Canadian residential ties

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Canadian residential ties

Postby Saint Jin » Fri Mar 02, 2012 06:22

Hello -- I would like to know how my fellow Canadians working in Taiwan handle their tax residency status.

As you know, Canadians maintaining residential ties to Canada are still liable to pay Canadian income tax, but those deemed non-resident in Canada are not. So the question becomes, what defines a resident of Canada?

There is a big discussion of this in the CRA document available at: http://www.cra-arc.gc.ca/E/pub/tp/it221 ... lid-e.html

Of course, not wanting to pigeon hole themselves by being too specific, the document is full of broad statements that are difficult to apply directly to individual circumstances.

What if one ran one's own business in Taiwan, issued oneself an ARC, and:
Didn't have any property in Canada (house, car, furniture, clothes, etc.) and didn't maintain a Canadian address.
Didn't have a spouse/kids still dwelling in Canada.
Didn't have any bank accounts, safety deposit box, credit cards, etc. in Canada.
Didn't have a Canadian health card.

But what if you had multiple "secondary" ties to Canada, including:
Still travelled back twice a year for 2-week long visits.
Kept a Canadian passport and driver's license (is a Taiwanese license sufficient for car rental in Canada?).
Belonged to professional associations in Canada.

Also, what if I took a few years to cash out my RRSP? The 10% penalty for a < $5000 early withdrawl is enough; above $5000 the percentage clawback starts going up and up.

They say that maintaining 1 secondary residential tie is not sufficient to make you deemed resident in Canada. But what about 3-4 secondary ties and 0 primary ties, as described above? What is your experience?

Would it be better to avoid the issue somewhat by keeping one's profits inside the business, paying oneself only the minimum required salary and using the corporation as a sort of savings account and source of petty cash? And how did you handle communications with the CRA? Did you prospectively tell them you were leaving the country and cutting residential ties, or did you just stop filing tax returns?
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Re: Canadian residential ties

Postby EigerMarcus » Fri Mar 02, 2012 10:10

This is a much discussed topic but one unfortunately that a comfortable answer escapes many of us. The only clear answer you will get from anyone at CRA is either no primary and avoid secondary ties at all or wait until you move back to Canada and file. Most people should be fine with some secondary ties but then it becomes a "case-by-case basis" if you want a clear answer.

True vacations back to Canada and maintaining a passport do not constitute secondary ties - or they did not years ago.

And how did you handle communications with the CRA? Did you prospectively tell them you were leaving the country and cutting residential ties, or did you just stop filing tax returns?


You used to be able to file notice of non-resident status if you intended to be outside of the country for two years or more. This notified the tax officials that you would not be around but it did not constitute a determination on their part that you had non-resident status. They would then later send you a notice indicating that you had not filed for the first year that you were fully out of Canada and you just replied that you had filed the notice of non-resident status.
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Re: Canadian residential ties

Postby Saint Jin » Sat Mar 03, 2012 07:46

EigerMarcus wrote:This is a much discussed topic but one unfortunately that a comfortable answer escapes many of us. Most people should be fine with some secondary ties but then it becomes a "case-by-case basis" if you want a clear answer.


Thanks EigerMarcus. That pretty much sums it up. They really like to keep things open. For my part, I can't do my job -- even remotely -- without professional association membership in Canada. I suppose that would be the secondary tie they'd be most interested in. Therefore, perhaps I should try to minimize my other secondary ties, though totally giving up the RRSP and drivers' license will be super inconvenient.
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