return for the year 2016
    If nutshell feels that he need not file the tax return, he should inform CRA the date he left Canada
    If nutshell decides to file the tax return anyway, he need not declare explicitly that he is a non resident. CRA can infer that information.

Thx
See here: http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s5/f1/s5-f1-c1-eng.html

Application of term ordinarily resident

1.16 Where an individual has not severed all of his or her residential ties with Canada, but is physically absent from Canada for a considerable period of time (that is, for a period of time extending over several months or years), the Courts have generally focused on the term ordinarily resident in determining the individual's residence status while abroad. The strong trend in decisions of the Courts on this issue is to regard temporary absence from Canada, even on an extended basis, as insufficient to avoid Canadian residence for tax purposes. Accordingly, where an individual maintains residential ties with Canada while abroad, the following factors will be taken into account in evaluating the significance of those ties:

-evidence of intention to permanently sever residential ties with Canada;
-regularity and length of visits to Canada; and
-residential ties outside Canada.
For greater certainty, the CRA does not consider that intention to return to Canada, in and of itself and in the absence of any residential ties, is a factor whose presence is sufficient to lead to a determination that an individual is resident in Canada while abroad.

Evidence of intention to permanently sever residential ties

1.17 Whether an individual intended to permanently sever residential ties with Canada at the time of his or her departure from Canada is a question of fact to be determined with regard to all of the circumstances of each case. Although length of stay abroad is one factor to be considered in making this determination (that is, as evidence of the individual's intentions upon leaving Canada), the Courts have indicated that there is no particular length of stay abroad that necessarily results in an individual becoming a non-resident. Generally, if there is evidence that an individual's return to Canada was foreseen at the time of his or her departure, the CRA will attach more significance to the individual's remaining residential ties with Canada (see ¶1.11 – 1.15), in determining whether the individual continued to be a factual resident of Canada subsequent to his or her departure. For example, where, at the time of an individual's departure from Canada, there exists a contract for employment in Canada if and when the individual returns to Canada, the CRA will consider this to be evidence that the individual's return to Canada was foreseen at the time of departure. However, the CRA would have to review each individual's situation on a case-by-case basis to determine whether the individual's remaining residential ties with Canada, including the contract of employment, are sufficient to conclude that the individual continues to be resident in Canada.
 

dpenabill

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Some General Observations about influence of tax-filing status relative to PR status:

A PR has no more obligation to file a Canadian tax return, or to pay Canadian taxes, than any other Canadian. Who must file a return, generally, and who must file a resident return in particular, are determined by Canadian tax laws and rules, most of which are applied and enforced by the Canada Revenue Agency.

There are no tax-filing status requirements for PRs. If, under CRA rules, a PR qualifies as a non-resident for tax-filing purposes, the PR may (should) file a non-resident return.

A professional tax advisor should be approaching the question about whether to file a non-resident tax return the same way the advisor would for a Canadian citizen. If a Canadian citizen living abroad in the same circumstances, with the same sources of income, is entitled to file a non-resident return, a PR in those circumstances is also entitled to file a non-resident return.

Where it tends to get confusing is that many of the facts and circumstances which are relevant in determining residency for taxation purposes can also be relevant when IRCC conducts a Residency Determination to assess a PR's compliance with the PR Residency Obligation.

But as others have pointed out, the issues and conclusions relative to taxation, within the purview of CRA, are totally separate and distinct from PR-status issues within the purview of IRCC. Thus, while many of the same facts are relevant to inquiries and issues for both, particular findings or conclusions are based on different criteria and are made for different purposes.

For example:

For CRA, residential ties are evidence which tend to indicate where a person is a resident.

For IRCC residential ties are evidence which tend to indicate where a person has been physically present.

For CRA, where an individual has been physically present is evidence to be considered in determining whether that person is a resident of Canada (for the given tax-year). (Presence in Canada for 183+ days during a calendar year leads to a presumption, albeit a rebuttable presumption, that person was a Canadian resident during that year.)

For IRCC, being a resident of Canada is merely evidence which supports a claim of physical presence in Canada.


Regarding a PR's obligation to file and pay taxes:

PRs, like all Canadians, are required to comply with Canadian law. Including Canadian taxation laws. The Canadian Revenue laws and rules impose both tax filing requirements and tax payment requirements.

This leads to what it says at the IRCC website providing information about PR status:

" . . . on the final sentence in the "What permanent residents can do" section on this page:

http://www.cic.gc.ca/english/newcomers/about-pr.asp "


"As a permanent resident . . . You must pay taxes and respect all Canadian laws at the federal, provincial and municipal levels."

But just like any other Canadian, a PR only needs to pay the taxes that Canadian laws and taxation rules require. If no taxes are due for a given tax-year, a PR is not obligated to pay any taxes for that tax year . . . in particular, what taxes a Canadian living outside of Canada needs to pay depends on the source of the income and whether for taxation purposes the Canadian is a resident or non-resident for the particular period of time, usually a tax-year.

A PR living abroad may or may not be required by CRA rules to file a resident tax return for a given tax-year (if a resident return is required, payment of taxes on world-wide income is required). If the CRA rules allow the PR to file a return for that year as a non-resident, this has no impact whatsoever on the PR's status as a PR. None. Period.

That said, as alluded to in my general observations above, the facts and circumstances which establish the PR's tax-filing-status as a non-resident are also relevant when assessing the PR's claims about days the PR was present in Canada, which is for purposes of assessing the PR's compliance with the PR Residency Obligation: the Residency Determination.

The obvious example: if a PR's circumstances are such that the PR was a non-resident of Canada for taxation purposes, for a given tax-year, the odds are high the PR did not spend very much time in Canada during that period of time. That is a matter of fact relevant to assessing compliance with the PR's Residency Obligation. Nonetheless, what really matters for IRCC's assessment of PR RO compliance, is the number of days the PR was present in Canada, not what the PR's tax-filing-status was.


Caution:

CRA rules governing who must file a resident tax return can be complicated, difficult to interpret, and even more difficult to apply. The CRA information referenced in this topic can be a lot more tricky to apply than is apparent.

This is also subject to international treaties, which to make things even more confusing, the terms of such treaties tend to differ from one country to another.

There are, for example, particular rules which govern persons with ties in both the U.S. and Canada which might subject the individual to taxation in both countries, which rules determine in which of the two countries the person is a resident for taxation purposes and which in turn allow the person to file a non-resident return in the other country, even if an ordinary residential ties analysis would lead to a different outcome.

To be clear, however, PR status has significance, in this regard, only in that having PR status is a factor, one individual factor among many, many factors which are relevant when CRA questions the tax-filing status of a Canadian filing a non-resident tax return (or while investigating a potential failure to file a required resident return). Many other factors have far greater weight and importance in making a determination as to whether or not a particular individual is obligated to file a resident tax return.

Among the factors which carry the most weight: actual physical presence, place of employment, location of dwelling place, and place where immediate family live.


CRA information to clients regarding Residence Status determinations:

That information is about CRA rules for determining residence status for taxation purposes and has minimal relevance for any other purpose.

In regards to suggestions that evidence of intention to permanently sever residential ties in Canada has any significance for a PR beyond merely being part of determining tax filing status, NO.

Canada's PR program totally eliminated any intention requirements for keeping PR status. A PR does not need to intend to reside in Canada in order to keep PR status.

For a PR who has breached the PR RO and who is, in effect, pleading H&C reasons why IRCC should allow the PR to keep status, yes, intentions are taken into consideration.

But for a PR who has met the PR RO, at least two years in the preceding five spent in Canada, intention is NOT relevant.

Thus, to be clear, CRA's Income Tax Folio S5-F1-C1, "Determining an Individual's Residence Status," is ONLY about determining residence status for taxation purposes and no other purpose. And definitely not for purposes of assessing compliance with the PR RO.


Summary:

Follow the rules and instructions. Respectively. The CRA rules for determining tax-filing status. The IRPA rules for meeting PR obligations.

Thus, for deciding whether to file a resident or non-resident tax return, follow CRA's rules and instructions in determining which is the proper way to file. As always, be accurate in reporting facts. While the fact of having PR status is a minor factor in determining which is the proper way to file, other factors will have far greater influence in this.

Thus, for purposes of maintaining compliance with the PR Residency Obligation, and reporting information to CBSA or IRCC attendant a PoE examination or in a PR card renewal application, again the important thing is to accurately report facts. What matters in this regard are the IRPA statutes and regulations, and of course the accurate facts themselves.

As for the facts, a PR who qualifies for non-resident tax filing status obviously is spending a lot of time abroad, and the more time a PR spends abroad, and indeed the more ties a PR has abroad, the greater the risk that IRCC will have concerns and engage in more probing scrutiny of the PR when there is a Residency Determination to be made. Should be nothing complicated or confusing or obscure about this.

Thus, a PR who is spending enough time abroad to be a non-resident of Canada for tax-filing purposes, would be prudent to carefully keep good records to document actual time in Canada. And this is true whether or not the PR actually files a resident or non-resident tax return . . . declared tax-filing status does not directly affect PR RO compliance determination . . . the PR RO compliance determination will be based on actual presence in Canada, subject to the PR being able to sufficiently document claimed presence with credible evidence of actual presence.
 
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Rob_TO

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There are 2 issues here - CRA and IRCC. To sum this up nicely:
CRA
- Intent to return to Canada plays a big role in if you are able to declare as a non-resident for tax purposes

IRCC
- They specifically ask for permission to check residency status for tax purposes, so how you filed is relevant to a PR card renewal app
- Declaring with CRA as a resident for tax purposes is not required for PR card renewals
- The closer you are to the minimum amount of days to meet RO, the more relevant tax status may become. Filing taxes as non-resident and barely meeting RO, may in itself cause a PR renewal app to go to secondary review and face very long processing times
- If for any reason process is started to revoke PR status due to not meeting RO, filing as resident or non-resident for tax purposes may become much more relevant again in an appeal

So as I said, filing as resident or non-resident may complicate things in the future for PR, depending on a number of variables or possible situations. Someone who is out of Canada for such a long time to be a non-resident, has a good chance to be closer to minimum RO days when they eventually try to renew PR card. So to avoid the black hole that can be secondary review and cause huge delays in getting new PR card, if it was me I would keep filing taxes as a deemed/factual resident. However if you intend to have well over the number of days for RO at renewal time, then tax filing would probably not be an issue.