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Caesar1313
Joined: 03 Apr 2008
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 Posted: Mon Jun 15, 2009 4:55 am Post subject: Too late to sell my car in Canada to not pay taxes? |
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| I'll have been here a year in August and am returning home for 2 weeks then coming back for another year. I never sold my car before I left, and now I'm concerned it will make it really difficult to plead my case as a non-resident when I return permanently. I don't care at all about the car, as it was a free piece of junk. My question is when you try to get non-residency do they ask you if you had property when you left Canada or upon your return? Is it too late for scrapping the car to have any effect on my desire to not pay taxes upon my return? |
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crossmr
Joined: 22 Nov 2008
Location: Hwayangdong, Seoul
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| Posted: Mon Jun 15, 2009 6:26 am Post subject: |
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as long as you established residency in Korea you're fine.
Canada has a tax treaty with Korea and anyone who is a deemed resident or factual resident for tax purposes automatically becomes a deemed non-resident which is the same as a non-resident for tax purposes provided they established residency in Korea. If you worked here its unlikely you'll have any trouble at all. |
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wings
Joined: 09 Nov 2006
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| Posted: Mon Jun 15, 2009 5:38 pm Post subject: |
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| as long as you established residency in Korea you're fine. |
Sorry to say this is not generally the case. A friend of mine who had been here for 2 years had to pay taxes in Canada for exactly that reason. She didn't sell her car and that was considered enough of a tie. Also if you sell your car in Canada then you will have an income in the country so you would have to pay tax at least on that amount which could raise the red flag for them to look into your case.
You can always try it and see what happens, the rules aren't very clear and the worst case is that you will have to pay with a bit of interest. |
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crossmr
Joined: 22 Nov 2008
Location: Hwayangdong, Seoul
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| Posted: Mon Jun 15, 2009 6:28 pm Post subject: |
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| wings wrote: |
| Quote: |
| as long as you established residency in Korea you're fine. |
Sorry to say this is not generally the case. A friend of mine who had been here for 2 years had to pay taxes in Canada for exactly that reason. She didn't sell her car and that was considered enough of a tie. Also if you sell your car in Canada then you will have an income in the country so you would have to pay tax at least on that amount which could raise the red flag for them to look into your case.
You can always try it and see what happens, the rules aren't very clear and the worst case is that you will have to pay with a bit of interest. |
Then she may not have established residency per the tax treaty. As a non-resident or deemed non-resident you don't have to pay tax on any income in a country that Canada has a treaty with, so long as you establish residency. If you have income in Canada then you have to pay your usual tax on it, plus a 45% premium (if you paid 15% per your income level, you now have to pay 22.5%) for being a non-resident.
Here are the situations your friend could have fallen into:
1. Factual Residency - See this regarding residency and being a factual resident:
http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html
2. Deemed Resident - http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html
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Deemed residents
You are a deemed resident for tax purposes for the entire tax year if you:
* stay in Canada for 183 days or more in that tax year;
* do not have residential ties with Canada; and
* are not considered a resident of another country under the terms of a tax treaty.
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If she wasn't in canada for more than 183 days during the tax year, she couldn't be a deemed resident
So she was likely considered a factual resident, however:
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| Effective after February 24, 1998, if you are a factual or deemed resident of Canada for tax purposes and a resident of another country according to a tax treaty Canada has signed with the other country, you may be considered a deemed non-resident of Canada. You become a deemed non-resident of Canada when your ties with the other country are such that, under the tax treaty, you are considered a resident there. |
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| As a deemed non-resident, the same rules apply to you as a non-resident of Canada. |
As of 2006 there was a new treaty with Korea regarding taxes.
http://www.fin.gc.ca/treaties-conventions/Korea_2-eng.asp
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Article 4
Resident
1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of the person's domicile, residence, place of head or main office, place of management or any other criterion of a similar nature, and also includes that State and any political subdivision or local authority thereof or any agency or other instrumentality of any such State, subdivision or authority. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in that State.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then the individual's status shall be determined as follows:
(a) the individual shall be deemed to be a resident only of the State in which the individual has a permanent home available and if the individual has a permanent home available in both States, the individual shall be deemed to be a resident only of the State with which the individual's personal and economic relations are closer (centre of vital interests);
(b) if the State in which the individual's centre of vital interests is situated cannot be determined, or if there is not a permanent home available to the individual in either State, the individual shall be deemed to be a resident only of the State in which the individual has an habitual abode;
(c) if the individual has an habitual abode in both States or in neither of them, the individual shall be deemed to be a resident only of the State of which the individual is a national;
(d) if the individual is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle its status and to determine the application of the Convention. Insofar as no such agreement has been reached, such person shall be deemed not to be a resident of either Contracting State for the purposes of enjoying benefits under the provisions of the Convention. |
Was your friend living in school provided housing which wasn't in her name? If she was, then she technically didn't have a home and became a resident of Canada and didn't satisfy residency requirements in Korea. If your school is providing housing, you might want to ask them to put your name on the lease and keep a copy for tax purposes to demonstrate you're a resident of Korea.
As well the bit on double taxation may apply to your friend
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Article 22
Elimination of Double Taxation
1. Subject to the provisions of Korean tax law regarding the allowance as credit against Korean tax of tax payable in any country other than Korea (which shall not affect the general principle thereof):
(a) where a resident of Korea derives income from Canada which may be taxed in Canada under the laws of Canada in accordance with the provisions of this Convention, in respect of that income, the amount of Canadian tax payable shall be allowed as a credit against the Korean tax payable imposed on that resident. The amount of credit shall not, however, exceed that part of Korean tax as computed before the credit is given, which is appropriate to that income; and
(b) where the income derived from Canada is a dividend paid by a company which is a resident of Canada to a company which is a resident of Korea which owns not less than 25 per cent of the total shares issued by that company, the credit shall take into account the Canadian tax payable by the company in respect of the profits out of which such dividend is paid.
2. In the case of Canada, double taxation shall be avoided as follows:
(a) subject to the existing provisions of the law of Canada regarding the deduction from tax payable in Canada of tax paid in a territory outside Canada and to any subsequent modification of those provisions - which shall not affect the general principle hereof - and unless a greater deduction or relief is provided under the laws of Canada, tax payable in Korea on profits, income or gains arising in Korea shall be deducted from any Canadian tax payable in respect of such profits, income or gains;
(b) subject to the existing provisions of the law of Canada regarding the allowance as a credit against Canadian tax of tax payable in a territory outside Canada and to any subsequent modification of those provisions - which shall not affect the general principle hereof - where a company which is a resident of Korea pays a dividend to a company which is a resident of Canada and which controls directly or indirectly at least 25 per cent of the voting power in the first-mentioned company, the credit shall take into account the tax payable in Korea by that first-mentioned company in respect of the profits out of which such dividend is paid; and
(c) where, in accordance with any provision of the Convention, income derived or capital owned by a resident of Canada is exempt from tax in Canada, Canada may nevertheless, in calculating the amount of tax on other income or capital, take into account the exempted income or capital.
3. For the purposes of this Article, profits, income or gains of a resident of a Contracting State that may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other State. |
She might want to see a CPA about appealing her ruling if she can prove she was a resident of Korea during that time. |
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