6 Responses to “The Impact of Canada’s Tax Treaties on Residency Status”

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1. potential_expat on Mar 13th, 2008 at %1:%Mar %p

   Regarding non-residency status in Canada. Often overseas jobs are advertised as “tax-free.” This is often the main attraction of such jobs in the first place. However as I have recently come to understand it, this “tax-free” situation while it might exist for nations of other counties it can not actually exist for a Canadian citizen can it?

   Should a person sever ties with Canada they are no longer responsible for income tax in Canada. However in order to be deemed a non-resident they much establish ties with the destination country, which in turn means that the person is responsible for income taxes in the destination country. Correct? Now while these taxes might not be as high as in Canada the person is still responsible for them and therefor is not tax-free.

   Is it ever possible for a person holding Canadian citizenship (and only Canadian citizenship) to be a deemed non-resident of Canada but also not be taxed on income in a destination country? And thus fall into this magical “tax-free” expat zone?

2. Todd Trowbridge on Mar 14th, 2008 at %1:%Mar %p

   In order to be a deemed non-resident of Canada, it would first be necessary to be considered a resident of both Canada and a foreign country with which Canada has a tax treaty (based on the definition of resident in the particular treaty). In many cases, this will mean that you will need to be liable to income tax in the foreign country in order to be seen as a resident under the particular treaty. Whether that country chooses to levy a personal income tax

   However, it is not necessary to be a “deemed” non-resident of Canada under a tax treaty in order to escape taxation in Canada. It is possible to become a non-resident of Canada based on severing residential ties to Canada in which case it would not be necessary to refer to the particular tax treaty to determine your ultimate residence. Of course, you would also have to be moving to a country that does not impose a tax on income.

   In most cases, this is the route you would need to go in order to fall into the “magical tax-free zone”. However, if you continue to have income sourced from countries that impose tax on income, you may still pay some income tax.

3. potential_expat on Mar 14th, 2008 at %1:%Mar %p

   So it’s true then? Unless becoming a resident of a tax free country a Canadian is responsible for income tax. Being overseas is not sufficient to exempt one from tax obbligations. In order to be a non-resident of Canada one must be a resident of another country in addition to cutting ties to Canada. Correct? Ie. A Canadian citizen who has absolutly no ties to Canada (save a passport) yet who can not prove that they are paying income tax in their destination country is still a resident of Canada for tax purposes. Correct? The bottom line is that I am under the impression that
   for a job I am considering I will be working with international colleagues who are living tax free as their workwide income is not taxed by their home country. Eg. Ireland. Yet me being Canadian I must be a resident of either Canada or the destination country and thus be responsible for the income tax that comes with it. Am I missing something?

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