Non resident

Tax Topics
1

Hi everyone, using community for the first time & would like suggestion to my following two questions.
1.My client came to Canada in 2017 & left Canada the same year with wife to another country for job without doing any work here in Canada. He does not have any residential ties, business or any other investment income. Now he is coming back in October 2020. He wants to file his 2017, 2018 & 2019 tax returns. I don’t see any reason why he would be filing when he was neither a resident or deemed resident during these years. If he file, would he have to declare all his world income & pay tax as a Non Resident. Is there any advantage for him to file taxes for the previous years.
2.My other client was a resident of Canada with his wife but he left Canada on Jan 01, 2019 for a job in US but his wife is still here. Do we have to file husband as Non Resident & wife as Resident. In case of filing Non Resident tax for husband, do the husband need to declare his US income in his Canadian tax return. he has already filed his US tax return.
Thanks all for viewing & comments

2

These clients hopefully are prepared to pay you properly for the additional time their files are going to take… :wink:
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  1. Client 1: “Is there any advantage for him to file taxes for the previous years.”
    If this was my file, I would take the position that “advantage” as such does not come into it, and neither does what he “wants to” do…
    Rather, I would view it as a question of law - specifically, the Canadian Income Tax Act (eg S250) and the Tax Treaty/convention with the other country(s). Everyone has to be tax-resident somewhere… I would investigate further, if this was my file.
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  2. Client 2: From what you posted, if this was my file, my first impression would be that both appear fully tax resident in Canada and both are taxed in Canada on their World-Wide Income. I would investigate further.
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    IMHO, one cannot take such cases in isolation - one has to obtain copies of the tax returns and assessments filed by these types of taxpayers in the other countries.
    One needs to take extreme extra care with any cases where tax residency is concerned - the penalties (financial and otherwise) can be huge and severe. Also, it is a complex area of law, so familiarity with the relevant sections of the ITA, tax treaties, and various cases is pretty much a necessity.
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3

Thanks for the comments

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In terms of situation number one - the client would not have to pay tax on world wide income as a non-resident - only on Canadian sourced income: https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/individuals-leaving-entering-canada-non-residents/non-residents-canada.html

If he has no income and is not a resident here there is no reason for him to file.

5

Thanks, was thinking in the same way but needed an affirmation from an expert.

6

I would agree (on a general basis) with rachel on tax treatment, IF the determination as to residency status for all relevant periods had already been definitively made, and had resulted in that conclusion.

IMHO, no expert could ever determine for certain the correct legal tax status and circumstances pertaining to a particular case file, without actually examining that whole case file - including the data and documents which these taxpayers have apparently not yet provided to anyone, so the determination has to ultimately be made by the person who has the file.
Whomever is handling cases such as these taxpayers, should examine the whole case file and all the documentation in the light of the earlier references and various suggestions.

The issues of determination of the applicable tax residency precedes the determination of the necessary tax treatment.
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For taxation: If tax-resident, then the usual world-wide income principles and rules apply. If non-resident, then taxed pursuant to Division D (S115 et al), and possibly S212 et al, as applicable. Or not at all if non-resident and Division D / S212 are both not applicable. (And sometimes partial year one status, and partial year another status).
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