Immigration and Emigration
When an individual immigrates to or emigrates from Canada in a calendar year, he or she is treated as a Canadian resident for the period he or she is resident in Canada, and a nonresident for the period he or she is a nonresident of Canada, and is usually referred to as a part-year resident.
Because an individual’s Canadian tax liability is based on residence, the date on which an individual becomes or ceases to be a resident of Canada is relevant in determining how, and how much of, the individual’s income is subject to Canadian tax.
Date an individual changes resident
Generally speaking, the date of the physical move is recognized as the date Canadian residence begins or ends. In other words, an individual becomes a resident of Canada the date on which the individual arrives Canada. And an individual becomes a nonresident of Canada the date on which the individual leaves Canada and severs all residential ties to Canada. However, other factors must be taken into consideration, including the extent to which the individual establishes or ceases to have residential ties with Canada.
If an individual has retains sufficient residential ties with Canada (i.e. remain a factual resident of Canada), the CRA does not consider that individual a non-resident and in this case is subject to Canadian tax on worldwide income. For example, even an individual no longer resides in Canada but his wife and dependents do, and have properties such as a home, a car or furniture in Canada. In such case, he will be considered a factual resident by the CRA.
Determination of an individual’s residence status can only be made based on the specific facts of each case. For more details, more information can be found in the "Am I a non-resident?".
New immigrants in Canada must know - Common Reporting Standard ("CRS"), probably the most influential (global) tax reform in the recent history!
As mentioned earlier, an individual becomes a resident of Canada the date on which the individual arrives Canada. Since Canadian residents are taxed on their worldwide income, "all" of your offshore income, such as employment income, capital gains on investment or properties and even bank interest have to be reported when filing your Canadian tax return. It's worth to mention here that you will need to make a declaration on your personal tax return every year whether you hold more than C$100,000 of specified foreign property including, but not limited to: cash, security and even life insurance policies that have cash value.
And why is the CRS your concern?
If you have not heard of the CRS or have not done an evaluation of its impact on your tax position, you're strongly advised to do it right away. Otherwise, you are running a very high risk of non-compliance and the consequences can be severe.
Quick Notes
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Over 150 countries, including Canada, Hong Kong and China have signed on to the CRS. In essence, CRS is an information standard for automatic exchange of information on financial accounts between the tax authorities of various jurisdictions.
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The most important difference of the CRS from the past is that the requirements and responsibilities lies with the financial institutions and it's done automatically without the need of your consent.
Example
If you are now a resident in Canada and you have financial accounts in Hong Kong and China, these financial institutions are required to disclose your financial information to the appropriate tax authorities, in this case, IRD in Hong Kong and the State of Administration of Taxation ("SAT") in China, In turn, the IRD and SAT will automatically direct the information to the Canadian Revenue Agency ("CRA") in Canada, and vice versa.
Penalties, Interest and Possible Criminal Prosecution – Consequences of Failure to Report
Canadian taxpayers who fail to report their foreign income or certain offshore assets can face significant penalties and accrued interest charges if caught by the CRA.
Prosecuting the taxpayer for the crime of tax evasion is another option in the CRA’s arsenal. If convicted of this crime, a Canadian taxpayer can face up to two years in prison.
For more details, go to Common Reporting Standard.
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