Asset Inventory: Portfolio Review
Most Expats will agree that coming home is way more shocking that leaving. Planning your financial details prior to return helps the reintegration process go smoothly. You will need energy to focus on the cultural reintegration – let us know that you are coming home and we can make sure no stone goes unturned.
Even as psychologists have developed an understanding of the personal and family characteristics that predict expatriate success, nagging questions remain. Likewise, few studies have explored how to prepare people for their return home–a time fraught with upheaval and, sometimes, disappointment. The biggest battle for people is not severing ties to Canada and moving half way across the world to another time zone – it is coming home.
Determination of Residency Status:
When you get into your car to travel to a new place, you may go to an online map site for directions. Applying that strategy on repatriation to Canada may help you reach financial destinations too. When driving, you need to consider many variables: traffic, the weather and gas are probably on your mind. When you chart your financial course upon return to Canada, you need to keep certain things in mind too.
How does the change in your tax status affect your current portfolio?
Is your personal Will in order, any changes to your estate planning needs?
How has your retirement strategy changed? Identify your new financial priorities to help with your investment decision making process.
You can still reduce taxes on return and in the future as a resident of Canada.
Preparing thorough asset strategies (with full disclosure of the job opportunity and future plans) is critical. If this is overlooked, Expats may find themselves paying taxes on offshore earnings several years after they assumed that ties had been severed. Remember that as every case is different; avoid generic advice by former well meaning Expats. Tax laws change continuously. We offer comprehensive services which address the big picture – ‘more than just tax’.
Working outside Canada does not necessarily mean taxes are not paid in Canada. Compared to Americans who are taxed on citizenship, Canadians are taxed on residency and often at a higher rate than UK or US residents. Do not assume that non-reporting of overseas income will remain undetected by CCRA. In general, in determining whether or not a person is resident in Canada one must look to both factual tests relevant to common law rules (largely derived from UK tax cases) as well as statutory rules found in the Income Tax Act. In addition, in many cases “tie breaker” rules found in Canada’s tax treaties may also come into play. These rules are all discussed in general terms below.
An individual will be resident in Canada in a particular year if that individual is “ordinarily resident” in Canada in that year. Disputes with the Canada Revenue Agency most often arise in this regard in connection with individuals who attempt to cease being in resident in Canada for tax purposes. The most significant of these rules is one that states that where, in any particular year, an individual “sojourns” in Canada for 183 days or more, that individual will be deemed to be resident in Canada throughout that particular taxation year. To “sojourn” is usually interpreted as being the equivalent of “visit” or “stay temporarily”.
There is little Canadian case law dealing with the residency of trusts for tax purposes. However, the general rule that most tax practitioners follow is that a trust will be considered to be resident where a majority of its trustees reside. The Canada Revenue Agency’s views on the residency of trusts are summarized in Interpretation Bulletin IT-447.
Any corporation incorporated in Canada after April 26, 1965 is deemed to be resident in Canada. A corporation incorporated outside of Canada may still be considered to be resident in Canada if its “mind and management” or “central management and control” are situated in Canada. Normally, this is found in the place where the director’s meetings are held.
Application of Treaties:
Canada’s tax treaties generally have rules that come into play where a person would otherwise be considered to be resident in both Canada and the other country that is party to that treaty (“tie breaker rules”). In the case of individuals (other than trusts) these rules normally provide as follows:
- If the individual has a permanent home available to him in one (but not both) of those countries, he shall be deemed to be resident in that country;
- If the individual has a permanent home available to him in both or none of those countries he will be deemed to be resident in the country with which his personal and economic relations are closer (“centre of vital interests”);
- If the country with which he has his centre of vital interests cannot be determined, he will be deemed to be resident in the country in which he has a habitual abode;
- If he has an habitual abode in both or neither country, he will be deemed to be resident in the country of which he is a citizen; and
- If he is a citizen of both or neither country, the “competent authorities” of both countries will settle the question by mutual agreement.