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nobuko
Joined: 14 Oct 2007
Posts: 17
Location: Canada
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 Posted: Mon Feb 04, 2008 12:33 pm Post subject: Canadian Revenue Agency - Determination of Residency Status |
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Now I know I was suppose to fill this out a while ago, as in before my arrival to Japan, but I didn't and forgot completely about the forms altogether. Has anyone gone through this procedure before? Have you filled the Determination of Residency status form? Also, were there any other forms that are necessary to complete this process?
I'm not sure I understand why I have to go through such a convoluted process? I have never done taxes in my life (had an accountant back in Canada do them) so my questions may seem a little doltish but I'll ask them anyways. It's about time I learn how this all works.
Does the government have the right to tax my world income for 2008? Will I need to file a Canadian income tax return for each year living outside Canada to report my world income?
Are we considered under the Japanese's treaty? Also are we considered a resident in Japan and not in Canada? Are we subjected to income tax in Japan to our world income (total income in and outside of Canada)? And lastly, does Japan have a tax treaty with Canada? or is that just part of the commonwealth nations. |
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lesderuiter
Joined: 01 Feb 2008
Posts: 3
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| Posted: Tue Feb 05, 2008 12:01 am Post subject: |
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I actually just posted a similar question on the 'newbie' discussion board earlier today. Someone told me to check out this website...
http://www.cra-arc.gc.ca/E/pub/tg/t4131/t4131-e.html
Revenue and Customs Canada website for taxation while abroad.
As far as I know, the CDN government taxes you when you get back on whatever you earned while abroad since you're still a factual citizen or something. I have heard that there is a way around this, but it involves cancelling your provincial health insurance (and buying travel insurance for your first 90 days back in Canada until your health insurance can be restarted), as well as filling out some form. I'd suggest getting in touch with an accountant though to get all the details, that's what I'm going to do before I leave. |
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seanmcginty
Joined: 27 Sep 2005
Posts: 203
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| Posted: Tue Feb 05, 2008 1:22 am Post subject: |
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The CRA taxes income based on your country of residence, not on your citizenship.
Basically, while you are resident in Canada you pay taxes on your world income. While you are resident outside of Canada you pay taxes only on your Canadian source income.
For example:
Lets say you spend the first 6 months of the year working in Canada and the second six months living and working in Japan. The income you earned in Canada in the first half would be taxable. The income you earned in Japan would not. But, lets say you have some Canadian investments that you continue to earn income on after you leave the country. You will still have to pay taxes on these even though you are not a Canadian resident because they come from a Canadian source.
Residency is determined by a number of factors. Basically if you just go to Japan to teach English you probably won't have to worry about it, you are not a resident of Canada anymore for tax purposes. However, if you go to Japan but maintain significant ties to Canada (like you continue to maintain a house there, your kids are going to school in Canada, you come back regularly to Canada,etc.) you might still be considered a resident. But for 99.9% of English teachers on one year contracts to teach English in Japan, they don't have anything to worry about. |
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Chris21
Joined: 30 Apr 2006
Posts: 366
Location: Japan
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| Posted: Tue Feb 05, 2008 6:11 am Post subject: |
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| However, if you go to Japan but maintain significant ties to Canada (like you continue to maintain a house there, your kids are going to school in Canada, you come back regularly to Canada,etc.) you might still be considered a resident. But for 99.9% of English teachers on one year contracts to teach English in Japan, they don't have anything to worry about. |
Actually, even just maintaining a bank account or credit cards can keep you in the Canadian taxation system. I was told by the government that because I had an AMEX card registered to a Canadian address, all of my Japanese income was eligible for Canadian taxation. I subsequently withdrew all money from my Canadian bank accounts, just in case.
Of course using any government services will also keep you as a Canadian resident (i.e. health coverage, GST rebate cheques, etc). |
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chirp
Joined: 03 Dec 2005
Posts: 148
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| Posted: Tue Feb 05, 2008 10:02 am Post subject: |
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| seanmcginty wrote: |
The CRA taxes income based on your country of residence, not on your citizenship.
Basically, while you are resident in Canada you pay taxes on your world income. While you are resident outside of Canada you pay taxes only on your Canadian source income. |
Unless you declare yourself to be a non-resident of Canada though, you are assumed to still be reaping the benefits, no matter where you are actually "in residence". Therefore, you will be taxed upon your return to Canada on any income earned while outside of the country (unless you declare yourself a non-resident). |
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seanmcginty
Joined: 27 Sep 2005
Posts: 203
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| Posted: Wed Feb 06, 2008 4:47 am Post subject: |
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| chirp wrote: |
| seanmcginty wrote: |
The CRA taxes income based on your country of residence, not on your citizenship.
Basically, while you are resident in Canada you pay taxes on your world income. While you are resident outside of Canada you pay taxes only on your Canadian source income. |
Unless you declare yourself to be a non-resident of Canada though, you are assumed to still be reaping the benefits, no matter where you are actually "in residence". Therefore, you will be taxed upon your return to Canada on any income earned while outside of the country (unless you declare yourself a non-resident). |
You don't have to declare yourself a non-resident, in fact you can't just unilaterally declare yourself a non-resident. You can file a form (can't remember which one) before you leave asking the CRA to determine if you are a resident for taxation purposes or not. In my case I never did that before I left Canada, but when I got back (after 5 years in Japan) I just wrote a letter explaining my situation to the CRA and they accepted that I had been a non-resident for those 5 years.
I've studied Tax law and have done a bit of work in the field. A determination of residency is based on a weighing of a number of factors by the CRA (as noted above) and has nothing to do with whether or not you declare yourself a non-resident. |
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Hoser
Joined: 19 Mar 2005
Posts: 694
Location: Toronto, Canada
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| Posted: Wed Feb 06, 2008 8:24 am Post subject: |
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Can't I just say I was backpacking for 3 years and I didn't make any money?  |
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poohbear
Joined: 01 Mar 2005
Posts: 46
Location: Toronto & Tokyo
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| Posted: Mon Feb 11, 2008 11:47 pm Post subject: |
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i thought japan and canada had an agreement wherein if u work in one u dont have to worry about taxes for the other? atleast that's what my accountant said!  lol !
Last edited by poohbear on Tue Feb 12, 2008 12:16 am; edited 2 times in total |
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nobuko
Joined: 14 Oct 2007
Posts: 17
Location: Canada
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| Posted: Mon Feb 11, 2008 11:58 pm Post subject: |
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| Quote: |
Actually, even just maintaining a bank account or credit cards can keep you in the Canadian taxation system. I was told by the government that because I had an AMEX card registered to a Canadian address, all of my Japanese income was eligible for Canadian taxation. I subsequently withdrew all money from my Canadian bank accounts, just in case.
Of course using any government services will also keep you as a Canadian resident (i.e. health coverage, GST rebate cheques, etc). |
I heard that you could always state the reason you have a credit card is to maintain a credit history because you don't plan on staying in Japan for the rest of your life. It seem rather pointless to establish credit in Japan.
Also, are GST rebates alright to cash in if they were sent for the year 2007? |
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seanmcginty
Joined: 27 Sep 2005
Posts: 203
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| Posted: Tue Feb 12, 2008 1:21 am Post subject: |
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| nobuko wrote: |
| Quote: |
Actually, even just maintaining a bank account or credit cards can keep you in the Canadian taxation system. I was told by the government that because I had an AMEX card registered to a Canadian address, all of my Japanese income was eligible for Canadian taxation. I subsequently withdrew all money from my Canadian bank accounts, just in case.
Of course using any government services will also keep you as a Canadian resident (i.e. health coverage, GST rebate cheques, etc). |
I heard that you could always state the reason you have a credit card is to maintain a credit history because you don't plan on staying in Japan for the rest of your life. It seem rather pointless to establish credit in Japan.
Also, are GST rebates alright to cash in if they were sent for the year 2007? |
Maintaining a credit card or bank account will not cause you to be deemed a resident for taxation purposes on its own. Remember, the CRA will look at the entirety of your situation and a number of factors in determining whether you are a Canadian resident and maintenance of bank accounts/credit cards is not going to be given much weight. The main things to worry about, if they apply:
-Do you maintain a house/residence in Canada?
-Do you have children or other dependents residing in Canada?
-Do you have significant amounts of personal property in Canada?
If you answer no to all of these then you are pretty much safe. Having credit cards/bank accounts might, on a weighing of everything, work against you, but only if you have other residential ties (like the ones above) and they have to decide one way or the other.
Cashing in GST rebate checks from previous years will have zero effect . |
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Chris21
Joined: 30 Apr 2006
Posts: 366
Location: Japan
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| Posted: Tue Feb 12, 2008 3:35 am Post subject: |
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| I had a credit card and a bank account (with about $30,000 in it), but no house or kids in Canada, and the government deemed me to still be a taxable resident (even though I hadn't lived in Canada for years). |
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seanmcginty
Joined: 27 Sep 2005
Posts: 203
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| Posted: Tue Feb 12, 2008 4:41 am Post subject: |
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| Chris21 wrote: |
| I had a credit card and a bank account (with about $30,000 in it), but no house or kids in Canada, and the government deemed me to still be a taxable resident (even though I hadn't lived in Canada for years). |
Did you actually end up paying taxes for your non-Canadian source income for the years you were out of the country? If so, you should speak to a tax lawyer about challenging the CRA's decision if your only residential ties were credit cards and a bank account. |
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Miyazaki
Joined: 12 Jul 2005
Posts: 635
Location: My Father's Yacht
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| Posted: Tue Feb 12, 2008 4:45 am Post subject: |
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| seanmcginty wrote: |
Maintaining a credit card or bank account will not cause you to be deemed a resident for taxation purposes on its own. Remember, the CRA will look at the entirety of your situation and a number of factors in determining whether you are a Canadian resident and maintenance of bank accounts/credit cards is not going to be given much weight. The main things to worry about, if they apply:
-Do you maintain a house/residence in Canada?
-Do you have children or other dependents residing in Canada?
-Do you have significant amounts of personal property in Canada?
If you answer no to all of these then you are pretty much safe. Having credit cards/bank accounts might, on a weighing of everything, work against you, but only if you have other residential ties (like the ones above) and they have to decide one way or the other.
Cashing in GST rebate checks from previous years will have zero effect . |
This is true and concurs with what I was told by Revenue Canada many years ago when there was no form to fill out to declare "non-residency" status! |
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VanKen
Joined: 29 Oct 2003
Posts: 139
Location: Calgary, AB Canada
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| Posted: Fri Apr 11, 2008 5:28 am Post subject: Canada Revenue Agency: Determination of Residency Status |
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| poohbear wrote: |
| i thought japan and canada had an agreement wherein if u work in one u dont have to worry about taxes for the other? atleast that's what my accountant said! lol ! |
Yes, Canada and Japan have a tax treaty. Basically, if you pay your taxes in Japan, you won't have to report the same income to the CRA. You decide where it is more profitable for you to report the income.
| Hoser wrote: |
| Can't I just say I was backpacking for 3 years and I didn't make any money? |
Sure, you could say that, then hope you don't get called in for an audit by the CRA. If you do, you'll have to explain how you survived without an income... and provide withdrawl slips from your savings account, a winning lottey ticket, police report from your begging in the street, etc.... I think you get the picture. |
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Hoser
Joined: 19 Mar 2005
Posts: 694
Location: Toronto, Canada
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| Posted: Fri Apr 11, 2008 1:21 pm Post subject: |
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| Thanks for bumping this thread-I was a bit worried about renewing my Canadian health insurance (my card has expired) because I don't want to be taxed on what I make over here. But if there's a tax agreement between Canada and Japan then I guess I don't have to worry. |
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