Tax Residency

[coolbreeze]

I landed as an immigrant in late 2011. Returned to India after a few days. Have not been to canada since.
My only connection at this point with canada is a bank account and an immigrant status.

No dependants, No health insurance, No job, No DL, No Credit card, No property in canada.

Am I canada resident for tax purposes?

 

[GinnyPi]

I landed as an immigrant in late 2011. Returned to India after a few days. Have not been to canada since.
My only connection at this point with canada is a bank account and an immigrant status.

No dependants, No health insurance, No job, No DL, No Credit card, No property in canada.

Am I canada resident for tax purposes?

No.

 

[coolbreeze]

Thanks for your reply GinnyPi.

THe reason I am worried is I am planning a move back to canada now.
Some people say I am in the grey area and I will need a residency determination by CRA.

Do I need to do that?

 

[GinnyPi]

If you have no ties or insufficient ties to Canada, you are not a resident for tax purposes. You say that the only thing you have in Canada is a bank account. Have you earned more than $50 in interest? Have you somehow earned some Canadian income? Do you have investments and have you made withdrawals? If yes, you may need to file a tax return.

If you do come back now in 2013, you will need to file a tax return next year if you are here for more than 6 months and/or earn Canadian income, or establish other ties (e.g. have your family here).

 

[coolbreeze]

Yes, a checking account only on which I have earned no interest at all.
No investments. No earnings. Yes, I have made withdrawals on the prinicpal amount .

If I move now and file my return in 2014, at what point will CRA question my tax residency for the period I was not there?
I wish to be prepared beforehand .

 

[GinnyPi]

Yes, a checking account only on which I have earned no interest at all.
No investments. No earnings. Yes, I have made withdrawals on the prinicpal amount .

If I move now and file my return in 2014, at what point will CRA question my tax residency for the period I was not there?
I wish to be prepared beforehand .

Withdrawals from your checking account are fine. This isn't income.

I can't imagine why CRA would question your tax residency for the period that you were not here. Even if they do question it, They will have no evidence of ties to Canada, because by your admission, you had no ties to the country. They can't just make stuff up. It may have been different if you lived in Canada for some years and then left and came back, but in your whole life, you have never established ties....When you file your first tax return next year, it will be processed by the international office, and if they need any additional information from you they will contact you.

If you feel that you need a residency determination, by all means complete the form and send it in. Seems unnecessary to me, but you're the only one with complete information.

 

[coolbreeze]

Thanks so much, Ginny Pi. You put my mind at ease.

I had never thought about this tax residency issue until a friend doubted I could be considered a tax resident ( bank account + immigrant status)
and be taxed on my Indian income after my landing in 2011.

Two more questions if you do not mind;

1. I want to take most of my life's savings from India, it about $ 200k to be transferred digitally through my bank.
I hope there won't be any tax on that considering it won't be my first landing this time .
2. FOr the first year I am there, let us assume I have no source of any income canadian or foreign except an annual $30000 interest
from deposits in India ( not taxable in India). How much tax will I pay on that roughly?

 

[seton]

1. I want to take most of my life's savings from India, it about $ 200k to be transferred digitally through my bank.
I hope there won't be any tax on that considering it won't be my first landing this time .
2. FOr the first year I am there, let us assume I have no source of any income canadian or foreign except an annual $30000 interest
from deposits in India ( not taxable in India). How much tax will I pay on that roughly?

1. Funds (cash equivalent) in your name will not be taxable. Only interest accrued after becoming a resident is taxable.
2. Depends on your province - federal tax rates are universal but provincial tax rates vary between provinces. You can use a tax calculate to estimate your tax burden - e.g. http://taxtips.ca/calculators.htm

 

[coolbreeze]

Thanks Seton.

Can you tell me about provincial tax , in general;

I was under the impression that federal govt. collects tax on behalf of its provinces except quebec.
that is what it says on the Canadian immigration webpage for new immigrants.
So why are there two taxes federal and provincial?

Does it mean if I am paying 30% to CRA , I also have to pay 30% to ON if I am living in ON?

 

[seton]

Thanks Seton.

Can you tell me about provincial tax , in general;

I was under the impression that federal govt. collects tax on behalf of its provinces except quebec.
that is what it says on the Canadian immigration webpage for new immigrants.
So why are there two taxes federal and provincial?

Does it mean if I am paying 30% to CRA , I also have to pay 30% to ON if I am living in ON?

CRA (Canada Revenue Agency - Federal Body) collects all taxes, including Quebec. You end up paying one amount to the CRA (or deducted through your payroll, where your employer remits to the CRA).

Taxes are made up of Federal and Provincial rates - your net tax rate will be a combination of the two. If your net tax rate is 30%, it may be 13% federal and 17% provincial. Your net rate will vary depending on where you live as different provinces have different rates and different income brackets. Also, different provinces have various types of tax credits that you might be eligible for, which will also affect your net rate.

But you will only pay taxes once to the CRA - when you file a return, you are essentially filling out a federal form and a province specific form (same concept for electronic filing).

Hope this helps.