My_question_is: Canadian-specific
Subject: Cdn non-resident buying condo in Canada?
Expert: taxman at centa.com
Date: Tuesday August 15, 2006
Time: 03:37 AM -0700
QUESTION:
Hello,
I am a 52 year old non-resident Canadian residing in Brazil, with no
intention of returning to Canada permanently. I am considering buying a
condominium apartment for use during my and my wife's visits to Canada. I am
curious to know whether this would threaten my Canadian non-resident status
and alter my tax situation.
I would likely not rent the condo in my absence. I would probably spend a
maximum of two to three months a year there, in stints of a month or so each
time. This could increase as we near retirement, but of
course will never exceed the half-year restriction.
Here are the relevant details.
1) I am a Canadian citizen who left Canada a little more than five years ago
to take up permanent residency in Brazil. The primary reason was to join my
wife, a Brazilian citizen who has always lived in Brazil. She is a
xxxxxxxxxxxxxxxxxxxx.We married in Brazil seven years ago, before I moved to
Brazil.
2) I have legal permanent residence status in Brazil. I pay income taxes in
Brazil and do not file Canadian tax returns. I have not yet applied for
Brazilian citizenship.
3) I sold my Canadian house immediately before moving to Brazil. I shipped
all my personal belongings to Brazil.
4) I and my wife have owned and lived in a home in Brazil for five years.
This house is our permanent residence.
5) I am a self-employed xxxxxxxxxx working in Brazil. I work from an office
in my home. Most of my income is from Canadian sources, but I have no
employment contracts or employment arrangements with Canadian companies and
all work is performed in Brazil. All my client invoices are issued under my
Brazilian address.
6) I have Canadian current bank accounts so Canadian companies can deposit
payment for my services, and a savings account consisting largely of funds I
had before leaving Canada. These are all registered as non-resident
accounts with my Brazilian address. Interest is subject to Canadian
withholding taxes. Of course, I also have Brazilian bank accounts.
7) I have an RRSP, which existed for many years before my move from Canada.
8) I have two Canadian credit cards to facilitate financial transactions in
Canada. They are registered with my Brazilian address. (I also have
Brazilian credit cards).
9) In the five years I have been away from Canada I have visited Canada on
average once a year--usually for two to four weeks--for vacations.
10) I have no dependents in Canada.
11) I have no business address or telephone listing in Canada. (Although
Voice Over Internet Protocol (VOIP) allows me to maintain an unlisted
Canadian phone number).
12) I no longer have a Canadian driver's licence and I cancelled my
provincial Health Insurance Plan when I left the country. I have a Brazilian
driver's licence and medical insurance here. I don't maintain any
professional memberships in Canada, nor do I have subscriptions etc. shipped
to Canadian addresses. From time to time I use my sister's address to
purchase services I use in Brazil because many North American businesses
won't accept non-North-American addresses.
13) As far as I know, I did everything properly to terminate my Canadian
residency when I left Canada. I obtained professional counsel from a large,
reputable tax consulting firm and followed their instructions. I have no
outstanding tax bills in Canada and filed a final income tax return for
2001, which stated it was my final year of residency. I have not been
contacted by the Canada Revenue Agency since then, so I assume there is no
problem.
Do you think it is possible to purchase a condominium apartment in Canada
and leave it vacant without changing my residency status or creating a
situation in which I would have to pay Canadian income tax on
any or all of my world income? A tax treaty exists between Canada and
Brazil.
If a condo purchase would jeapardize my situation, what would be the case if
my wife--a Brazilian citizen with no ties to Canada other than me--bought
the property in her name?
Thanks kindly for your assistance.
--------------------------------------------------------
david ingram replies:
There is no doubt that buying a condo in Canada leaves you open to attack by
the CRA but it does not matter whether it is in your name or your wife's
name. If it is "available" for your use, the CRA can take a run at you.
And, forget about the 183 day rule for time in Canada. If you were spending
5 months in Brazil, 3 months in Canada and another 4 months touring Asia and
Europe, Canada would tax you.
The real rule is that you have to be in Brazil (your home country) for more
than 183 days to be a non-resident of Canada. A whole bunch of people have
been caught in this when they set themselves up as residents of Costa Rica
and then were only there for three or four months a year even though they
were not in Canada more than 183 days. I think they were mostly called Air
Canada pilots.
However, if you are in Canada less than three months a year and your wife is
clearly Brazilian, works in Brazil and is there most of the time and you are
with her AND you do not have a sponsorship application to bring her to
Canada as a Permanent Resident, They would not succeed in taxing your world
income under Article IV (2) (a) of the Canada Brazilian Tax treaty which you
can have emailed to you at
http://www.fin.gc.ca/scripts/Publication_Request/request_e.asp?doc=brazil_e.
pdf&title=Canada-Brazil+Income+Tax+Convention
But, if you are being paid from Canadian sources and are in Canada 3 months
of the year and work sort of year round, you "will" be taxable on your
income earned while in Canada under Article XIV of the Treaty. I found an
article about your first experience with a Broadband internet connection for
instance.
No problem. File your Canadian return, pay the tax on 25% of your writing
income to Canada and claim the tax paid to Canada as a foreign tax credit on
your Brazilian return.
-----------------------------------------------------
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