Canadian Income Tax

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Hi, I was just wondering what people are doing about reporting all this foreign income

1) Get yourself declared 'non resident'
that would mean my entire RSP account becomes unlocked and 'taxable income' for 2010. That could cost me over $30,000!!!

2) Dont declare it, but then could get caught with a huge back tax bill if ever audited

3) Set aside 20% to pay Canadian Income Tax, plus a bit more for CPP & EI. Might be able to claim some of the 5% foreign tax back for a credit

Just wondering what experience and suggestions people have?
Hi Asif!

In your case, consult your an accountant or a professional. For people who don't own property or have investments, non-resident would be the way to go. I had proof I paid income tax elsewhere. However, your situation is different, so definitely contact a professional and have them give you some suggestions. You do not want to have to pay more than you need to obviously!

Has anybody actually gone thru the Non-Resident route with Revenue Canada and have any advice on the process?

I found out you do not have to cash in your entire rsp balance after all, you just arent eligible to contribute any more into it until you declare yourself back resident with revenue canada.

here is some of what i have pieced together

here is the link where they talk about the process

you have to sever primary ties (house, car). spouse and kids are also considered primary ties if they are staying in canada so if they are not going with you then you will still have primary ties. in my case i am single and i sold my condo.

then there is the 183 day rule. because i have been in canada more than 183 days in 2010 i will be considered resident for 2010 and will have to pay tax upto dec 31/10. that means i have to declare foreign income upto dec 31,10.

in april 2011 i have to file a tax return for the 2010 tax year. not sure how i will be doing then when all the receits will be mailed to my canadian address but i have to figure this out.

before you leave canada, you should file form NR73 which shows your intent to become non resident and they will give you an opinion and start the process. Try to show supporting evidence such as letters to banks etc notifying them that you intend to be non resident and out of the country for more than two years. i am waiting for a copy of my contract to show supporting evidence

last step, when you file your tax return in april 2011 you have to declare your property (excluding cash and rsps) and calculate capital gains from acquisition. ie, if you bought a 5 year gic in 2008 for $10,000 and its worth $12,000 now, you have $2000 capital gain, even though you are not cashing in your 5 year gic. regardless, you have to pay departure tax on your paper capital gains.

from what i understand this is the process, although i still have not gone thru all the steps myself. try to call the international tax office. they take two months to respond to letters if you need confirmation in writing.

once you are non resident, your RSP and TFSA become frozen. meaning, you can take money out but you are no longer eligible to contribute in. after a few years when you declare yourself back resident, then you are eligible to contribute based on canadian earned income.

if you are earning income when you are gone, such as the 5 year gic example, the bank is notified that you are non resident. they then take a flat 25% tax off any earnings since you will no longer be filing canadian income taxes

again, i suggest calling the international tax office

also, there are licencing issues what your bank and financial advisor can and cant do when you are declared non resident. make sure you discuss this with them and set up all your investments accordingly before you become non resident. create a paper trail to show revenue canada you told the bank your intent to become non resident, this will help your case

basically you can only withdraw as a non resident. they can not trade or buy new funds for you. so not sure where to be parking this foreign income other than a savings account?

download or order the book 'non residents and income tax' T4058E from the revenue canada website and the appropriate forms to complete

this is just the information i have pieced together, so i am by no means an expert, and still have to go thru the process myself to find it all out, so if anyone can help pls let me know!!! :-)
Thanks SO Much Asif! Very helpful!
i found my old post from a year ago

there was a lot of wrong information being passed around when i was looking into it but if you look at my post above it hopefully explains it a bit clearer

i was declared non resident as of the date i left canada in aug/10 so i did not have to file a tax return upto dec 31. as a result i had overpaid taxes up till august as i was being taxed on an annual rate so i ended up with a big tax refund

now when i visit i have no Ohip Health Insurance so I just buy a two weeks visitors insurance policy before i come