Liability for Tax

Question 1

Taxation and residence status

Answer 1

• full year residence: taxed on WW income for the year
• part year residence: taxed on WW income for the part of the year they were a resident
• non-residence: taxed on CAD sourced income (employment/business/investment of CAD property) and withholding taxes apply to passive income and interest from non-arms length parties

Question 2

Determining residency (factors)

Answer 2

• primary factors: dwelling in Canada, spouse in Canada, Dependents in Canada
• secondary factors: personal property in Canada, social/economic/other ties
• other factors: not factually resident but living in Canada for more than 182 days, member of the Canadian armed forces, ambassador/officer of Canada or province

Question 3

Date that taxpayer become non-resident

Answer 3

• the later date of:
  1) date individual leaves canada
  2) date spouse/dependents leave canada
  3) date becomes resident of new country

Question 4

Determining residency of Corporations

Answer 4

• incorporated in Canada after April 26, 1965
• central management is in Canada
• Control is in Canada

Question 5

Deemed disposition when become non-resident

Answer 5

• when become non-resident, you are deemed to have disposed of assets at that date
• exemptions are: Canadian real property, Business property, RRSP
• however there is an election to include exclusions in deemed disposition, which can be used against capital losses

Question 6

If a non-resident is employed in Canada, Carried on a business in Canada, or Disposed of Canadian property

Answer 6

• taxed in Canada on the Canadian source income
• withholding rate = 25%, however a treaty may apply to lower such rate

Question 7

If permanent establishment is in Canada

Answer 7

• considered to be running a business in Canada even if non-resident