Ch1: Introduction To Federal Taxation In Canada Flashcards
Common Law Rules (the Canadian courts have established rules to determine if you are resident of Canada):
What are the significant residential ties?
- Dwelling (place of residence, renting/owning)
- Spouse or common law partner
- Dependants
Last 2: spouse/kids living in Canada with you.
Common Law Rules (the Canadian courts have established rules to determine if you are resident of Canada):
What are the secondary residential ties?
- Personal property
- Social ties (sports team, religious group/church)
- Economic ties (employer, credit cards, bank accounts)
- Landed immigrant status or work permit
- Health card, driver’s license
- Vehicle registration
- Passport (if you have none except passport, does not make you resident)
- Membership in Canadian unions or professional associations
If no significant ties, need to have a lot of secondary ties to be considered resident of Canada.
Common Law Rules (the Canadian courts have established rules to determine if you are resident of Canada):
What is other (temporary absences)?
Has residence status been retained:
- Intent to come back?
- Frequency of visits
- Residential ties outside of Canada (most important one, secondary ties outside of Canada).
Part year residence: explain entering Canada.
Immigrate: enter Canada at a certain date during the year for the rest of your life. Usual immigration rules. You become resident of Canada, have to report world income (pro rata for portion of the year).
Part year residence: explain departing Canada.
Emigrate: depart Canada at a certain date during the year for the rest of your life. Until you are no longer resident of Canada, you have to report world income (pro rata for portion of the year). You become non-resident at the latest of:
- Departure date
- Departure of spouse and dependants
- Establishment of new residence
Deemed residents - has priority over the Common Law rules. What are the deemed rules of residency?
If the common law rules say you are resident, you have to look at the deemed rules (deemed rules override common law rules).
- Sojourners in Canada for 183 days or more.
—> sojourner: non-resident of Canada, comes in and out. Does not include daily commute to work. - Members, at any time during the year, of the Canadian armed forces when stationed outside of Canada.
- Ambassadors, ministers, high commissioners, officers or servants of Canada, as well as agents general, officers, or servants of a province, provided they were Canadian residents immediately prior to their appointment.
What are the types of income taxed under Part 1 for non residents?
- Employment income earned in Canada
- Business income earned in Canada (owning business in Canada)
- Disposition of taxable Canadian property (sell Canadian real estate)
Return required if Part 1 is tax payable
What is Part 13 of the Income Tax Act (property income of non-residents)?
Passive income earned in Canada by a non resident is taxed under Part 13 of ITA.
e.g., interest income, rental income, pension income, dividend income, etc.
Part 13 is a withholding tax of 25% (less if a treaty exists).
The payor is obliged to withhold the amount and remit to the CRA. Do not file tax return.
Common Law Rules (the Canadian courts have established rules to determine if you are resident of Canada):
What determines if the corporation is resident of Canada?
If NOT resident of Canada:
- Yearly test: Mind and Management determines if Canadian resident —> where are the major decisions made? Where are the books and records kept? Where are the directors meetings held?
If DEEMED resident of Canada:
- If incorporated in Canada after April 26, 1965: resident of Canada.
- If incorporated before April 27, 1965:
> Was resident at any time after (because of Mind and Management)
> Carried on business in Canada at any time after
> Basically, as soon as in Canada, you pay taxes in Canada. Even if you come to Canada for 1 year and then leave, you still pay taxes in Canada.
