# Would I have to file a Canadian tax return if I stay more than 182 days in Canada ?



## achab (May 31, 2014)

Hello Tax Gurus,


I am trying to decide whether or not to stay more than 182 days in Canada in 2018. One major deciding factor is whether or not I would have to file a Canadian and/or a British Columbian tax return if I do.

I am a US citizen and, based on my understanding of the US-Canada tax treaty, I wouldn't owe any Canadian taxes on my US source income if I stayed in Canada more than 182 days in 2018, as the residency tie breaker would go in favor of the US (my center of vital interests). So, my question here relates to filing obligations, consequence(s) if electing not to file if I don't have to file, and not about any taxes I would have to pay.

Let's assume in this thread that there will be no changes in Canadian tax law in the next two years, and that whatever filing obligations currently apply for 2016 will be the same for 2018.

Let's assume also here that, if I stayed more than 182 days in Canada in 2018, I would owe no income tax to Canada on my US source income thanks the US-Canada income tax treaty.

Most of my income is US source based. The only exception is a very small internet based business. If I tried to maximize profit from it in 2018, the profit would be under $10,000. I will willing to keep the profit below $5,000, or even below $0, if that helps me avoid tax filing obligations. Also, the web site was developed while I was living in the US, so I believe (but I am not sure) that even that income is US source based. If it's not US source, how low does my profile have to be to avoid a Canadian tax filing obligation ?

Canada's revenue agency's web site says that you must have to file a [Canadian] tax return if you have to pay tax for [2018]. Does that mean that, if I don't have to pay tax thanks a tax treaty, I don't even have to file ? Or do I have to, if I spend more than 182 days in Canada in 2018, file a tax return just to declare my US source income, then invoke the treaty to justify the fact that I owe no taxes to Canada ?

Same questions as above, but for British Columbia, if I stay more than 182 days in Canada. There are two cases here: 1) more than 182 days in British Columbia and 2) less than 183 days in British Columbia.


Assuming that I don't have to file a Canadian tax return if I stay more than 182 days in Canada in 2018, would I lose something by not filing, such as the one time opportunity to declare how I want my US based Roth IRA to be treated for Canadian income tax purposes, if and when I file a Canadian tax return in years after 2018 ?


----------



## Bevdeforges (Nov 16, 2007)

I'm hoping someone familiar with Canadian tax rules will come along to answer your questions.

But in the meantime, let me just mention a couple of "general" points involving international taxation. Normally, you don't get to choose which jurisdiction you file your returns with - if you are a US citizen, then you almost always will have to at least file a return, even if no taxes are due. (The main exception is if your gross income is less than the filing threshold for your filing status.)



> Also, the web site was developed while I was living in the US, so I believe (but I am not sure) that even that income is US source based. If it's not US source, how low does my profile have to be to avoid a Canadian tax filing obligation ?


This is the part of your post that worries me a bit. It does not matter when or where your web site was developed. You are considered to be working in whatever country you are physically present in while doing whatever work it is you do. So, income related to the period when you are living in Canada is treated as Canadian source income, no matter where it is paid to or from.

OTOH, if you are physically present outside the US for at least 330 days in a 12 consecutive month period, you may well be eligible to exclude your "earned income" altogether, using the Foreign Earned Income Exclusion. And if you are registered in Canada with the social insurance authorities (and paying the relevant taxes/contributions) you would avoid having to pay the self-employment tax. But that assumes that you are registered for and declaring taxes in Canada.

Just something to think about.
Cheers,
Bev


----------



## achab (May 31, 2014)

achab said:


> Hello Tax Gurus,
> ... how low does my profile have to be to avoid a Canadian tax filing obligation ?


Correction: how low does my PROFIT (not profile) have to be to avoid a Canadian tax filing obligation ? Or does Canada revenue agency care about gross revenue, not profit ? If so, how low does the gross revenue have to be to avoid a Canadian tax filing obligation ?


----------



## Nononymous (Jul 12, 2011)

I actually have no idea, and I suspect nobody else on this forum will either. You need to talk to a Canadian tax expert or accountant or whatever. Particularly as you have the American angle to deal with.

Under what status would you be in Canada? As I understand it, six months is the limit for a visitor, and technically you should not be "working" even if it's US-based online or remote employment.

My advice: if you're coming as a tourist, stay up to 182 days, do whatever it is you do for money, and don't worry about telling the Canadian authorities. Any longer and it gets complicated.


----------



## achab (May 31, 2014)

Nononymous said:


> ...
> Under what status would you be in Canada? ....


From an immigration perspective, I am a permanent resident of Canada. But, in many countries, including Canada, the US and Mexico, resident is defined differently by immigration authorities and taxing authorities.


----------



## Nononymous (Jul 12, 2011)

Ah. Are you a permanent resident from an immigration perspective but a non-resident from a tax perspective? (Does that even work?)

My guess is that you really need to talk to an accountant or call the CRA. 

I don't think there's anything particularly magic about the 182-day limit then. If you're back in Canada as a "resident" then you're obliged to file. If you just "visit" for a few months and return to the US, you could probably get away with pretending it never happened.


----------



## Nononymous (Jul 12, 2011)

Nononymous said:


> Ah. Are you a permanent resident from an immigration perspective but a non-resident from a tax perspective? (Does that even work?)


I ask this because I had some friends who moved to the US after a number of years in Canada, but who wanted to maintain permanent resident status until they qualified for citizenship. This was legally possible - to my great surprise - but they filed Canadian tax returns the entire time (and paid a fair bit extra) because to maintain permanent residence they also needed to maintain tax residence.


----------



## achab (May 31, 2014)

Nononymous said:


> Ah. Are you a permanent resident from an immigration perspective but a non-resident from a tax perspective? (Does that even work?)
> ....


Here is Revenue Canada's definition of Resident: 
https://www.canada.ca/en/revenue-ag...anada-non-residents/non-residents-canada.html

There is no reference in it to one's immigration status at all.

By the way, I believe I have figured from the web site above that, in my situation, I would not be a resident of Canada even if I lived in Canada 365 or 366 days a year as a (immigration status wise) permanent resident of Canada. I was just hoping to get a reply from somebody who meets the same or similar set of assumptions I laid out, the most important one being that, according to the US-Canada tax treaty, I am a resident of the US, and who has had experience staying in Canada more than 182 days and either not having to file a Canadian tax return or finding out that he still have to file a Canadian (or Canadian province) tax return.


----------



## Nononymous (Jul 12, 2011)

I would read the CRA definition as: if you have no residential or other significant tie to Canada AND you do not stay in Canada for more than 183 days AND you have no Canadian income source, then you are not obliged to file a Canadian return for that tax year. 

Note that this is effectively the same situation as a visitor coming to Canada for up to six months with some sort of non-Canadian income source - they would not be obliged to file. 

I'm not sure what the US-Canada tax treaty has to do with it. You can't stay in Canada 365 days per year but somehow opt for American tax residency only. (And you will of course *always* have US tax residency as a US citizen.)

Ultimately you should talk to someone who does this for a living. Also I have no idea how this works with your immigration status. (On that front I might be inclined to seek professional advice or otherwise exercise caution.)


----------



## Bevdeforges (Nov 16, 2007)

As Nononymous says, I'd be really really careful about this one. IIRC Canada is one of those countries where you are obligated to file tax returns until you formally "check out" of residence and the tax system there. The tax treaty doesn't allow you to do an either-or thing. If you are a US citizen, you are ALWAYS considered "tax resident" in the US. It's up to the laws of the "other" country whether they consider you tax resident or not - and then the treaty may offer guidance as to which country you actually pay your taxes to. But generally, a US citizen winds up filing two full sets of tax returns.

The notion of being physically resident in one or the other country may serve as the tie-breaker when it comes to who gets first crack at taxing a certain income stream. But most instances of the term "resident" in the tax treaties seem to refer to physical residence, not "tax residence."

Yeah, I know, clear as mud. Welcome to the Wonderful World of International Taxation.
Cheers,
Bev


----------

