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ramen209
Joined: 14 Apr 2009
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 Posted: Wed Aug 12, 2009 9:54 pm Post subject: cancel Canadian heath insurance to avoid taxes? |
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Should I cancel my health insurance before going to Korea for a year?
A friend of a friend worked in Korea and upon his return to Canada, was forced to pay taxes on the money he earned while there. He said he could have avoided it by canceling his Canadian health insurance.
Does anyone have any experience or information about this? |
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E_athlete
Joined: 09 Jun 2009
Location: Korea sparkling
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| Posted: Wed Aug 12, 2009 10:42 pm Post subject: Re: cancel Canadian heath insurance to avoid taxes? |
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| ramen209 wrote: |
Should I cancel my health insurance before going to Korea for a year?
A friend of a friend worked in Korea and upon his return to Canada, was forced to pay taxes on the money he earned while there. He said he could have avoided it by canceling his Canadian health insurance.
Does anyone have any experience or information about this? |
sorry I havent heard of any Canadian paying their taxes from their earnings from Korea. For one thing the government doesn't know you are working in Korea. There is no T4 slip that gets sent to the Canadian government so they do not know you are working unless you tell them. |
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Johnysuth
Joined: 17 Feb 2009
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| Posted: Wed Aug 12, 2009 11:25 pm Post subject: Re: cancel Canadian heath insurance to avoid taxes? |
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| ramen209 wrote: |
Should I cancel my health insurance before going to Korea for a year?
A friend of a friend worked in Korea and upon his return to Canada, was forced to pay taxes on the money he earned while there. He said he could have avoided it by canceling his Canadian health insurance.
Does anyone have any experience or information about this? |
Nah your friends full of it, why would not cancelling your health insurance alert the Canadian government of your employment in Korea. Although you should cancel it so your not making pointless MSP payments (assuming your contract includes Korean health insurance) |
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Manner of Speaking
Joined: 09 Jan 2003
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| Posted: Thu Aug 13, 2009 8:11 am Post subject: Re: cancel Canadian heath insurance to avoid taxes? |
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| ramen209 wrote: |
Should I cancel my health insurance before going to Korea for a year?
A friend of a friend worked in Korea and upon his return to Canada, was forced to pay taxes on the money he earned while there. He said he could have avoided it by canceling his Canadian health insurance.
Does anyone have any experience or information about this? |
If you move out of province for a year or longer, you are covered by the health insurance plan of the province you lived in for six months from the date you moved, even if you move out of the country. Most people who move to Korea just let their health insurance 'lapse' if they are on a one-year contract. 'Cancelling' your provincial health insurance will have no effect on your federal income taxes because they are under federal, not provincial, jurisdiction. The rule of thumb generally is that if you've lived outside the country for two years or more, you're no longer deemed a resident and don't have to pay income tax.
If you return to Canada and re-acquire residency after a one-year contract, you will have to pay federal income tax less Korean income tax which is deducted from your paycheque. |
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howie2424
Joined: 09 Jan 2003
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| Posted: Thu Aug 13, 2009 5:13 pm Post subject: |
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Manner of Speaking wrote
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| If you move out of province for a year or longer, you are covered by the health insurance plan of the province you lived in for six months from the date you moved, even if you move out of the country. Most people who move to Korea just let their health insurance 'lapse' if they are on a one-year contract. 'Cancelling' your provincial health insurance will have no effect on your federal income taxes because they are under federal, not provincial, jurisdiction. The rule of thumb generally is that if you've lived outside the country for two years or more, you're no longer deemed a resident and don't have to pay income tax. |
Nothing personal MOS, but this simply isn�t accurate. Under Canadian tax law determining residency for tax purposes is a nebulous concept at best. It�s an intention based test where the tax authorities examine why you left the country. If, based on an examination of the totality of your circumstances, CRA determines that you left with the intention of someday returning, they can deem you a resident of Canada and tax your foreign income, even though you were working temporarily in another country. In determining your intention they consider, among other things, what ties to the country you maintained when you left. Retaining your provincial health insurance is one such tie because it suggests that you intend to return someday. Read about it here where it says
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Other ties that may be relevant include:
� a Canadian driver's licence;
� Canadian bank accounts or credit cards;
� health insurance with a Canadian province or territory. |
http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/rsdncy-eng.html
Now that�s all theory. The reality is that the folks over at CRA are so busy that most people who come to Korea for a one year contract and don�t file a return in Canada just fall of the radar for a year and nobody cares. Your friend was one of the unlucky ones.
The guy on this board who knows the most about this is The Lemon. Do a search for his posts and read what he�s had to say over the years about it. His advice has, in my experience, always been very accurate and reliable. |
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Manner of Speaking
Joined: 09 Jan 2003
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| Posted: Thu Aug 13, 2009 5:27 pm Post subject: |
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| All already known. The issue is the health insurance. The reason why the health insurance provision is a factor is because many retirees live in the southern US or elsewhere but return for a few weeks a year in order to keep it registered and to stay qualified for provincial coverage. |
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dogshed
Joined: 28 Apr 2006
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| Posted: Thu Aug 13, 2009 5:39 pm Post subject: |
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| You should keep your Canadian insurance. If you get really sick in Korea you will most likely loose your job and loose your coverage and you will most likely want to be treated in a modern country like Canada. |
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howie2424
Joined: 09 Jan 2003
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| Posted: Thu Aug 13, 2009 5:43 pm Post subject: |
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| Quote: |
| All already known. The issue is the health insurance. The reason why the health insurance provision is a factor is because many retirees live in the southern US or elsewhere but return for a few weeks a year in order to keep it registered and to stay qualified for provincial coverage. |
Again, nothing personal but this is incorrect. The health insurance is a factor because by retaining it, you demonstrate to CRA that your departure from the country is temporary and that you may be a de facto resident for tax purposes. CRA will consider this factor regardless of your age or whether you�re a retiree. If you can point me to a source for the suggestion that this is only a factor for retirees I�d be in your debt because this is an issue near and dear to me. I have an investment property in Canada and like to stay up to date on changes to the tax laws to cover my butt. |
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Manner of Speaking
Joined: 09 Jan 2003
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| Posted: Sat Aug 15, 2009 11:47 pm Post subject: |
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Ramen's question was, "Should I cancel my health insurance before moving to Korea for one year?" And my response was, "Cancelling your provincial health insurance will have no effect on your taxes because the latter is under federal jurisdiction." As far as I know in all provinces, you are covered for the first six months you are out of province, so even people who intend to move overseas permanently just let their provincial coverage lapse. The provision of considering whether or not you have provincial health insurance as a factor of determining your residency status was only brought in a few years ago because of the snowbird thing; when I first moved overseas it was not listed as one of the factors used to determine your residency status.
The residency status thing is a whole can of worms anyway because Revenue Canada won't give anyone a straight answer that they can be legally bound to. You can fill in a form and have them offer you an "opinion" on your residency status that is legally meaningless as they can't be held to it. Which is why there's no point in going into the ins and outs of it - I was only interested in answering Ramen's specific question. Dogshed is probably right in suggesting that you keep your provincial health insurance, or just not bother to cancel it until the expiry period. If you were to write a letter to your provincial health insurance agency before you go saying you are moving out of country permanently and have other insurance so you no longer need OHIP or whatever, that might help...but problem is if you are back in the country after only one year, Revenue Canada is going to figure out a way to ding you for that overseas income regardless of whether or not you've cancelled your provincial health insurance. And having property of any kind in Canada is going to ding you, unless you put the property in someone else's name. |
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