Do a non resident PR has to pay taxes for his out of Canada income

[people]

Hi,

My PR process is in final stages and if I am granted a PR I will send my wife and two kids to Canada to live and maintain their PR and citizenship requirement whereas I ll stay at my current place.I will support them financially ,my wife is not supposed to work.
I am planning to visit Canada once an year for a month .I am also not going to buy any property but I am thinking of taking a driving licence ,opening a joint bank account,renting a house to my wife's name.
Kindly explain do I have to pay taxes on my OUT OF CANADA earned income.
Moreover what is the minimum taxable income in Alberta and Canada?
(as my family will reside there)

I ll be highly obliged.Moreover can anyone provide me some official link regarding this matter.

Thanks

 

[people]

bump!!!!

 

[toby]

For a link to official information , search for CRA Canada on the Internet. Good luck sorting through all that information!

The short answer is that yes, you will be considered a Canadian taxpayer, and taxable on worldwide income. There are three primary criteria that make one a Canadian taxpayer:
1) One has access to a principal residence (not a seasonal residence like a cottage) in Canada throughout the year – whether rented or owned.
2) One has family dependants in Canada, like children and/or spouse.
3) One spends more than 183 days per year in Canada.

In CRA’s eyes you will be a taxpayer because of criteria 1 and 2.

The other criteria (bank account, driver’s licence, etc) are secondary considerations, and may deem you a taxpayer only if you have enough of them. But your case seems clear. You will have to declare your worldwide income to Canada, less taxes paid elsewhere (if the country where you earn that income has a tax treaty with Canada).

The amount of tax payable depends on whether the income is interest, salary, dividends, or capital gains -- and on how much you earn. The more you earn, the higher the tax percentage is in Canada. Best suggestion is to buy a tax-preparation program like Quicktax and input your numbers.

Now, you are probably aware that as a Permanent Resident you must spend at least two years out every five years in Canada, right? Spending only one month a year will cause you to lose your status.

 

[Jonboy]

You will have to declare your worldwide income to Canada, less taxes paid elsewhere (if the country where you earn that income has a tax treaty with Canada).

This bit is not quite correct. Tax treaties set out which country is entitled to tax various sources of income and, in some cases, the rate of withholding tax the source county can retain.

However, the ability to deduct foreign tax paid is in the Income Tax Act and is not dependent on a tax treaty. Also, you have to declare foreign income gross, without deduction of foreign taxes. This can make a big difference to tax payable in Canada.

E.g. you earn $20,000 in foreign income and pay $4,000 in foreign taxes on this. Your tax rate in Canada is 30%. The calculation you suggest is:

Declare $16,000 (20,000 - 4,000) and pay tax at 30% (16,000 x .3) = $4,800. You get to keep $11,200 (20,000 - 4,000 - 4,800).

The actual calculation is:

Declare $20,000. Calculate Canadian tax due as $6,000 (20,000 x .3). Deduct foreign tax paid of $4,000 so remit $2,000 to the CRA. You get to keep $14,000.

This is obviously a simplistic example but the principal is correct.

 

[people]

thanks for your inputs.I live and earn in Saudi Arabia which is a tax free country.

 

[toby]

The actual calculation is:

Declare $20,000. Calculate Canadian tax due as $6,000 (20,000 x .3). Deduct foreign tax paid of $4,000 so remit $2,000 to the CRA. You get to keep $14,000.

This is obviously a simplistic example but the principal is correct.

1) Your calculation is the one I thought was correct all along, Jon. When I said to calculate taxes owed to Canada, less taxes paid elsewhere, I meant deduct the taxes paid elsewhere from the taxes owed to Canada. Sorry if I was unclear.

2) I am interested to learn from you that one can deduct taxes already paid elsewhere from taxes owed to Canada -- even where there is no tax treaty between the two countries. I have often read that the benefit to a taxpayer of a tax treaty is to eliminate double taxation. But since (as you point out) the Tax Act already eliminates double taxation, what is the real purpose of a tax treaty?

3) Finally, how does a taxpayer coordinate the two tax returns? Canada wants to see a Tax Assessment Notice (or whatever it is called in country B) to see what taxes have really been paid in country B. Let's assume that both tax returns (to Canada and country B) are due by the end of April. Tax slips in country B are not available much before the end of February (as is often the case in Canada). So ... taxpayer files first in country B, but the Assessment Notice arrives in (say) May -- which is too late to file the Canadian tax return.

Must the taxpayer file a provisional tax return in Canada, and an amended one in May once the Assement Notice from country B is available? Seems like a lot of work.

 

[people]

Thanks guys but what if I am not paying any income tax in my home country(saudi Arabia) as its a tax free country.

Plz explain n oblige.

 

[Baloo]

Thanks guys but what if I am not paying any income tax in my home country(saudi Arabia) as its a tax free country.

Plz explain n oblige.

The replies were given previously:

"The short answer is that yes, you will be considered a Canadian taxpayer, and taxable on worldwide income."

"you have to declare foreign income gross, without deduction of foreign taxes".

If you are not paying tax outside of Canada, there is nothing (tax in other countries) that you can offset against Canadian tax (even if permissible).


@ toby - As far as I can see, a tax treaty is mainly about the two countries exchanging information.

 

[Jonboy]

1) Your calculation is the one I thought was correct all along, Jon. When I said to calculate taxes owed to Canada, less taxes paid elsewhere, I meant deduct the taxes paid elsewhere from the taxes owed to Canada. Sorry if I was unclear.

No problem. Sorry that I misunderstood.

2) I am interested to learn from you that one can deduct taxes already paid elsewhere from taxes owed to Canada -- even where there is no tax treaty between the two countries. I have often read that the benefit to a taxpayer of a tax treaty is to eliminate double taxation. But since (as you point out) the Tax Act already eliminates double taxation, what is the real purpose of a tax treaty?

The tax treaties set out when a country has the right to tax income of a resident of the other country, and sometimes the rate of that tax. They specify the general principals of avoiding double taxation but leave it to each country to enact their own legislation to implement it. The way Canada has chosen to legislate is to give a credit for all foreign taxes paid, not just those in a tax treaty country.

3) Finally, how does a taxpayer coordinate the two tax returns? Canada wants to see a Tax Assessment Notice (or whatever it is called in country B) to see what taxes have really been paid in country B. Let's assume that both tax returns (to Canada and country B) are due by the end of April. Tax slips in country B are not available much before the end of February (as is often the case in Canada). So ... taxpayer files first in country B, but the Assessment Notice arrives in (say) May -- which is too late to file the Canadian tax return.

Must the taxpayer file a provisional tax return in Canada, and an amended one in May once the Assement Notice from country B is available? Seems like a lot of work.

You prepare your tax return for country B first and pay any taxes due. Then you prepare your Canadian tax return and claim the credit for the foreign taxes paid. I guess that if you have made a mistake on the country B return and country B assesses a different amount of tax then you will need to file an adjustment to your Canadian return. You don't need the foreign notice of assessment as evidence of foreign tax paid when you file your Canadian return. I think receipts or other evidence like a W2 from the US will be sufficient.

 

[rpurdie]

Can i ask a slightly different question:

I moved to Canada on 30 July, worked before that date in the UK and paid my taxes there. After 30th July, worked in Canada and paid taxes here. Let's say I earned 20,000GBP (call it 30,000CAD) after tax up to July and earned 25,000CAD since July in Canada.

Now its tax return time, do I have to put my $30K income from pre-immigration on the Canadian tax return? Presumably I can claim a deduction for it given it has already been taxed in the UK?

 

[canuck_in_uk]

Can i ask a slightly different question:

I moved to Canada on 30 July, worked before that date in the UK and paid my taxes there. After 30th July, worked in Canada and paid taxes here. Let's say I earned 20,000GBP (call it 30,000CAD) after tax up to July and earned 25,000CAD since July in Canada.

Now its tax return time, do I have to put my $30K income from pre-immigration on the Canadian tax return? Presumably I can claim a deduction for it given it has already been taxed in the UK?

No, you do not have to declare foreign income earned prior becoming a resident of Canada.

http://www.cra-arc.gc.ca/newcomers/#txg

For the part of the tax year that you were NOT a resident of Canada

You pay Canadian income tax on Canadian source income.

You have to report the following amounts:

income from employment in Canada or from a business carried on in Canada;
taxable capital gains from disposing of taxable Canadian property; and
the taxable part of scholarships, bursaries, fellowships and research grants you received from Canadian sources.

For the part of the tax year that you WERE a resident of Canada

You have to report your world income (income from all sources, both inside and outside Canada) earned after becoming a resident of Canada for income tax purposes on your Canadian tax return.

 

[S7]

No, you do not have to declare foreign income earned prior becoming a resident of Canada.

http://www.cra-arc.gc.ca/newcomers/#txg

For the part of the tax year that you were NOT a resident of Canada

You pay Canadian income tax on Canadian source income.

You have to report the following amounts:

income from employment in Canada or from a business carried on in Canada;
taxable capital gains from disposing of taxable Canadian property; and
the taxable part of scholarships, bursaries, fellowships and research grants you received from Canadian sources.

For the part of the tax year that you WERE a resident of Canada

You have to report your world income (income from all sources, both inside and outside Canada) earned after becoming a resident of Canada for income tax purposes on your Canadian tax return.

Ok this is interesting, so I have this question, what If i want to declare it but not to get taxed on it as it was earned before I become PR. The reason why I want to declare it it for Notice assessment which will help to apply for parents super visa

I hope someone can help


Regards,
S7

 

[canuck_in_uk]

No, you can't do that.

 

[S7]

No, you can't do that.

Thanks!


Anyway I can apply for parents visa without NOA?

 

[canuck_in_uk]

Anyway I can apply for parents visa without NOA?

They can apply for a TRV without your NOA. For a supervise or sponsorship, NOA is required.