Canadian Tax Q&A

Q: Can Canadians get exempt from paying taxes in either country?

A: Not without claiming non-residency for tax purposes (more on this later). As a resident of Canada for tax purposes, you must pay both Korean and Canadian taxes. However, because there's a double tax treaty between Canada and Korea, the Government of Canada will give you  a tax break.

Here's a quick example  (doesn't take into account any tax credits and deduction you may receive to lower your tax liability, both in Korea and Canada):

Assumptions:

Tax rate Korea: 15%
Tax rate Canada: 15%

Korean income: $20,000 CAD (after converting)

Taxes paid to Korean government: $20,000*15%= $3,000

The Cdn government will use the amount you paid to the Korean government to reduce your taxable income in Canada.

Thus, Taxable income in Canada = $20,000 - $3,000 (from above) = $17,000

Canadian tax liability = $17,000*15% = $2,550

Q: Really? There is no way to avoid paying Korean or  Canadian taxes?

A: You gotta pay Korean taxes--period.

You can avoid paying Canadian taxes if you call the Canada Revenue Agency (CRA hereafter)  and tell them you want to be a non-resident of Canada for tax purposes. However, whether you can claim non-residency depends on your residential ties to Canada:

"You are a non-resident for tax purposes if you:

normally, customarily, or routinely live in another country and are not considered a resident of Canada; or

do not have significant residential ties in Canada; and

you live outside Canada throughout the tax year; or

you stay in Canada for less than 183 days in the tax year."

Residential ties include:


-a home in Canada;
-a spouse or common-law partner (see the definition in the General Income Tax and Benefit Guide) or dependants in Canada;
-personal property in Canada, such as a car or furniture;
-social ties in Canada; and
-economic ties in Canada

Other ties include the following:

a Canadian driver's licence;
Canadian bank accounts or credit cards; and
health insurance with a Canadian province or territory [1]

The main ties are the following: (1) spouse; (2) house ; property and/or car ownership under your name; and/or (3) investments (including savings accounts, not chequeing).

If you don't any of the those main ties, it's safe to assume you can claim to be a non-resident.  If you wanna be completely safe, you can submit form IT221R3-CONSOLID    Determination of an Individual's Residence Status to the CRA and they will determine whether you can claim non-residency [2].

Note that if you self-claim to be a non-resident, but the CRA later determines you were actually a resident, they can retroactively make your claim invalid, meaning you will have to pay taxes (plus interest) for the year(s) you claimed to be a non-resident,

Q: Do I have file my returns here?

A: You must file a Canadian income tax return if you:

have to pay tax; or
want to claim a refund.



Q: How do I report my Korea income on my return?

A: Ideally, ask your employer for a year-end pay stab and keep it just in case the CRA asks for it.  In Korean, it's "원어민교사 연말 급여지급내역," meaning "year-end foreign teacher's salary payments." Then use the exchange rate to convert it to Canadian dollars. I doubt the CRA will be picky when it comes to the exchange rate, but if you're concerned and wanna be precise, you can look up historical rates on the Bank of Canada's web site to get a yearly average (you might have to calculate it yourself).

I know some employers (especially hagwons) do not give pay stubs. In this case, just estimate. If the CRA asks for proof, I'm sure they will understand if you tell them your employer was disorganized (or whatever) and didn't provide pay stubs.

Q: I know some people who are residents, but when they filed their returns for the years they were in Korea, they reported no income.

A: Tax evasion is illegal. While I will admit  it's highly unlikely the CRA will find out if you only do it for one year, it's illegal nevertheless.

The risk increases dramatically if you're in Korea for several years and file paper returns in Korea. The CRA will may notice that you keep sending returns from Korea and will suspect that you are earning income there. Filing via NETFILE is less suspicious.

The greatest risk is when you're away for several years and decide to to file all your returns when you return to Canada and report no income.

Q: Came to Korea in '10. Returned to Canada for a year, and now I'm back, and probably for a long time. Can I apply for non-residency retroactively (i.e., my first year in Korea in '10?

A: Yes. Again, if you self-claim this, remember the CRA can make your claim invalid.

Q: Do I lose my health coverage if I declare non-residency?

A: If you're out of Canada for more than three months, you lose your coverage whether you're a resident or not. You will have to apply for it if you return to Canada.

Q: Will I lose any other privileges if I declare non-residency?

A:  Yes.

1) GST/HST credit available in certain provinces. In the end, however, you're likely better off declaring non-residency.

2)

Ineligible for Government grants and scholarship; in Ontario, you need to be a resident of the province for the last 12 months to be eligible. This will affect you if you intend to go back to school.


References

[1] http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html

[2] http://www.cra-arc.gc.ca/E/pub/tp/it221r3-consolid/README.html

A quick note to anyone on this board from Saskatchewan, but I found out yesterday via Sask Health's website that non-residents can get their helthcare coverage back as soon as you return to Canada.  There is a form to fill-out, which will soon be available online, too.  I hope this is true for other provinces. 

I am from Ontario and before I came to Korea I had to show my work contract to the OHIP office and they said my health care would not be suspended as long as each year I show my new contract. However, if you don't show your contract, you are suspended when you get back for 3 months from healthcare. 

I've been away from Canada for 6 years and I am never going to live there again. I spoke to Revenue Canada about this and was told I have to send in an income tax form every year to claim 100% of my CPP and old age pension. If I declare non-residency I don't have to file but my pensions will be reduced by a percentage - I can't remember how much 10-20-%???

So every year I download the form and sign it and date it and mail it to Ottawa. I include a handwritten note that says I made nothing and I ain't ever coming back. They can fill it out themselves.

I haven't heard anything about it from the frozen north. No news is good news.

Do you know if public schools take money off your pay each month for this?  I really hope so... I don't have 3000 to pay for taxes...

They should automatically take the taxes off each month, in addition to the health insurance and pension. You can ask for a copy of your pay and deductions at the end of each month to make sure.

I'm really curious how much I will have to pay when I get back to Canada...

So if I started at the end of September and I want to file my taxes, I need something from my school I am assuming? What should I ask my school to give me? I haven't recieved any pay stubs or anything like that..

Do you know if public schools take money off your pay each month for this?  I really hope so... I don't have 3000 to pay for taxes...

As stated above, the quick example doesn't take into consideration tax credits and deductions for simplicity. You won't have to pay 3 million KRW in taxes.

I'm really curious how much I will have to pay when I get back to Canada...

Again, example above doesn't take into consideration tax credits and deductions in Canada (tuition credit, OSAP interest payments, etc.). Your Korean income will also reduce your tax liability.  If anything, you'll get a refund.

So if I started at the end of September and I want to file my taxes, I need something from my school I am assuming? What should I ask my school to give me? I haven't recieved any pay stubs or anything like that..

Look at the FAQ with regards to paystubs. If not, just use your gross income and convert to CAD.

Q: How do I report my Korea income on my return?

A: Ideally, ask your employer for a year-end pay stab and keep it just in case the CRA asks for it.  In Korean, it's "원어민교사 연말 급여지급내역," meaning "year-end foreign teacher's salary payments."

I asked my co-teachers about this and I can get one, but only in Korean. I'm curious how other Canadians dealt with reporting their Korean income to the CRA? Does the CRA need/want an English version of it? Did any other Canadians have to get their school to issue one in English? Thanks in advance for any replies that might have some answers about this.

Q: How do I report my Korea income on my return?

A: Ideally, ask your employer for a year-end pay stab and keep it just in case the CRA asks for it.  In Korean, it's "원어민교사 연말 급여지급내역," meaning "year-end foreign teacher's salary payments."

I asked my co-teachers about this and I can get one, but only in Korean. I'm curious how other Canadians dealt with reporting their Korean income to the CRA? Does the CRA need/want an English version of it? Did any other Canadians have to get their school to issue one in English? Thanks in advance for any replies that might have some answers about this.

That'd be ideal, but, realistically, good luck with that! If I were you, I'd just convert your yearly gross salary into CAD using the average yearly exchange rate.

If the CRA is serious, they'll ask you to go to the Canadian embassy (if you're in Korea) or the Korean one (or consulate) to certify the pay stubs (if you decide to wait and just file in Canada). However, will the CRA go through that trouble ? Hmm, maybe if you were making hundreds of thousands or millions in Korea, but otherwise, chances are nil to none.

SOOOO just not filing at all, playing the ignorance card... good idea or bad??

SOOOO just not filing at all, playing the ignorance card... good idea or bad??

Read the FAQ and you decide if it's a good idea or not. Bottom line: it's illegal.

Try applying for non-residency if you really don't want to pay taxes.

For those Canadians who have been deemed non-residents - thoughts?

For the 2013 tax year, I'll be out of Canada for all 365 days (going on year 2 - leaving in 2014) meaning I'll have 0 Canadian income in 2013.

I also have no spouse, dependents, property, "social ties", home in Canada. My driver's license and health card have expired since I've been here. The only tie I have back home is a bank account/credit card.

Do you think this is enough to get me deemed a non-resident? I really don't want to pay taxes back home and am wary of filing a falsified return...

For those Canadians who have been deemed non-residents - thoughts?

For the 2013 tax year, I'll be out of Canada for all 365 days (going on year 2 - leaving in 2014) meaning I'll have 0 Canadian income in 2013.

I also have no spouse, dependents, property, "social ties", home in Canada. My driver's license and health card have expired since I've been here. The only tie I have back home is a bank account/credit card.

Do you think this is enough to get me deemed a non-resident? I really don't want to pay taxes back home and am wary of filing a falsified return...

yes, it's enough. both my health card and driver's license are still valid, plus i have OSAP and a bank account too. i have been a non-resident since i left canada in 2009!

I didn't do a thing (except collect pay stubs) & file my taxes when I got back to Ontario.

H&R Block were totally incompetent & claimed I owed thousands in taxes. They were wrong.

I got a friend of mine who is a former accountant and current deputy treasurer of a small Canadian town to do my taxes. He told me that as long as I have no ties to Canada, (property, etc.) I wouldn't owe a dime. My taxes were filed, and he was right.

However, don't take my word on this, perhaps it's different for others. I'll try to get a more definitive answer on this soon.

I didn't do a thing (except collect pay stubs) & file my taxes when I got back to Ontario.

H&R Block were totally incompetent & claimed I owed thousands in taxes. They were wrong.

I got a friend of mine who is a former accountant and current deputy treasurer of a small Canadian town to do my taxes. He told me that as long as I have no ties to Canada, (property, etc.) I wouldn't owe a dime. My taxes were filed, and he was right.

However, don't take my word on this, perhaps it's different for others. I'll try to get a more definitive answer on this soon.

As stated in the FAQ,  as long as you don't have the big three (spouse,  property,  and investments) , you should be able to self - declare as a non- resident and thus not pay taxes. To be COMPLETELY safe, however,  you'll have to submit the appropriate form to the CRA.

Where did you get 15% from? Isn't the tax in Korea 15%?

Second question, When can I apply for non-residency? Can I do it right now? I've only just come to Korea, and I don't know how long I'm staying here.