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Willy_In_Japan
Joined: 20 Jul 2004
Posts: 329
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 Posted: Sat Apr 23, 2005 3:47 pm Post subject: |
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Well yeah, of course if you return to Canada you are no longer a non-resident.
But you could still get that year out in there. As long as you paid tax in Jpaan it's a moot point.
My main qualm is with these people talking all this BS about double taxation and the mystical whims of Rev Can etc etc.. |
Its NOT a 'moot point' if you pay taxes in Japan.
I think the point you are missing MikeL, is that sure you wont be 'double taxed', buy you WILL be taxed at the highest level. If you owe 10 percent of your wages in Japan to taxes, and that same income in Canada would cause you to owe 30 percent, Revenue Canada will STILL hit you with a 20 percent tax bill for your year in Japan.
They simply deduct the taxes you pay in Japan as contributing towards your Canadian tax bill on world wide income for the tax year. Having non residence status saves one a ton of money. And, it has been argued back and forth about the 'rule' of being out of the country for more than two years is a 'requirement' for gaining non residency status. From what I can gather, there is no set in stone rules, but they are 'guidelines', and are not 'mythical whims' of Revenue Canada, they are quite real. |
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JimDunlop2
Joined: 31 Jan 2003
Posts: 2286
Location: Japan
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| Posted: Sat Apr 23, 2005 4:05 pm Post subject: |
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It's true... There is no hard and fast rule to anything... And if you read the Revenue Canada website, it's no more specific either. I think they like to keep it vague on purpose.
Anyway, the most common figure I've heard for declaring non-residency is 6 months... But results may vary. So may the number and type of "ties" you have with Canada. I've been told by a person who has gone through this kind of "fight" with the government that it works on a point system.... That each "tie to Canada" scores you a certain point value... Once you have a certain number of points, you reach the "residency threshold" if I may call it that.. At which point you no longer qualify for non-residency.
Obviously, it's kinda tough to argue with the government saying "I'm a non-resident" when you are saying that from within the country... 
Just as an aside, I was paying 37% income tax on a salary that was a bit less than what I earn now. So, do understand that my desire to go back to live in Canada is somewhat squelched by that... My wife feels likewise. We don't know just how long we will live in Japan, but it's been over 2 years thus far and we both don't see any end to our sojourn for the next few years at least. |
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Celeste
Joined: 17 Jan 2003
Posts: 814
Location: Fukuoka City, Japan
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| Posted: Sat Apr 23, 2005 10:20 pm Post subject: |
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A family member of mine who works for revenue Canada has told me that the rules are not so vague to trip up real non-residents, but to catch people who are working across the border in the US and still living in Canada. THere are those who would try to to still live in Canada, but recieve their salary from an offshore source and not pay any taxes on it. My accountant back in Canada has set me up as a non-resident twice now, and there haven't been any problems with it. I think that the biggest problem people run into is trying to declare themselves non-residents AFTER they have been hit with a large tax bill. If you do the paperwork ON TIME or even before you leave Canada, it will go much more smoothly than if you try to challenge an assessment after the fact.
Don't be afriad of revenue canada, but if like most of us English teachers, accounting is not your strong point HIRE AN ACCOUNTANT (preferably one who specializes in nin-resident taxation). If anyone needs a good non-resident accountant in Vancouver, PM me and I can recommend mine. |
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Mike L.
Joined: 28 Feb 2003
Posts: 519
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| Posted: Sun Apr 24, 2005 1:33 am Post subject: |
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Celeste wrote:
A family member of mine who works for revenue Canada has told me that the rules are not so vague to trip up real non-residents, but to catch people who are working across the border in the US and still living in Canada. THere are those who would try to to still live in Canada, but recieve their salary from an offshore source and not pay any taxes on it. |
Thanks for injecting this bit of reality into the discussions Celeste.
Willy: read the tax treaty preamble of the Rev Can site. What you speak of is double taxation which the treaty clearly aims to avoid. As Celeste says the aim of Rev Can is to snare those trying to live in Canada while escaping Canadian taxes via their foreign income source and by declaring themselves non-residents. There are also many Canadians, mostly in America, who intend to use Canadian services while there but avoid Canadian taxes.
The difference in tax rates has nothing to do with anything. If you reside in a country, you pay taxes there. "Non-residency" has little to do with the tax treaty it's mainly for those who want to park cash and or invest in Canada in several ways. It allows us to avoid agrievous Canadian tax rates.
Lived here for 3 years before applying for my "non-residnet status" and never payed a cent to the Canadian government.
It makes sense, thus the tax treaties with oh about 60 countries... |
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Willy_In_Japan
Joined: 20 Jul 2004
Posts: 329
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| Posted: Tue Apr 26, 2005 2:08 am Post subject: |
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Willy: read the tax treaty preamble of the Rev Can site. What you speak of is double taxation which the treaty clearly aims to avoid. As Celeste says the aim of Rev Can is to snare those trying to live in Canada while escaping Canadian taxes via their foreign income source and by declaring themselves non-residents. There are also many Canadians, mostly in America, who intend to use Canadian services while there but avoid Canadian taxes.
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What I speak of is NOT double taxation.
Are you trying to say that if you are living in Japan, and considered a resident of Canada for tax purposes, that you say to the Japanese government.........'sorry, but I paid taxes in Canada, I don't have to pay them here'?
The fact is, that in this case, you pay your taxes to Japan, (lets say 10 percent for agument sakes),.....file in Canada, and they subtract the amount of taxes that you paid in Japan and send you a bill for the balance.
Are you trying to say this doesnt happen?
Paying taxes in part to Japan and in part to Canada, is not double taxation. You still are paying the same amount as if you were living and working in Canada.
Double taxation is when you pay the full amount of taxes on income to both Japan and Canada.
Tax treaties in addition to avoiding having to pay full amounts of taxes in each country, are set up to catch people attempting to avoid paying taxes all together. If you are working as a Canadian in Japan, Japan reports this fact to Canada. |
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Mike L.
Joined: 28 Feb 2003
Posts: 519
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| Posted: Tue Apr 26, 2005 8:09 am Post subject: |
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Are you trying to say that if you are living in Japan, and considered a resident of Canada for tax purposes, that you say to the Japanese government.........'sorry, but I paid taxes in Canada, I don't have to pay them here'?
The fact is, that in this case, you pay your taxes to Japan, (lets say 10 percent for agument sakes),.....file in Canada, and they subtract the amount of taxes that you paid in Japan and send you a bill for the balance.
Are you trying to say this doesnt happen? |
Yes, I am. What's this case?
If you are a Canadian resident for tax purposes then yes you would pay taxes in Canada only.
You need a visa to work in Japan and are thus liable to pay Japanese taxes only.
The tax treaty makes that clear.
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Paying taxes in part to Japan and in part to Canada, is not double taxation. You still are paying the same amount as if you were living and working in Canada. |
How does one pay half a tax bill in Canada and half in Japan?
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| Tax treaties in addition to avoiding having to pay full amounts of taxes in each country, are set up to catch people attempting to avoid paying taxes all together. If you are working as a Canadian in Japan, Japan reports this fact to Canada. |
Do they? Is there a msater list somewhere of Canaidans abroad who are being spied on by the Candian government? |
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JimDunlop2
Joined: 31 Jan 2003
Posts: 2286
Location: Japan
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| Posted: Tue Apr 26, 2005 8:45 am Post subject: |
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| Mike L. wrote: |
Yes, I am. What's this case?
If you are a Canadian resident for tax purposes then yes you would pay taxes in Canada only.
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Mike: That makes no sense at all. I cannot approach my Japanese employer and say: "Excuse me, but in the eyes of the Canadian government, I'm a Canadian resident. I only pay taxes in Canada. Please do not deduct taxes from my salary."
They'd laugh at me. Then if they did what I told them, they'd likely end up in jail...
Income tax is automatically deducted from your salary here. There is no choice in that regard, whether you are listed as a "Canadian resident for tax purposes" or not. Nor is there any "form" I can fill out, if I return to Canada, that the money I paid to the Japanese government will be refunded me. |
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Mike L.
Joined: 28 Feb 2003
Posts: 519
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| Posted: Tue Apr 26, 2005 10:02 am Post subject: |
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Jim Dunlop wrote:
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| Mike: That makes no sense at all. I cannot approach my Japanese employer and say: "Excuse me, but in the eyes of the Canadian government, I'm a Canadian resident. I only pay taxes in Canada. Please do not deduct taxes from my salary." |
Right Jim. But, I never said you should.
I wrote:
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| You need a visa to work in Japan and are thus liable to pay Japanese taxes only. |
Jim Dunlop wrote:
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| Income tax is automatically deducted from your salary here. There is no choice in that regard, whether you are listed as a "Canadian resident for tax purposes" or not. Nor is there any "form" I can fill out, if I return to Canada, that the money I paid to the Japanese government will be refunded me. |
Exactly, both countires have point of source income tax systems. Which leads to my point the: the absolute rediculousness of paying taxes in two countries on one income.
Businesses aside of course.
It doesn't happen. The tax treaty has this one taken care of.. |
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JimDunlop2
Joined: 31 Jan 2003
Posts: 2286
Location: Japan
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| Posted: Tue Apr 26, 2005 10:20 am Post subject: |
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| Mike L. wrote: |
I wrote:
You need a visa to work in Japan and are thus liable to pay Japanese taxes only. |
Ahh.. But that's where the problem lies. This is the point at which you may disagree with me, but there is nothing in any tax treaty that makes your visa to work in Japan a "get out of jail free" card that excludes you from paying income tax in Canada. Your Japanese work visa has nothing to do with the Canadian government. It has zero bearning on your responsibility to pay tax to Canada if Rev Can says that you are liable for worldwide income unless you have been deemed a non-resident...
Why do you think getting "non-residency" is such a big deal to Canadian ex-pats? Why would there even be such a thing if not to avoid being taxed at the going Canadian rate for your salary level when you shouldn't be? Tax treaties only cover the portion you've already paid to the country where you've earned your money.... |
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Gordon
Joined: 28 Jan 2003
Posts: 5309
Location: Japan
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| Posted: Tue Apr 26, 2005 10:30 am Post subject: |
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If there was no tax treaty between Japan and Canada and I was in Japan for 1 year (hypothetically) still as a resident of Canada, then I would be paying 7% in Japan and then 30% in Canada (or whatever tax bracket I'm in), so that would come to 37%. Now since there is a tax treaty, I would pay 30% in Canada minus the 7% I already paid in Japan, so that would be 23% in Canada and 7% in Japan.
Non-residency allows you to only pay the tax owing in Japan that is why we apply. Have you applied Mike? |
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Mike L.
Joined: 28 Feb 2003
Posts: 519
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| Posted: Tue Apr 26, 2005 10:56 am Post subject: |
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| Non-residency allows you to only pay the tax owing in Japan that is why we apply. Have you applied Mike? |
Had it for almost 2 years.
Non-residency isn't necessary to aovid paying taxes in Canada while living in Japan.
You can "opt" to file but I don't see why anyone would.
The act of living overseas makes you a sort of non-resident de facto. The longer you do it the more it becomes areality. Thus my non-residency claim was little more than a formality.
As long as T-4's are not being produced then Rev Can would have little clue or concern as to what's going on with you. You're off the radar screen. Unless you owe them money.
There are over a million Canadians living/working overseas it's a fact of life.
How do you I make these bold assertions. I've spoken with Rev Can Ad nauseum about these things.
Again, to all of you: How do you pay taxes in 2 countries on an income earned in one country where you are residing?
Has this actually happened to any of you? Doubt it.
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| Your Japanese work visa has nothing to do with the Canadian government. It has zero bearning on your responsibility to pay tax to Canada if Rev Can says that you are liable for worldwide income unless you have been deemed a non-resident... |
Again I've never had this sort of experience with Rev. Can. They've always been very clear and fair in all my dealings with them.
Have your experiences been different?
BTW I worked there one summer so I know a little more about them than some... |
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Celeste
Joined: 17 Jan 2003
Posts: 814
Location: Fukuoka City, Japan
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| Posted: Tue Apr 26, 2005 11:31 am Post subject: |
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| I think that if you don't file and then you show up in Canada a few years later with a LARGE SUM OF CASH revenue Canada will probably ask for its share of said sum. For this reason it is a good idea to get your non-resident's status and then you can save some of your money for later. (If you are very spendy type of person and plan to return to Canada with nothing but your memories of a good time abroad, or if you intend never ever to return except to have your cold corpse interred, then maybe you could just opt not to file and no one would be any the wiser.) |
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JimDunlop2
Joined: 31 Jan 2003
Posts: 2286
Location: Japan
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| Posted: Tue Apr 26, 2005 12:09 pm Post subject: |
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Mmmkay... Let's try to clarify a bit here so we can be on the same page...
I don't think that non-residency is quite so "de-facto" Mike.
From the CRA official website, at this link:
http://www.cra-arc.gc.ca/E/pub/tp/it221r3-consolid/it221r3-consolid-e.html
(I referred to this in a past thread here: http://www.eslcafe.com/forums/job/viewtopic.php?t=21985&)
we find the following...
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Discussion and Interpretation
General
� 1. Under the Canadian income tax system, a person's liability for income tax is based on his or her status as a resident or a non-resident of Canada. A person who is resident in Canada during a taxation year is subject to Canadian income tax on his or her worldwide income from all sources. Generally, a non-resident person is only subject to Canadian income tax on income from sources inside Canada. A person may be resident in Canada for only part of a year, in which case the person will only be subject to Canadian tax on his or her worldwide income during the part of the year in which he or she is resident; during the other part of the year, the person will be taxed as a non-resident.
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(Bold=theirs)
Next, we have this:
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� 2. The term "resident" is not defined in the Income Tax Act (the "Act"), however, the Courts have held "residence" to be "a matter of the degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living with its accessories in social relations, interests and conveniences at or in the place in question."
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and
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� 3. An individual who is ordinarily resident in Canada as described in � 2 is considered to be factually resident in Canada. Where an individual is determined not to be factually resident in Canada, he or she may still be deemed to be resident in Canada for tax purposes by virtue of subsection 250(1) of the Act (see �s 19-23).
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It clearly states it here:
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Factual Residence -- Leaving Canada
Residential Ties In Canada
� 4. The most important factor to be considered in determining whether or not an individual leaving Canada remains resident in Canada for tax purposes is whether or not the individual maintains residential ties with Canada while he or she is abroad. While the residence status of an individual can only be determined on a case by case basis after taking into consideration all of the relevant facts, generally, unless an individual severs all significant residential ties with Canada upon leaving Canada, the individual will continue to be a factual resident of Canada and subject to Canadian tax on his or her worldwide income.
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(Bold highlighting in this paragraph is my own).
The whole document is pretty long, but if you have questions, it may be a good read.
As an aside, you don't NEED to do ANYTHING to get non-residency... We didn't (my wife and I) buy we are definitely non-residents (as we've been in touch with CRA a number of times in regards to issues)....
What people tend to wish to do, is to obtain a determination of residence status, which is optional but not required. It is called Form NR73. But it is only an opinion and nothing more. Once again.. bold=mine.
Details here:
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| Taxpayers who plan to leave or have left Canada, either permanently or temporarily, should consider completing Form NR73, Determination of Residency Status (Leaving Canada), which can be found on the CCRA's website (www.ccra.gc.ca) or ordered from any Tax Services Office. Taxpayers who have entered or sojourned in Canada during the year should consider completing Form NR74, Determination of Residency Status (Entering Canada), which can be similarly obtained. Once completed, Form NR73 or NR74, as applicable, should be mailed to the address given above or faxed to (613) 941-2505. In most cases, the CCRA will be able to provide an opinion regarding a taxpayer's residence status from the information recorded on the completed form. This opinion is based entirely on the facts provided by the taxpayer to the CCRA in Form NR73 or NR74, as applicable, therefore, it is critical that the taxpayer provide all of the details concerning his or her residential ties with Canada and abroad. This opinion is not binding on the CCRA and may be subject to a more detailed review at a later date and supporting documentation may be required at that time. |
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Mike L.
Joined: 28 Feb 2003
Posts: 519
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| Posted: Tue Apr 26, 2005 12:41 pm Post subject: |
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| I don't think that non-residency is quite so "de-facto" Mike. |
The quote you provided seems to say otherwise.
REV Can website:
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| A person may be resident in Canada for only part of a year, in which case the person will only be subject to Canadian tax on his or her worldwide income during the part of the year in which he or she is resident; during the other part of the year, the person will be taxed as a non-resident. |
Nonresident status for us, English Teachers in residing full time in Japan, is a moot point. We clearly already have it. |
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JimDunlop2
Joined: 31 Jan 2003
Posts: 2286
Location: Japan
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| Posted: Tue Apr 26, 2005 12:52 pm Post subject: |
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Yes.... they will be taxed only for the part of the year they are in Canada IF and only if they've qualified for non-residency for the other part of that year.
There are still two clausses that you shouldn't ignore:
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| While the residence status of an individual can only be determined on a case by case basis... |
and especially
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Courts have generally focused on the term "ordinarily resident" in determining the individual's residence status while abroad. The strong trend in decisions of the Courts on this issue is to regard temporary absence from Canada, even on an extended basis, as insufficient to avoid Canadian residence for tax purposes.
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That would seem to indicate that taking just a year to work abroad (whether it be in Japan or elsewhere) isn't enough to alter your residency status.
My wife and I took care to get rid of all our assets, e.g. property we owned, closed as many bank accounts as we could, got rid of our provincial health care cards, stopped paying into our RRSPs, etc.. etc... If everything would have been so automatic, we wouldn't have had to have done all those things. Seems to me that "intention to return to Canada" is one of the most important determining factors here. |
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