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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1242
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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Hi Arthur, I am a canadian citizen that is planning to go

Resolved Question:

Hi Arthur,

I am a canadian citizen that is planning to go the expat way in few months. I will not be in Canada for many years, not even for visits.

I have an apartment that I am paying mortgage for. I also have an online small business that brings in income.

I am aware that I need to pay income tax on my business income.

Here are my questions:

1) Would I need to rent my apartment to satisfy the non-resident status tax wise?

2) Will my condo and business work against me as expat?
Submitted: 1 year ago.
Category: Tax
Expert:  Arthur Rubin replied 1 year ago.

Arthur Rubin :

I'm afraid it depends on where you're going, because of tax treaties. The only Canadian tax treaties I've seen provide that if you are considered a resident of the other country, and your "residential ties" are closer in the other country than in Canada, then you are a resident of the other country, even if you don't rent out your home.

Customer:

I am going to a country that has no tax treaty with Canada

Customer:

I do however have a small business in canada that I can mange online

Customer:

and I have this condo

Customer:

I will stop my health card

Customer:

do I need to cancel my bank account?

Customer:

In case of rent, if my expenses (condo fees, property tax, and mortgage) exceed my rent, am I considered to have any kind on taxable income from the condo rent? Say $1000 condo fees, $500 property tax, and $2500 mortgage on a rent of $3000

Customer:

The bank account role is to get the rent and business income

Arthur Rubin :

I'll have to check. It's a more complex situation if you retain a potential residence, even if you rent it out. Give me a moment to check the precise wording.

Customer:

I will have far more residential ties in the country I am going to

Customer:

ok

Customer:

thank you

Arthur Rubin :

Although renting out your Canadian home to an unrelated party is a factor, the most critical factor is that you need to establish significant residential ties in the other country, and that you objectively show no plans to return to Canada. As for renting out your home, you could return to take possession of it when the lease expires. Bank accounts, drivers's

Arthur Rubin :

OOPS, I hit the wrong key. Give me a moment....

Arthur Rubin :

In the absence of a treaty, you need to establish both that you do not have significant residential ties to Canada, which seems to require renting your home, and that you establish significant residential ties to the other country. Secondary residential ties include:

Customer:

I already purchased a house there, and most of my family and my wife's family lives there

Arthur Rubin :

Secondary residential ties include, from tax folio S5-F1-C1, paragraph 1.14, include:

Customer:

The kids are now very small but maybe we decide to go back when it's time for high school

Arthur Rubin :

  • personal property in Canada (such as furniture, clothing, automobiles, and recreational vehicles);

  • social ties with Canada (such as memberships in Canadian recreational or religious organizations);

  • economic ties with Canada (such as employment with a Canadian employer and active involvement in a Canadian business, and Canadian bank accounts, retirement savings plans, credit cards, and securities accounts);

  • landed immigrant status or appropriate work permits in Canada;

  • hospitalization and medical insurance coverage from a province or territory of Canada;

  • a driver's license from a province or territory of Canada;

  • a vehicle registered in a province or territory of Canada;

  • a seasonal dwelling place in Canada or a leased dwelling place referred to in ¶1.12;

  • a Canadian passport; and

  • memberships in Canadian unions or professional organizations.

Customer:

Well I have a Canadian passport and an ontario driver license

Customer:

so you are saying I also need to cancel my driver's license?

Arthur Rubin :

Again, in order to become a non-resident, you need to establish that you do not have significant residential ties.

Customer:

All Canadians have a passport, no?

Arthur Rubin :

If you become a resident of the other country, they should insist that you get a drivers license there.

Customer:

There are millions of canadian expats. If they give up their passport, they are no more canadian expats since they are no more canadian

Customer:

I already have a diver license there

Arthur Rubin :

You're correct as to the passport; as tax residence isn't affected by citizenship, the passport shouldn't be a major factor.

Customer:

so in your opinion

Arthur Rubin :

But you should only have a drivers license in one jurisdiction, even if not required by law.

Customer:

I should sell my condo instead of renting it

Customer:

so that leaves my small business and its related bank account

Customer:

and the ontario driver license

Customer:

I don't plan on renewing the ontario license once it expires

Customer:

but do I have to actually go and cancel the active license I have

Customer:

?

Arthur Rubin :

I don't know; I'm basing my assertions on the law and regulations, but I can't be sure how the CRA (or whatever it's called now) applies them without looking at specific cases. Selling the condo and cancelling the Ontario drivers license would certainly be points against significant residential ties. Paragraph 1.12 of the Folio states that "leas[ing] a dwelling place located in Canada to a third party on arm's-length terms and conditions" will be taken into account by the CRA, and noting the state of the real estate market at the time of departure. I would think that would mean that if the real estate market is down, leasing might be considered acceptable; but, if it is up, then you should attempt to sell.

Customer:

Interesting

Customer:

So basically I file my taxes as non-resident and see if it's accepted

Customer:

or can they go back years in the future, say in 10 years, and change their mind ?

Arthur Rubin :

Pretty much. You can request a preliminary ruling using form NR73, or or request an Advance Income Tax ruling, if you want a more definite reply.

Arthur Rubin :

I don't think they can go back that far.

Customer:

In other words, if I files my taxes as expat in 2015 and it got accepted, and nothing changes in my situation in 2016-2020, they can't suddenly decide that they are now not happy with expat status, even if all has remained the same

Customer:

Interesting about that Advanced Income Tax ruling

Customer:

How long would that take? Do you have any idea?

Arthur Rubin :

The document http://www.cra-arc.gc.ca/E/pub/tp/ic70-6r5/ic70-6r5-00e.pdf says that it should be within 60 days (90 days if it requires interpretation); but that it costs $100/hr for the first 10 hours work, and $155/hour for each additional hour; and you need to make an initial payment of 5 hours + GST ($535).

Customer:

Wow! You have been of great help Arthur. Thank you so much.

Arthur Rubin :

Sorry, that should have for each hour of the first 10 hours work.

Customer:

I really appreciate your assistance

Customer:

I see you have a Math degree

Arthur Rubin :

Yes

Customer:

I have a BSc in Math

Customer:

and then moved to medicine

Customer:

but really thank you

Customer:

I am more clear about what I need to do now

Customer:

have a nice evening

Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1242
Experience: 22 years of tax preparation experience, including individual, trust, and estate returns.
Arthur Rubin and 5 other Tax Specialists are ready to help you

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