Working outside Canada while keeping residency obligation

[specialmary]

Hi all,

I finally go through the Ontario PNP Express Entry process and got my PR very recently. I have just landed, and I have some questions about fulfilling PR obligation.

I am in an occupation where finding a job is very difficult. In addition, I probably want to take care of my elderly parents in my own country. However, I may be able to get on-leave for brief periods in my job and thus come to Canada for brief periods here and there. Doing so, I may be able to stay in Canada for 24 months within a five-year period. However, during the time I am in Canada, I will still be continuously employed by a foreign company (which has no connection with Canada). In PR renewal application in the future, I know that they ask for my employment history.

So my question is:
Which is the more appropriate description for fulfilling PR obligation: ‘staying in Canada for 2 out of five years’ or ‘living and working in Canada for 2 out of five years’? I probably can fulfill the former (staying in Canada for 2 out of five years) but not the later (living and working). Any thoughts?

 

[Naheulbeuck]

Hi all,

As long as you understand that it means living on average close to 5 months in Canada each year, it is the former, you need to live in Canada for 2 out of 5 years. You also need to understand the tax implication of such plan as it may result with you having to pay significant additional taxes depending on the country you are from.

 

[specialmary]

As long as you understand that it means living on average close to 5 months in Canada each year, it is the former, you need to live in Canada for 2 out of 5 years. You also need to understand the tax implication of such plan as it may result with you having to pay significant additional taxes depending on the country you are from.

Thanks for your answer... I wonder if I need to pay for Canadian tax if I, let's say, stay in Canada for less than 180 days per year and I do not have a job in Canada (even though I am continued employed by a foreign company during an entire year).

I have heard two versions. The first version is that I do not need to pay tax for work OUTSIDE Canada if I am here in Canada for less than 180 days. The second version is that I do not need to pay tax for work OUTSIDE Canada if I do not have work inside Canada. I do not have a spouse or dependent in Canada, and I do not have a home in Canada.

 

[Rob_TO]

Thanks for your answer... I wonder if I need to pay for Canadian tax if I, let's say, stay in Canada for less than 180 days per year and I do not have a job in Canada (even though I am continued employed by a foreign company during an entire year).

I have heard two versions. The first version is that I do not need to pay tax for work OUTSIDE Canada if I am here in Canada for less than 180 days. The second version is that I do not need to pay tax for work OUTSIDE Canada if I do not have work inside Canada. I do not have a spouse or dependent in Canada, and I do not have a home in Canada.

As mentioned to maintain the residency obligation you need to spend an average of 40% of your time or around 5 months per year average physically in Canada. What do you intend to do in Canada during those times? Residency for tax obligations is more to do than just physical time in Canada.

If you are very close to not meeting residency obligation and never file a Canadian tax return, you may have a hard time in secondary processing when it comes time to renew your PR card.

 

[specialmary]

As mentioned to maintain the residency obligation you need to spend an average of 40% of your time or around 5 months per year average physically in Canada. What do you intend to do in Canada during those times? Residency for tax obligations is more to do than just physical time in Canada.

If you are very close to not meeting residency obligation and never file a Canadian tax return, you may have a hard time in secondary processing when it comes time to renew your PR card.

Thanks to your reply. Then I am confused... I asked two accountants and one said that I do not need to pay tax for work outside Canada if I stay less than 180 days. Another said that I do not need to pay tax if I do not have work inside Canada. As I do not have dependent or spouse in Canada, what decides whether one needs to pay tax or not for work outside Canada then? The number of days in Canada?

 

[Rob_TO]

Thanks to your reply. Then I am confused... I asked two accountants and one said that I do not need to pay tax for work outside Canada if I stay less than 180 days. Another said that I do not need to pay tax if I do not have work inside Canada. As I do not have dependent or spouse in Canada, what decides whether one needs to pay tax or not for work outside Canada then?

It depends on the ties you establish in Canada. Read here for more info: http://www.cra-arc.gc.ca/tx/tchncl/ncmtx/fls/s5/f1/s5-f1-c1-eng.html

I would pay special attention to this one: Evidence of intention to permanently sever residential ties

While you're a PR, you can only claim non-residency for tax purposes if you intend to permanently sever your ties to Canada. But since you would have just gotten PR, and will try to be maintaining the RO with regular trips back to Canada, I would predict a very strong chance CRA would see this as you NOT trying to sever ties with Canada. In fact it's just the opposite, that by trying to maintain your RO you are planning to return to Canada permanently at some point in the future. For this reason you may not be deemed a non-resident regardless of your physical days here, and if ever audited by CRA (which is highly probable if you go so many years as a PR without filing a tax return) you could be forced to do re-assessments of all previous years and pay back all Canadian taxes owed on worldwide income earned during that time.

My advice is that if you're trying to maintain RO to keep PR in the future, then do your Canadian taxes on worldwide income each year.

 

[Bs65]

Thanks to your reply. Then I am confused... I asked two accountants and one said that I do not need to pay tax for work outside Canada if I stay less than 180 days. Another said that I do not need to pay tax if I do not have work inside Canada. As I do not have dependent or spouse in Canada, what decides whether one needs to pay tax or not for work outside Canada then? The number of days in Canada?

putting aside the tax question do you have a plan on how you will show you have met the RO given being employed and paying tax is one of the easy options to show RO is being met.

 

[specialmary]

putting aside the tax question do you have a plan on how you will show you have met the RO given being employed and paying tax is one of the easy options to show RO is being met.

I see... I actually do not mind the tax if this will make me maintain my RO for sure. However, I am not ultimately sure if I can stay in Canada physically for 2 (out of 5) years to maintain permanent residency. Canada also levy heavy tax for incomes outside Canada too. I am planning to come to Canada as much time as I can (at least 3-4 months per year). I have my elder parents and a sick relative to take care of back home, and I am a bit hesitate to leave them behind.

So to me I definitely do not want to pay tremendous amount for tax while not being able to keep my permanent residency in Canada (by not fulfilling 2 out of 5 years residency requirement). Flying back and forth between Canada and my home country is very tiring, but at least it gives me a certain safety net (in case something goes terribly wrong in my home country).

 

[Rob_TO]

I see... I actually do not mind the tax if this will make me maintain my RO for sure. However, I am not ultimately sure if I can stay in Canada physically for 2 (out of 5) years to maintain permanent residency. Canada also levy heavy tax for incomes outside Canada too. I am planning to come to Canada as much time as I can (at least 3-4 months per year). I have my elder parents and a sick relative to take care of back home, and I am a bit hesitate to leave them behind.

So to me I definitely do not want to pay tremendous amount for tax while not being able to keep my permanent residency in Canada (by not fulfilling 2 out of 5 years residency requirement). Flying back and forth between Canada and my home country is very tiring, but at least it gives me a certain safety net (in case something goes terribly wrong in my home country).

Meeting the RO requires physical residency in Canada. If you don't meet the 2 in 5 years criteria, then you will be in breach of the RO regardless if you're filing Canadian taxes or not.

If you're in breach of RO, then your future PR status may depend on convincing CIC you have valid H&C reasons to not meet the RO (such as caring for sick relatives). However you will not know if your H&C claim will be successful until you actually try it. So there is definitely no guarantee they will accept it, and yes there's a possibility even if you file Canadian taxes all these years but then lose a H&C claim for not meeting RO, your PR can be revoked anyways.

The simplest and only guaranteed way to ensure you can stay a PR of Canada is to simply meet the RO days requirement at all times. Once you've passed 3 years/1095 days outside Canada in your first 5 years, you will then be in violation of RO and subject to your PR being revoked.

Whether or not you're a deemed/factual resident for tax purposes is a separate issue you will have with CRA. In terms of CIC, filing Canadian taxes may help with a possible future H&C claim, while not filing any taxes for so long may be a negative impact to any future H&C claim, but I'm not sure really what impact this would have.

 

[Buletruck]

Remember, you may not actually be paying tax. You will be reporting it. Depending on the country, Canada has reciprocal tax agreements with a significant number of countries. If the countries have an agreement, you may have to pay any difference between the two, worst case. Otherwise you are just filling a return.

 

[Gregor.Samsa]

Note than filling taxes in Canada could help you renewing your PR card

 

[specialmary]

Note than filling taxes in Canada could help you renewing your PR card

Thanks. Robert_To also said the same thing.

However, I do not understand how filing tax would help renewal of PR card. I thought that resident for immigration purpose is different from resident for tax purpose... Any insight will be helpful!

 

[Rob_TO]

Thanks. Robert_To also said the same thing.

However, I do not understand how filing tax would help renewal of PR card. I thought that resident for immigration purpose is different from resident for tax purpose... Any insight will be helpful!

Read what I posted above about "Evidence of intention to permanently sever residential ties" in CRA tax law.

Being a non-resident for tax purposes means you want to permanently sever ties to Canada. If you ever intend to return to Canada in the future, then technically you should not be qualified as a non-resident for tax purposes.

When renewing PR card, other than passport stamps and entry/exit records, CIC may use Canadian tax returns as proof you've been residing in Canada over previous 5 years.

 

[keesio]

Thanks. Robert_To also said the same thing.

However, I do not understand how filing tax would help renewal of PR card. I thought that resident for immigration purpose is different from resident for tax purpose... Any insight will be helpful!

IRCC views tax returns as a strong proof of residency. It's why the new citizenship laws require to file taxes in at least 4 of the last 6 years when applying for citizenship.

Hence showing them that you filed taxes in Canada is seen as strong supporting evidence when you need to prove your RO (PR or Citizenship).