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My question is: Canadian-specific
QUESTION: Dear David,
Great website - thank you.
What risks does one assume by following your advice and not filing an NR-74
form for the Determination of Residency - see your previous advice to a
respondent from Libya - and simply coming back to Canada someday, albeit
unforeseen.
Hope this question is meaty enough to warrant
an answer on the website - and
if not, please drop me a line at my email:
trevor.lewis@macquarie.com - I am
living in Korea and would be interested to speak to you further regarding an
eventual return to Canada, the next time that I fly through Vancouver. I
am
interested in, if possible, structuring the purchase of Canadian property
such that it is not directly attributable to my residency determination.
I
realize that this is probably likely impossible - but would like to explore
the possible options.
regards,
TXXXXX XXXXX
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david ingram replies
The form you are referring to is an NR-74 which is used to
determine if a person has succeeded in leaving the country as a taxable
resident.
The NR 74 is used when someone enters Canada to determine if
they have become a taxable resident.
The difference between living in Korea and living in Libya is
the difference between night and day.
In your case, taxation of your income in Canada is mostly
governed by Article IV of the Korea <> Canada Income Tax Treaty which reads as
follows:
Convention Between Canada and the Republic of Korea
For the Avoidance of Double Taxation and the Prevention of Fiscal Evasion
With Respect to Taxes on Income
The Government of Canada and the Government of the Republic of Korea
desiring to conclude a convention for the avoidance of double taxation and
the prevention of fiscal evasion with respect to taxes on
income have agreed as follows:
I. Scope of the Convention
Article 1
Personal Scope
This Convention shall apply to persons who are residents of one or both of
the Contracting States.
Article 2
Taxes Covered
1. This Convention shall apply to taxes on income imposed on behalf of
each Contracting State, irrespective of the manner in which they are levied.
2. The existing taxes to which the Convention shall apply are in
particular:
(a) in the case of Canada: the income taxes imposed by the Government of
Canada (hereinafter referred to as "Canadian tax");
(b) in the case of Korea:
(i) the income tax, and
(ii) the corporation tax,
(hereinafter referred to as "Korean tax").
3. The Convention shall apply also to any identical or substantially
similar taxes which are imposed after the date of signature of this
Convention in addition to, or in place of, the existing taxes.
II. Definitions
Article 3
General Definitions
1. In this Convention, unless the context otherwise requires:
(a) (i) the term "Canada" used in a geographical sense means the
territory of Canada, including any area beyond the territorial waters of
Canada which, under the laws of Canada, is an area within which Canada may
exercise rights with respect to the sea-bed and sub-soil and their natural
resources;
(ii) the term "Korea" means the Republic of Korea, and when used in a
geographical sense, the term means all the territory in which the laws
relating to Korean tax are in force. The term also includes the territorial
sea thereof, and the sea-bed and sub-soil of the submarine areas adjacent to
the coast thereof, but beyond the territorial sea, over which Korea
exercises sovereign rights, in accordance with international law, for the
purpose of exploration and exploitation of the natural resources of such
area;
(b) the terms "a Contracting State" and "the other Contracting State"
mean, as the context requires, Canada, or Korea;
(c) the term "person" includes an individual, an estate, a trust, a
company, a partnership and any other body of persons;
(d) the term "company" means any body corporate or any entity which is
treated as a body corporate for tax purposes; in French, the term "soci=E9t=E9"
also means a "corporation" within the meaning of Canadian law;
(e) the terms "enterprise of a Contracting State" and "enterprise of the
other Contracting State" mean respectively an enterprise carried on by a
resident of a Contracting State and an enterprise carried on by a resident
of the other Contracting State;
(f) the term "competent authority" means:
(i) in the case of Canada, the Minister of National Revenue or his
authorized representative;
(ii) in the case of Korea, the Minister of Finance or his authorized
representative;
(g) the term "tax" means Canadian tax or Korean tax, as the context
requires;
(h) the term "national" means:
(i) any individual possessing the nationality of a Contracting State;
(ii) any legal person, partnership and association deriving its status as
such from the law in force in a Contracting State.
2. As regards the application of the Convention by a Contracting State any
term not otherwise defined shall, unless the context otherwise requires, have
the meaning which it has under the laws of that Contracting State relating to
the taxes which are the subject of the Convention.
Article 4
Fiscal Domicile
1. For the purposes of this Convention, the term "resident of a
Contracting State" means any person who, under the law of that State, is
liable to taxation therein by reason of his domicile, residence, place of
head or main office, place of management or any criterion of a similar
nature.
2. Where by reason of the provisions of paragraph 1 an individual is a
resident of both Contracting States, then this case shall be determined in
accordance with the following rules:
(a) he shall be deemed to be a resident
of the Contracting State in which he has a permanent home available to him.
If he has a permanent home available to him in both Contracting States, he
shall be deemed to be a resident of the Contracting State with which his
personal and economic relations are closest (hereinafter referred to as his
"centre of vital interests");
(b) if the Contracting State in which he has his centre of vital
interests cannot be determined, or if he has not a permanent home available
to him in either Contracting State, he shall be deemed to be a resident of
the Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither
of them, he shall be deemed to be a resident of the Contracting State of
which he is a national;
(d) if he is a national of both Contracting States or of neither of them,
the competent authorities of the Contracting States shall settle the
question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a company is a
resident of both Contracting States, then it shall be deemed to be a resident
of the Contracting State of which it is a national. |
.
Assuming that you have a residence in Korea and do NOT have one in Canada,
Article 4(2)(b) which I have highlighted in red says that you are taxable in
Korea, not Canada.
It is also very easy to buy property in Canada and remain a non-resident (if
you are in a Tax Treaty Country like Korea) provided the property is rented out
to a non-arms length person for a lease period of a year or longer.
I would be happy to help you with this on your return or before your return to
Canada if you are here.
We can also work by mail, email or courier.
David Ingram - www.centa.com
the CEN-TA Group
US / Canada / Mexico (and Korea)
Income Tax and Working Visa Matters
108-100 Park Royal South
West Vancouver, BC, CANADA
V7T 1A2
(604) 913-9133 Fax (604) 913-9123
Cell (604) 657-8451 10 AM to 10 PM 7 days a week
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