Back Taxes and PR Obligations

[Alabaman]

I have some questions regarding back taxes and PR Obligations.

1. Will Canada Revenue require you to pay back taxes if you are a landed immigrant but did not move to Canada to live until 3 years after you landed?

2.Does filling out the tax form NR-74 (Determination of Residency Status) have a significance on your PR obligation? In other words, will Immigration refer to this form (and your taxes) when the residency questionnaire is completed in the future?

Does any body have experience with these issues? Please post your views and comments.

Thanks.

 

[PommeDeRoute]

Hello,

1. Not necessarily. For tax purposes, it will depend on whether or not you have residential ties to Canada. If you do, you may be required to pay tax on the worldwide income you earned after becoming a PR. See here the information on residential ties from Revenue Canada http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nwcmr-eng.html#b.

2. Do you mean if you apply for citizenship and are required to fill out a residency questionnaire? I am not sure about this one. Maybe one of the experts can chime in.

 

[toby]

Did you establish residence in Canada when you landed? If you did, then CRA (the tax department) considers you taxable on worldwide income from that time on, less any tax paid to another country with which Canada has a tax treaty.

For a full discussion on whether you are considered a taxpayer or not, look up the CRA website, and get IT-221R3 (Consolidated). NR74 is for complex cases where you need CRA to give you an official opinion.

But if your situation is not complex, in essence, you are a taxpayer in Canada (and taxable on worldwide income) if you stayed more than 183 days per year, or if you have access to a residence for the full 12 months per year (whether rented or owned).

If not, then you are not yet a taxpayer in Canada (therefore no back taxes), and you will be liable for taxes only when you enter Canada to reside.

Residence in the eyes of CRA and in the eyes of Immigration are two different things. You do not become a taxpayer until you pass the 183 day mark, but you can maintain permanent residence by staying only 146 days per year. Thus it is possible to be a resident, but not a full-time taxpayer.

What if you spend between more than 146 days but less than 183 days per year in Canada? In that case you are taxable on your worldwide income while in Canada, but only taxable on intra-Canada income while outside Canada.

Clear as mud?

 

[Alabaman]

Thanks toby and PommeDeRoute for the insights.

 

[Suin]

Did you establish residence in Canada when you landed? If you did, then CRA (the tax department) considers you taxable on worldwide income from that time on, less any tax paid to another country with which Canada has a tax treaty.

For a full discussion on whether you are considered a taxpayer or not, look up the CRA website, and get IT-221R3 (Consolidated). NR74 is for complex cases where you need CRA to give you an official opinion.

But if your situation is not complex, in essence, you are a taxpayer in Canada (and taxable on worldwide income) if you stayed more than 183 days per year, or if you have access to a residence for the full 12 months per year (whether rented or owned).

If not, then you are not yet a taxpayer in Canada (therefore no back taxes), and you will be liable for taxes only when you enter Canada to reside.

Residence in the eyes of CRA and in the eyes of Immigration are two different things. You do not become a taxpayer until you pass the 183 day mark, but you can maintain permanent residence by staying only 146 days per year. Thus it is possible to be a resident, but not a full-time taxpayer.

What if you spend between more than 146 days but less than 183 days per year in Canada? In that case you are taxable on your worldwide income while in Canada, but only taxable on intra-Canada income while outside Canada.

Clear as mud?

is that applicable for the citizens too, toby?

 

[toby]

Yes, Suin. The tax rules apply equally to residents and citizens -- residence is the issue for taxation, not nationality. There is even a "sojourning" rule that applies to foreigners, who are not even residents, who spend more 183+ days in Canada. They thereby become taxable on worldwide income, and may escape possible double txation (in Canada and in their own country) only if there is a tax treaty between the two countries.