Like every other developed nation, taxation in Canada is complex. The uniqueness of tax issues for investors and Canadian immigrants lies in the fact that taxation is based on residency. This means that you pay taxes for all income you earn in Canada and outside the country. As such, you need to have clear residency determination to know how much you are required to pay.
There are courts that look at residential ties to determine how much you will pay. The level of residency may be weak or strong. The strong ones include having a dwelling place that is either owned or rented. Residency of a spouse or dependents like children also counts. The court will also focus on how frequent you travel into and out of Canada as well as your traveling status.
Weaker ties will also affect the amount you are required to pay. They are considered if stronger or major ties are impossible to apply or are divided. What is considered as weaker ties includes possession of vehicles, furniture and cloths among other personal properties, availability of social links like being a member to a club or church and economic ties in the form of bank accounts, investments and credit cards. There are personal ties like driving licenses, voting rights, healthcare and non-dependent relations.
Determining your resident status is the work of Canadian Revenue Authority. Their investigations involve several questions aimed at ascertaining the information they already have. There is a NR74 form to be filled that captures your status. It is the information you give that will determine your status.
Categories that are deemed to be resident and thus automatically taxed include government employees like those enlisted in the armed forces. Sojourners or people who have been in Canada for 183 or more days are also taxed as residents. The days may be broken or continuous. CRA will make a determination after evaluating all available facts from your stay.
It is common to confuse part-year residents with sojourners. To get a clearer picture, a person whose status was approved in April will have entered the taxation bracket by December. For those whose status is approved in September, taxation window opens before confirmation of their status. However, global taxation regime kicks in before residency taxation.
There are treaties signed with countries of origin to avoid double taxation. For an immigrant or investor, CRA will evaluate the treaties and communicate on the taxation regime to be used. You are however required to report it as taxable income. Deductions will be done by CRA before local laws apply. Passive income like dividends, royalties and interests is not exempt from taxes. However, there is a minimum that is charged to ensure that you retain as much as possible. Foreign tax credits will also reduce the chances of double taxation.
What do you do with moving charges? If your move commences or ends in Canada, you are not entitled to deductions. However, residents of Canada before and after the move will enjoy the deductions. It is worth noting that CRA revises rules and applies them on individual basis. It therefore helps to fully understand your status to take full advantage and avoid penalties or brushes with the law.
There are courts that look at residential ties to determine how much you will pay. The level of residency may be weak or strong. The strong ones include having a dwelling place that is either owned or rented. Residency of a spouse or dependents like children also counts. The court will also focus on how frequent you travel into and out of Canada as well as your traveling status.
Weaker ties will also affect the amount you are required to pay. They are considered if stronger or major ties are impossible to apply or are divided. What is considered as weaker ties includes possession of vehicles, furniture and cloths among other personal properties, availability of social links like being a member to a club or church and economic ties in the form of bank accounts, investments and credit cards. There are personal ties like driving licenses, voting rights, healthcare and non-dependent relations.
Determining your resident status is the work of Canadian Revenue Authority. Their investigations involve several questions aimed at ascertaining the information they already have. There is a NR74 form to be filled that captures your status. It is the information you give that will determine your status.
Categories that are deemed to be resident and thus automatically taxed include government employees like those enlisted in the armed forces. Sojourners or people who have been in Canada for 183 or more days are also taxed as residents. The days may be broken or continuous. CRA will make a determination after evaluating all available facts from your stay.
It is common to confuse part-year residents with sojourners. To get a clearer picture, a person whose status was approved in April will have entered the taxation bracket by December. For those whose status is approved in September, taxation window opens before confirmation of their status. However, global taxation regime kicks in before residency taxation.
There are treaties signed with countries of origin to avoid double taxation. For an immigrant or investor, CRA will evaluate the treaties and communicate on the taxation regime to be used. You are however required to report it as taxable income. Deductions will be done by CRA before local laws apply. Passive income like dividends, royalties and interests is not exempt from taxes. However, there is a minimum that is charged to ensure that you retain as much as possible. Foreign tax credits will also reduce the chances of double taxation.
What do you do with moving charges? If your move commences or ends in Canada, you are not entitled to deductions. However, residents of Canada before and after the move will enjoy the deductions. It is worth noting that CRA revises rules and applies them on individual basis. It therefore helps to fully understand your status to take full advantage and avoid penalties or brushes with the law.
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