Paying Taxes in Canada as a Permanent Resident while working in Europe

[SIYR]

Hello,

I landed in Canada a month ago and became a Permanent Resident of Canada. My former US employer did not want to let me go and offered me a new position in Europe temporarily which I'm inclined to accept. This position is not permanent and will return to Canada after 10-12 months of experience in Europe.

Can anyone please inform if this affects my residency obligations? Also, in terms of taxes, do I have to pay taxes in Canada while being employed in Europe?

 

[scylla]

It will impact your residency obligation from the perspective that the time you spend working outside of Canada cannot be counted towards either your PR residency requirement or your citizenship residency requirement.

For taxes, you will be classified as a non-resident based on what you've said and won't file Canadian taxes.

 

[SIYR]

Thanks for the reply Scylla!

 

[canuck78]

Answer is a bit different if you have a spouse and children living in Canada while you are in Europe.

 

[SIYR]

Thanks canuck78. I'm single with no dependents.

 

[Rob_TO]

Hello,

I landed in Canada a month ago and became a Permanent Resident of Canada. My former US employer did not want to let me go and offered me a new position in Europe temporarily which I'm inclined to accept. This position is not permanent and will return to Canada after 10-12 months of experience in Europe.

Can anyone please inform if this affects my residency obligations? Also, in terms of taxes, do I have to pay taxes in Canada while being employed in Europe?

As long as you didn't establish a whole bunch of "ties" to Canada in the 1 month you were here (financial accounts, loans, registered accounts, membership in clubs, buying a home/car, getting a provincial drivers licence/healthcare etc etc) then you are most likely a non-resident for tax purposes.
See here, specifically section 1.14 on secondary residential ties: 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

The more ties you have, the more chance there would be of CRA declaring you a resident. So if you did open up any of those things, you might want to officially close/cancel them so you have no links to Canada while working in Europe.

 

[SIYR]

Oh! Thanks for the heads up Rob_TO! The only "ties" that I can think of are my bank accounts, credit card and a drivers license. If these are active during my time off Canada, I end up paying double taxes, both in Europe and Canada and with no money in hand eventually.

 

[Rob_TO]

Oh! Thanks for the heads up Rob_TO! The only "ties" that I can think of are my bank accounts, credit card and a drivers license. If these are active during my time off Canada, I end up paying double taxes, both in Europe and Canada and with no money in hand eventually.

If you really want to be considered a true non-resident so not needing to pay Canadian portion of taxes, I would cancel all of those accounts to be safe.

Also even if considered a resident for tax purposes you don't pay "double tax", you would just top up your Europe taxes to meet the Canadian amount. i.e. if tax in country you're in is 30%, and Canada would be 40%, then you'll pay 30% to your working country first then just an additional 10% to make up the difference to Canada's level. If you are in a country with higher income tax than Canada, you wouldn't owe anything to Canada.

 

[APPNOV2014NY]

Closing bank account and credit cards will affect your credit score and closing DL will impact your future car insurance rate in Canada. I did cancel my Quebec DL when I moved to USA in 2016 and now I think it was a stupid move.

CRA asks you to figure out yourself if you have any residential ties to Canada or not. Since you do not have any income, residence/or dependents in Canada, you can mention that you are not a resident.

For financial year 2016, I had 1.5 months residency, 2 weeks Canadian income and Bank accounts/Locker for entire year. I still declared myself as non-resident and CRA was fine with it.

 

[SIYR]

Thanks Rob_TO and APPNOV2014NY. Truly appreciate your response.

The income tax is higher in the European country where I'm planning to work. I did some research few hours ago and looks like there's a double tax treaty between Canada and the other country in Europe. I haven't looked at the fine print yet.

 

[steaky]

Closing bank account and credit cards will affect your credit score and closing DL will impact your future car insurance rate in Canada. I did cancel my Quebec DL when I moved to USA in 2016 and now I think it was a stupid move.

CRA asks you to figure out yourself if you have any residential ties to Canada or not. Since you do not have any income, residence/or dependents in Canada, you can mention that you are not a resident.

For financial year 2016, I had 1.5 months residency, 2 weeks Canadian income and Bank accounts/Locker for entire year. I still declared myself as non-resident and CRA was fine with it.

Except BC, closing DL will not impact future car insurance as long as you have proof of driving experience.

 

[Rob_TO]

Closing bank account and credit cards will affect your credit score and closing DL will impact your future car insurance rate in Canada. I did cancel my Quebec DL when I moved to USA in 2016 and now I think it was a stupid move.

CRA asks you to figure out yourself if you have any residential ties to Canada or not. Since you do not have any income, residence/or dependents in Canada, you can mention that you are not a resident.

For financial year 2016, I had 1.5 months residency, 2 weeks Canadian income and Bank accounts/Locker for entire year. I still declared myself as non-resident and CRA was fine with it.

The issue would only be serious if you were ever audited by CRA in the future. They can go back and look at your tax returns from many years previous, and if they only then notice all the secondary ties you had to Canada on some previous return you had declared as non-resident, they could decide you should have been a resident for tax purposes and force a re-assessment on you.

Just because your tax return is accepted with no issues in a given year, doesn't mean you are entirely clear for that year. Lots of stuff on tax returns is on the honor system so people will only face trouble if ever audited.

OP doesn't' need to close ALL their accounts but having as minimal as possible ties to Canada would be safest.

 

[SIYR]

The issue would only be serious if you were ever audited by CRA in the future. They can go back and look at your tax returns from many years previous, and if they only then notice all the secondary ties you had to Canada on some previous return you had declared as non-resident, they could decide you should have been a resident for tax purposes and force a re-assessment on you.

Just because your tax return is accepted with no issues in a given year, doesn't mean you are entirely clear for that year. Lots of stuff on tax returns is on the honor system so people will only face trouble if ever audited.

Thanks for the advice!

 

[APPNOV2014NY]

The issue would only be serious if you were ever audited by CRA in the future. They can go back and look at your tax returns from many years previous, and if they only then notice all the secondary ties you had to Canada on some previous return you had declared as non-resident, they could decide you should have been a resident for tax purposes and force a re-assessment on you.

Just because your tax return is accepted with no issues in a given year, doesn't mean you are entirely clear for that year. Lots of stuff on tax returns is on the honor system so people will only face trouble if ever audited.

OP doesn't' need to close ALL their accounts but having as minimal as possible ties to Canada would be safest.

Oh.. I did declare my "few dollars" interest earnings from Canadian savings account in tax returns so CRA knows about this already.

 

[canuck_in_uk]

Thanks Rob_TO and APPNOV2014NY. Truly appreciate your response.

The income tax is higher in the European country where I'm planning to work. I did some research few hours ago and looks like there's a double tax treaty between Canada and the other country in Europe. I haven't looked at the fine print yet.

You don't need to close your accounts or cancel your DL. You will not be declared a resident for tax purposes based only on those small secondary ties, especially if you aren't even using the bank accounts while you are outside of Canada.