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robot
Joined: 07 Mar 2006
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 Posted: Thu Dec 27, 2007 5:24 pm Post subject: buying property in Canada, living in Korea |
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I am a Canadian non-resident interested in purchasing some property back home.
The problem is that one of the well-known keys to a non-resident status claim is not having any significant ties (including property) to Canada. If I owned a house, a hefty Canadian income tax would very likely be imposed on the salary I make here in Korea, which just won't do at all.
Is there a way around this problem? How can a non-resident invest in Canada without having to send half their salary back to the government as well? Surely there's a way -- Koreans living here pick up places all the time without their incomes being taxed, right? I have a F-series visa, if that helps at all.
Any advice would be appreciated. |
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howie2424
Joined: 09 Jan 2003
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| Posted: Thu Dec 27, 2007 6:28 pm Post subject: |
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| Owning property in Canada is only one aspect of determinimng your residency status. If your property is truly an investment property and you've leased it to an arms length tenant for market value rent, you're fine. I lease a condo I own in Canada to a tenant. Every year I file a non-resident Canadian tax return and declare the rental income but not my teaching income in Korea. I've never had CRA question me on it. Hope that helps. |
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Ilsanman
Joined: 15 Aug 2003
Location: Bucheon, Korea
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| Posted: Thu Dec 27, 2007 11:05 pm Post subject: |
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| Ask a family member to put it in their name. Problem solved. Or invest together to make it worth their while. |
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Homer
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| Posted: Fri Dec 28, 2007 6:02 am Post subject: |
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| Quote: |
| Owning property in Canada is only one aspect of determinimng your residency status. If your property is truly an investment property and you've leased it to an arms length tenant for market value rent, you're fine. I lease a condo I own in Canada to a tenant. Every year I file a non-resident Canadian tax return and declare the rental income but not my teaching income in Korea. I've never had CRA question me on it. Hope that helps. |
This is luck of the draw....they have not audited you because they do not do so with everyone. You should know that they can audit you however because property is pretty much at the top of the list to determine residency. Since it is a condo, the income is quite low so Revenue Canada would not really be keen to look into it as a priority case. That is most likely why nothing a happens.
If you own a revenue earning property (say a multi-appartment building) then things get more tricky because you have to pay tax on that income. Then the residency questions might be raised due to higher earnings. If they look into it, they can make a case that you are in fact a resident (you have property in Canada, which shows (to them) intent to return). Then they can basically tax your Korean income on Canadian rates (meaning you would have to pay the difference between K-income tax and cdn-income tax). However, you have to consider that the Canadian government would have to really want to look into this to follow the paper trail. But, it can happen and playing ostrich with this is a bad idea.
OP: You can purchase a property through someone (family member, trusted friend). That is the only real way to be clear of residency tax laws.
That person owns the property, collects income on it pays taxes and invests it for you. Preferably by dumping profits into the morgage to pay it off faster.
We did something like this and our building back home was paid off in less than 8 years total. |
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howie2424
Joined: 09 Jan 2003
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| Posted: Fri Dec 28, 2007 2:53 pm Post subject: |
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OP: You can purchase a property through someone (family member, trusted friend). That is the only real way to be clear of residency tax laws.
That person owns the property, collects income on it pays taxes and invests it for you. Preferably by dumping profits into the morgage to pay it off faster. |
It may be the only clear way to avoid residency laws but it probably also constitutes tax evasion, a criminal offence in Canada. I'm not sure counselling the OP to commit a crime is the best advice to be giving him.
OP if you're really interested in buying a property in Canada do what I did. Shell out the money for a consultation with a tax accountant beforehand. You're likely to get some better advice there than you will from anyone on this board including me. |
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quilter
Joined: 11 Feb 2006
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| Posted: Fri Dec 28, 2007 3:39 pm Post subject: |
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| I spoke to Taxation Canada about this same issue, and they said I just had to pay taxes on the revenue I earned in Canada, not in Korea. That being said, I have lived outside of Canada for more than 10 years. |
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Homer
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| Posted: Sat Dec 29, 2007 6:01 am Post subject: |
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| Quote: |
| It may be the only clear way to avoid residency laws but it probably also constitutes tax evasion, a criminal offence in Canada. I'm not sure counselling the OP to commit a crime is the best advice to be giving him. |
Good advice about a tax accountant...
We did that howie...in fact we consulted 3 and got the same advice 3 times: have a family member or trusted friend buy the property for you and administer it. They can pay the tax on the income from the property (taking the money from the income itself) and dump the excess back into the morgage and into a management fund for repairs and upkeep.
So my advice comes from the advice I got from tax accountants! 
This is not tax evasion.
If you buy it yourself Revenue Canada can use the property as residency proof and tax your Korean income on Canadian standards...but this would require the government actively look into your case...and if you own just one property...you become small fry. |
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JamesFord
Joined: 14 Jun 2007
Location: my personal playground
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| Posted: Sat Dec 29, 2007 7:35 am Post subject: |
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| So after your family pays off the mortgage and all of that... how do they transfer the house back to your name without a sale? |
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Homer
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| Posted: Sat Dec 29, 2007 1:00 pm Post subject: |
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| So after your family pays off the mortgage and all of that... how do they transfer the house back to your name without a sale? |
They can sell it back to you for whatever price you wish to set....
They can leave it to you as an inheritance.
They make it a gift to you.
The options are numerous.
Once the morgage is paid...the person keeps paying taxes on the income generated by the property and can then invest it for you in whatever you like...paying income tax on the return if need be.
This can even be another revenue bearing property if you wish.
What you need is someone you can trust. |
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Cheonmunka
Joined: 04 Jun 2004
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| Posted: Sun Dec 30, 2007 12:03 am Post subject: |
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I have non-residency for NZ but have property there. I pay NZ tax on any generated from NZ income.
NZ does not have such a thing as 'intent to return.' You are either a resident or a non-resident. You should apply to be a non-resident if you are intending to be away more than a year. But there is certainly no such thing there as an intent to return. Good grief, that's odd. So odd that I can't believe it.
Think about all the foreign investors into Canada. They pay a non-residency tax for any profits. Well, if there's no profit, ie, you are paying the mortgage interest then work out if you'll get a tax loss to carry forward from year to year. In NZ mortgage interest is tax deductible. When I do a year's work back in NZ I don't expect to pay any tax on that year's income because of my successive losses from the mortgage costs of the years previous.
If Canada is slumping like the US, what a great time to buy. |
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