To not become a non-resident for tax purposes quesetion

[lchazl]

If I am a citizen and wife is PR, we want to go back to her home country for an extended time BUT keep our residency in Canada for tax reasons, I know the rule is 6 months in a calendar year.

SO - in theory can we leave approx. 30 June 2023 and come back 29 June 2024 - and keep our residency for tax purposes? (Because 6 months away in each calendar year?)

 

[canuck78]

If I am a citizen and wife is PR, we want to go back to her home country for an extended time BUT keep our residency in Canada for tax reasons, I know the rule is 6 months in a calendar year.

SO - in theory can we leave approx. 30 June 2023 and come back 29 June 2024 - and keep our residency for tax purposes? (Because 6 months away in each calendar year?)

Why exactly do you want to keep you residency for tax purposes? What type of residency you have is not as simple as presence in Canada also not as simple as presence in a tax year. It will be up to CRA to determine what kind of residency you both have. Ties to Canada not only time in Canada go into determining whether you are a tax resident. You must advise CRA when you are leaving Canada for an extended amount of time and you can also ask them to determine whether you will be a tax resident or not. The first year is easier to determine if you already have over 6 months presence in Canada that year.

 

[lchazl]

Why exactly do you want to keep you residency for tax purposes?

Because it's much easier to file taxes, don't have to worry about forgetting to tell all the various agencies, benefits intact, etc. I know about deemed/factual resident, filling out NR73 / 74, etc. We will be vacationing in another country (still have home and belongings, car, etc. in Canada) and not exactly sure when we'd come back, imagine spending 7 months away (6 months in 2023 and 1 month in 2024, or 3 in 2023 and 4 in 2024, etc.). So was just curious if there were hard and fast rules re holidaying outside of Canada over 2 calendar years.

 

[owleroz]

If I am a citizen and wife is PR, we want to go back to her home country for an extended time BUT keep our residency in Canada for tax reasons, I know the rule is 6 months in a calendar year.

SO - in theory can we leave approx. 30 June 2023 and come back 29 June 2024 - and keep our residency for tax purposes? (Because 6 months away in each calendar year?)

I am not a tax expert but I faced something similar while moving from US to Canada during my PR. Tax residency is not simply determined by amount of time spent in Canada or outside Canada. CRA also looks at ties to Canada if you are outside Canada for a while. I suggest asking a tax professional and looking up specific CRA rules to determine ties to Canada.

 

[lchazl]

I am not a tax expert but I faced something similar while moving from US to Canada during my PR. Tax residency is not simply determined by amount of time spent in Canada or outside Canada. CRA also looks at ties to Canada if you are outside Canada for a while. I suggest asking a tax professional and looking up specific CRA rules to determine ties to Canada.

Yeah thx it is purposely done in a gray area which is annoying. Found this:

We often assist people in determining their tax residency under Canadian law. One question that often comes up is whether they have spent more than 183 days in the Country, as clients have often heard this term come up as a “threshold” for Canadian tax residence. However, in practice, this rule only rarely determines the result.

...

Even where an individual leaves the country and returns to sojourn for more than 183 days, this rule still often does not determine residency. Many countries, including, for example, the United States and the United Kingdom, have tax treaties that clarify residence rules. Because the 183-day rule would make the Taxpayer resident in both countries, a tie-breaker rule in the treaty to determine residency. Under Canadian law, the result of this tie-breaker will determine residency. The key question in these cases turns first on where the individual has a “permanent home available to them”, and if they have a home in each country, to “where their personal and economic relations are closest”, with a series of other tie-breakers if that is unclear.

 

[canuck78]

Yeah thx it is purposely done in a gray area which is annoying. Found this:

We often assist people in determining their tax residency under Canadian law. One question that often comes up is whether they have spent more than 183 days in the Country, as clients have often heard this term come up as a “threshold” for Canadian tax residence. However, in practice, this rule only rarely determines the result.

...

Even where an individual leaves the country and returns to sojourn for more than 183 days, this rule still often does not determine residency. Many countries, including, for example, the United States and the United Kingdom, have tax treaties that clarify residence rules. Because the 183-day rule would make the Taxpayer resident in both countries, a tie-breaker rule in the treaty to determine residency. Under Canadian law, the result of this tie-breaker will determine residency. The key question in these cases turns first on where the individual has a “permanent home available to them”, and if they have a home in each country, to “where their personal and economic relations are closest”, with a series of other tie-breakers if that is unclear.

The only way to truly determine your residency status will be to contact CRA. They will determine it based on your information.

 

[canuck78]

Because it's much easier to file taxes, don't have to worry about forgetting to tell all the various agencies, benefits intact, etc. I know about deemed/factual resident, filling out NR73 / 74, etc. We will be vacationing in another country (still have home and belongings, car, etc. in Canada) and not exactly sure when we'd come back, imagine spending 7 months away (6 months in 2023 and 1 month in 2024, or 3 in 2023 and 4 in 2024, etc.). So was just curious if there were hard and fast rules re holidaying outside of Canada over 2 calendar years.

You still will have to notify everyone if spending a year abroad. You won’t necessarily still qualify for benefits or healthcare. Very different spending a year abroad versus spending 6 months and the one month the next year as long as you return to Canada in between the 6 months and the 1 month.

 

[lchazl]

You still will have to notify everyone if spending a year abroad. You won’t necessarily still qualify for benefits or healthcare. Very different spending a year abroad versus spending 6 months and the one month the next year as long as you return to Canada in between the 6 months and the 1 month.

Right so that's my point, there's no hard and fast rules - such like spending last 4 months of 2023 and first 4 months of 2024 abroad (so total 8 months, but what about 9 months, 10, or 11?) - where is the "cutoff"?- it's a gray area I believe for what reason I don't know (to scare you into not testing the limits? Or to create more work for CRA to determine on a case-by-case basis?). If they instead had it such as "if you leave Canada for x days without returning for y days and leaving again (or something very concrete), then you must declare non residency unless for x y z conditions.

 

[canuck78]

Right so that's my point, there's no hard and fast rules - such like spending last 4 months of 2023 and first 4 months of 2024 abroad (so total 8 months, but what about 9 months, 10, or 11?) - where is the "cutoff"?- it's a gray area I believe for what reason I don't know (to scare you into not testing the limits? Or to create more work for CRA to determine on a case-by-case basis?). If they instead had it such as "if you leave Canada for x days without returning for y days and leaving again (or something very concrete), then you must declare non residency unless for x y z conditions.

You are right there aren’t clear rules that spell out whether you are a tax resident or not. Canada is likely a lot more flexible than other countries when it comes to this issue. When it comes to whether you qualify for healthcare or must reapply when you return the rules are much more clear and are dependent on each province. You can usually have a good idea whether you will be a tax resident or not. Based on your other posts you are looking at time away per year. Once you leave Canada you need to consider total time away and can’t necessarily break it up by time away per tax year. For the year you leave it is easy to look at months spent in Canada and if over 6 months you are likely a tax resident. Whether you continue to receive all benefits while outside Canada will be determined by CRA, depends on the benefits and also depends on how long you will be away. Nobody is going to be able to give you a clear cut answer. Would also try to get written proof or audio proof if you can’t get written proof from CRA. The customer service line can give out incorrect advice.

 

[lchazl]

You are right there aren’t clear rules that spell out whether you are a tax resident or not. Canada is likely a lot more flexible than other countries when it comes to this issue. When it comes to whether you qualify for healthcare or must reapply when you return the rules are much more clear and are dependent on each province. You can usually have a good idea whether you will be a tax resident or not. Based on your other posts you are looking at time away per year. Once you leave Canada you need to consider total time away and can’t necessarily break it up by time away per tax year. For the year you leave it is easy to look at months spent in Canada and if over 6 months you are likely a tax resident. Whether you continue to receive all benefits while outside Canada will be determined by CRA, depends on the benefits and also depends on how long you will be away. Nobody is going to be able to give you a clear cut answer. Would also try to get written proof or audio proof if you can’t get written proof from CRA. The customer service line can give out incorrect advice.

Fully agree with you. Thanks for taking the time.

 

[dpenabill]

Right so that's my point, there's no hard and fast rules - such like spending last 4 months of 2023 and first 4 months of 2024 abroad (so total 8 months, but what about 9 months, 10, or 11?) - where is the "cutoff"?- it's a gray area I believe for what reason I don't know (to scare you into not testing the limits? Or to create more work for CRA to determine on a case-by-case basis?). If they instead had it such as "if you leave Canada for x days without returning for y days and leaving again (or something very concrete), then you must declare non residency unless for x y z conditions.

"Residency" for tax purposes is separate and apart from "residency" for other purposes (even though there is considerable overlap in relevant factors, and each can be a relevant factor in regards to the other).

Moreover, in regards to qualifying for various kinds of benefits, those can involve eligibility requirements that combine other elements in addition to residency. The Ontario Health Insurance Plan (OHIP), for example, requires ACTUAL PRESENCE in Canada (for 153 days during any 12 month period of time) in ADDITION to being a "resident" of Ontario.

A person with just about any ties to living or working or obtaining income in Canada can declare they are a tax resident of Canada with almost NO risk Canada Revenue will make inquiry otherwise, let alone conclude otherwise. But, again, qualifying for various benefits, credits, deductions, and so on, often, if not usually or nearly always, depends on more than just being a resident for tax purposes.

And of course being a tax resident of Canada does not preclude another country from treating the individual as a tax resident of that country.

Leading to . . .

eah thx it is purposely done in a gray area which is annoying. Found this:

It warrants keeping the information you referenced, published by the Kalfa Law firm, in context. It is about avoiding being treated a resident for tax purposes in multiple countries, which otherwise would typically result in a substantially greater tax burden.

If the circumstances are such that an individual might be considered a resident for tax purposes in more than one country, most countries (nearly all?) will have NO problem with the taxpayer filing a return and paying taxes as a tax resident in that country EVEN IF they have also filed a return and paid taxes as a tax resident in another country.

Thus, for a taxpayer who files a Canadian tax return as a resident of Canada, for tax purposes, there is virtually no risk that Canada Revenue would disagree. This does not conclusively determine eligibility for benefits, credits, or deductions.

Where the CRA gets involved in determining if a taxpayer is a tax resident of Canada, or not, is in regards to individuals who file claiming they are not a resident of Canada for tax purposes, or who have failed to file a tax return when the CRA has reason to believe they should have.

The Annoying Greyness of Who is Resident for Tax Purposes:

This is largely the product of how complex the circumstances of real life can be for many, many people in a globalized economy in conjunction with very open borders and the prevalence of people with status to live and work in multiple countries. The variables are many, subject to all sorts of contingencies and conflicts. And there is no shortage of individuals who will go to great lengths to more or less game the system, to not just avoid tax obligations (legally) but to evade them contrary to the law and rules.

Ultimately there are so many variables that, in complicated cases, simple rules cannot adequately dictate tax residency with any degree of reliable certainty. For those with complicated situations, as @owleroz suggested, best to consult with qualified tax professionals (and this does not include those out-of-the-box companies).

 

[lchazl]

"Residency" for tax purposes is separate and apart from "residency" for other purposes (even though there is considerable overlap in relevant factors, and each can be a relevant factor in regards to the other).

Moreover, in regards to qualifying for various kinds of benefits, those can involve eligibility requirements that combine other elements in addition to residency. The Ontario Health Insurance Plan (OHIP), for example, requires ACTUAL PRESENCE in Canada (for 153 days during any 12 month period of time) in ADDITION to being a "resident" of Ontario.

A person with just about any ties to living or working or obtaining income in Canada can declare they are a tax resident of Canada with almost NO risk Canada Revenue will make inquiry otherwise, let alone conclude otherwise. But, again, qualifying for various benefits, credits, deductions, and so on, often, if not usually or nearly always, depends on more than just being a resident for tax purposes.

And of course being a tax resident of Canada does not preclude another country from treating the individual as a tax resident of that country.

Leading to . . .



It warrants keeping the information you referenced, published by the Kalfa Law firm, in context. It is about avoiding being treated a resident for tax purposes in multiple countries, which otherwise would typically result in a substantially greater tax burden.

If the circumstances are such that an individual might be considered a resident for tax purposes in more than one country, most countries (nearly all?) will have NO problem with the taxpayer filing a return and paying taxes as a tax resident in that country EVEN IF they have also filed a return and paid taxes as a tax resident in another country.

Thus, for a taxpayer who files a Canadian tax return as a resident of Canada, for tax purposes, there is virtually no risk that Canada Revenue would disagree. This does not conclusively determine eligibility for benefits, credits, or deductions.

Where the CRA gets involved in determining if a taxpayer is a tax resident of Canada, or not, is in regards to individuals who file claiming they are not a resident of Canada for tax purposes, or who have failed to file a tax return when the CRA has reason to believe they should have.

The Annoying Greyness of Who is Resident for Tax Purposes:

This is largely the product of how complex the circumstances of real life can be for many, many people in a globalized economy in conjunction with very open borders and the prevalence of people with status to live and work in multiple countries. The variables are many, subject to all sorts of contingencies and conflicts. And there is no shortage of individuals who will go to great lengths to more or less game the system, to not just avoid tax obligations (legally) but to evade them contrary to the law and rules.

Ultimately there are so many variables that, in complicated cases, simple rules cannot adequately dictate tax residency with any degree of reliable certainty. For those with complicated situations, as @owleroz suggested, best to consult with qualified tax professionals (and this does not include those out-of-the-box companies).

A wealth of info - much appreciated - I am checking into my province's health plan requirements as well and making sure it lines up with my vacation plans, as well as other benefits, thanks for clearly laying it out getting to the crux of the matter.

 

[bricksonly]

As a Canadian citizen or PR, if you don't call CRA to change, your have to file your tax return every year, even you get 0 income from Canada and worldwide...the 6 month is a requirement means you HAVE to, doesn't means you are QUALIFIED to. So don't worry about this, you can file your tax return for your WORLDWIDE income even you stay 0 days in Canada and have zero tie with Canada, CRA doesn't care.

I have only experience in Ontario, yes, Health Card ask 153 days in Canada and as an Ontario resident (that doesn't means you have to live in Ontario for even one day), only if you keep resident tie within Ontario, say DL, bank account, credit card...But if you want to keep other benefit ,say CCTB, GST return...yes, you can still get it even you live outside Canada but keep your tax filing.

You can choose to be non-resident for tax purpose but keep part of your resident tie within Canada. No problem. The most important thing is to call CRA, tell them your whole family MOVED (living and working permanently aboard). They will mark your file as non-resident and stop any benefit from your account, and you will have to file non-resident tax for your Canadian income ONLY.

 

[canuck78]

As a Canadian citizen or PR, if you don't call CRA to change, your have to file your tax return every year, even you get 0 income from Canada and worldwide...the 6 month is a requirement means you HAVE to, doesn't means you are QUALIFIED to. So don't worry about this, you can file your tax return for your WORLDWIDE income even you stay 0 days in Canada and have zero tie with Canada, CRA doesn't care.

I have only experience in Ontario, yes, Health Card ask 153 days in Canada and as an Ontario resident (that doesn't means you have to live in Ontario for even one day), only if you keep resident tie within Ontario, say DL, bank account, credit card...But if you want to keep other benefit ,say CCTB, GST return...yes, you can still get it even you live outside Canada but keep your tax filing.

You can choose to be non-resident for tax purpose but keep part of your resident tie within Canada. No problem. The most important thing is to call CRA, tell them your whole family MOVED (living and working permanently aboard). They will mark your file as non-resident and stop any benefit from your account, and you will have to file non-resident tax for your Canadian income ONLY.

For OHIP you actually need to be physically present in Ontario for a certain number of days to meet the residency obligation. You can’t just keep residential ties and still use those days to qualify for OHIP. If you keep ties in Canada that doesn’t guarantee that you can declare yourself a nonresident for tax purposes. It really depends on the ties which is why it is wise to let CRA determine whether you are a tax resident or not. Saying that you and your family have left Canada does not guarantee that you are not still a tax resident.

 

[aurora2018]

If I am a citizen and wife is PR, we want to go back to her home country for an extended time BUT keep our residency in Canada for tax reasons, I know the rule is 6 months in a calendar year.

SO - in theory can we leave approx. 30 June 2023 and come back 29 June 2024 - and keep our residency for tax purposes? (Because 6 months away in each calendar year?)

what happens if you don't keep tax residency? that is my question too