Canadian Non-Residency

[plasticfish]

I am a Canadian citizen, I have moved back to Hong Kong since 2007. I've been working here for about 1 year. I want to know what can I do to claim non-residency so that I do not have to pay taxes for both countries?

My status:

-Single
-no property in Canada / HK
-still holding credit cards, bank accounts, health card and drive license in Canada
-family in Canada

I already know that I will not stay in HK forever, just to work in here for few years then will go back to Canada.

So what should I do to avoid paying taxes?

[gilleshk]

You don't need to do anything really. If you live here for two years and you don't show any obvious ties to Canada like a residence, a spouse staying back or a leave of absence, you'll be OK.

Obviously, you shouldn't use your health cards or claim any canadian benefit during that time. In an ideal world, you don't renew your credit cards and driver's license but it's not a big deal.

In any case, this only becomes a problem if you are audited which is highly unlikely. Many people break all of those rules and get away with it. Some people fill out a form to declare themselves a non resident but it seems this may not be a great idea because it sort of sinles you out. In any case, it's not required.

[gilleshk]

As I said, filling the specific non residency form is not required, all you have to do is meet the conditions of non residency. If there are no Canadian income to pay taxes on, nothing is needed. If there are taxes(capital gains, interest, rental property etc...) then you complete your canadian tax form as a non resident.

[Mattny81]

Gilleshk got it right, I called Sevice canada a couple weeks ago. They dude on the phone said if I don't claim non-residence then I must pay taxes on ALL worldly income. To become non-resident was as easy as breaking ties to canada like mentioned and writing a letter to service canada saying when you left the country and you would like to be deemed non-resident for tax purposes. Then thats it. No more 2 years required.

Also trying to get an answer about HK and Macao treaties was difficult. But the guy said if he were me he would claim non-resident.

[YVR-HKG]

Yeah.. I agree that he has to do nothing w/ CRA now..

"The test" is for determining residency only if it needs to be determined.. (either for the auditors sake, or for a gray-area ex. somebody that has huge ties or maintains multiple homes worldwide).

That said..

The year you left, when you filed your tax return, you should have stated on your return on the first page the date you left Canada. This triggers a code in the CRA systems to mark you down as leaving Canada, and pro-rates your non-refundable tax credits for the year that you left.
This is what some people probably mean by "declaring non residency".. otherwise I not familiar with any other forms for that specific purpose.

[gilleshk]

First of all, the issue only becomes one if you are audited which is extremely rare. Out of the hundreds of canadians I know, only a couple were audited and it was more related to the property they were trying to dispose of...

Therefore, if you are audited, you must prove that you were indeed a non resident. The way to do this is to satisfy the requirements set on the site you posted.

There is no need to send a form, a letter or anything else. You pay the taxes you owe if you have canadian income by filling out the tax return and if and when you return to Canada, you start again as if you'd never left.

I have done so a few times as most people I know and I happen to know a few tax lawyers residing here in HK and they advise the same thing to their clients unless there are special circumstances where they feel that Revenue Canada could give them problem with.

If you want to be anal about it, then go ahead and fill out the forms and get CRA to deem you a non resident but it's definitely not necessary.

[Mattny81]

Always better to be safe then sorry no? Aduits are fairly random, and then there are some that are flagged for audits... that is something I do not need to have to worry about in the back of my mind.

I mean don't declare... its a risk, one you are or are not willing to take.

[gilleshk]

The declaration means absolutely nothing... what is important is to meet the requirements. You can declare yourself a non resident, it won't change a thing if for example you come here for two years on a leave of absence and have a job waiting for you back home.

At the end of the day, it comes down to the audit. CRA will check if you meet the requirements or not. Many of the tax lawyers I know have mentioned that sending paperwork beforehand may raise flags and make you a more likely target for audit therefore they advise against it.

Some people opt to get the CRA to rule on their case beforehand(essentially and audit) if there are ambiguous matters or special circumstances such as a spouse living in Canada.

The bottom line is that to be safe, you have to sever ties and not demonstrate your intention to return in the near future. Renewing credit cards, driver's license, health cards, having a spouse there, a job waiting or a residence that isn't rented at arms length all demonstrate an intention to return. That's what needs to be avoided...

As always, the best advice may be not to listen to know it all posters on a website but to consult a professional tax lawyer if in doubt.

[Mattny81]

Right on GillesHK, when it comes down to it you are right best to leave it to the professionals.

[dtb]

Funny thing is, when I left Canada to HK back in the late 90s, I called up Revenue Canada and specifically asked for the procedure for claiming the non residence status. The official simply told me that, since you were leaving Canada for good and have no ties in Canada, why you need to do so? And he said no form is needed, simply packed and go.