20_International_Issues_in_Taxation

20_International_Issues_in_Taxation - Chapter 20...

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Chapter 20 – International Issues in Taxation
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Introduction • The following topics are covered in this chapter: – Residency – Taxation of Non-Residents earning Canadian source income – Double Taxation issues – Emigration and Immigration – Foreign Source Income earned by residents
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International Tax Treaties • These treaties between countries facilitate trade and investment by removing income tax obstacles, such as potential double taxation – The treaties also: • Create certainty for anyone involved in cross border transactions, • Prevent discrimination, • Ensure sharing of revenues, and • Provide information sharing mechanisms for administration of tax laws – In general, where a tax treaty and the ITA differ, the treaty takes precedence – In discussing treaties, we will focus on the Canada/US treaty, although Canada has tax treaties with 107 countries that are signed, or in negotiation.
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Residence • The basis for Canadian taxation is residency: • ITA 2(1) – An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time during the year. • Residency is not defined in the Act, rather, it is determined by applying rules and guidelines that originate in court decisions, common law, the ITA and tax treaties • The rules vary depending on the type of entity: they are different for individuals, corporations and trusts
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Residence of Individuals • An individual can be: – A full time resident – A non-resident – A deemed resident • Sojourners • Others – A part year resident is a combination of two of these: Someone whose residency status changes from full time to non-resident (or the other way around) during the year
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Individuals - Full time Residents • This describes the average person who lives in Canada full time, whose home, job, family and other personal property are in Canada. • These individuals are taxable in Canada on their worldwide income • Short departures from the country for business or vacation are not an issue that affects the residency of these individuals.
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Individuals – Non-residents Taxation of non-residents earning Canadian source income will be discussed later in the Chapter. If a non-resident has no Canadian income there will be no Canadian tax payable. In order to determine whether or not someone who leaves Canada, has become a non-resident, we have to look at whether or not they have maintained residential ties with Canada. Significant residential ties: – The following are considered significant ties to Canada, meaning that if they exist, they will generally result in an individual being considered a resident despite having left the country: Dwelling (unless rented to arm’s length party) Spouse or common law partner remains in Canada (unless living separate or apart prior to departure) Dependants remain in Canada
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Individuals – Non-residents In the absence of one or more significant residential ties,
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This note was uploaded on 01/31/2011 for the course MOS 4462 taught by Professor Ann during the Fall '10 term at UWO.

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20_International_Issues_in_Taxation - Chapter 20...

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