Tax issues for new Canadians.

• Author: Neilson, Hugh

While there are many attractions to Canada, I cannot recall anyone attracted by a desire to experience our income tax system! Like most developed tax systems, ours can be extremely complex, and can impose results perceived as neither just nor equitable. Many tax issues are unique to new Canadians, while others are more likely to affect them.

Wherever I Lay My Hat ...

Like many countries, Canada taxes on the basis of residency, and Canadian residents are taxable on all income earned, whether arising within or outside Canada.

The determination of residency can be an uncertain area. The tax courts look to "residential ties" to determine a person's residency. Stronger residential ties include a dwelling place (owned or rented), the residency of a spouse and dependents (e.g. children), and the duration and frequency of trips to Canada. Weaker ties, more commonly examined where the major ties are either inapplicable or divided, include personal property (e.g. clothes, vehicle, furniture), social ties (e.g. club memberships, church), economic ties (e.g. investments, bank accounts, credit cards) and personal ties (e.g. health care, driver's licence, voting, non-dependent relations). Provincial health care coverage generally requires residency in a province, making this a common question from skeptical CRAauditors. An Alberta resident covered by provincial health care is likely a Canadian resident as well. Canada Revenue Agency (CRA) form NR74 sets out many of the issues the CRA will consider in making a residency determination.

Canada Revenue Agency (CRA) Form NR74 sets out many of the issues the CRA will consider in making a residency determination.

Some individuals are deemed resident in Canada regardless of residential ties. These include many government employees such as members of the Armed Forces, as well as any person who is physically present in Canada for 183 days or more in the calendar year (commonly referred to as a "sojourner").

I Just Got Here!

The sojourner is easily confused with a part-year resident. An individual who takes up residency in April will be in Canada more than 183 days in the year, while one arriving in September will not. The sojourner rules only apply to someone whose actual residency has not changed in the year. Where residency commences (or ends) in a calendar year, that person will be subject to tax on world-wide income for that portion of the year in which she was resident, and only on income from Canadian...