property selling grieve

[4togo]

Our property in Canada did not sell before leaving the country a month and a half ago. Now we have an acceptable offer in. However, we need to confirm on the contract whether we are non-residents of Canada. It looks like because we left, the implication may be that the buyer's lawyer may withhold 25% to 50% of the sum to pass on to the CRA as capital gain till next years filing round. It is a tricky business to wrap our heads around the matter and our realtor is no help either. We can't believe we would be dinged for not having been able to sell before leaving the country. I am seriously contemplating to go back to Canada till the closing date two months on to be able to say that it still is my primary residence and that I am a resident of Canada. How crazy is that? Anyone encountered this? Expert advise much appreciated.

[JandM]

I don't know the answer to your problem, but I do know that being a non-resident of the UK for official purposes is definitely not as simple a matter as just moving out, because they want to keep hooks on you as long as you might owe them anything (while at the same time shoving you off as fast as possible if they might owe you, but that's another matter). It strikes me that the tax/law situation for Canada might be similar.

If I were you, I would make contact with a Canadian accountant or lawyer on this point, as commonsense forms of words don't necessarily mean the same when on official documents.

[James 1077]

I would have a check with your lawyer. Normally you are only a non-resident once you are out of a country for 6 months.

[ralf-nz]

I would have a check with your lawyer. Normally you are only a non-resident once you are out of a country for 6 months.

Where do you have this information from? I would say 'normal(ly)' is quite relative.
When we left (not Canada though) we needed to deregister with our local registration (of address) office.

However I agree legal advice is needed here.

[James 1077]

Where do you have this information from? I would say 'normal(ly)' is quite relative.
When we left (not Canada though) we needed to deregister with our local registration (of address) office.

However I agree legal advice is needed here.

Normal for Commonwealth/Empire based tax systems.

http://www.cra-arc.gc.ca/tx/nnrsdnts.../nnrs-eng.html

This shows the 6 month rule also works but with other factors as well - so, as before, advice should be taken.

Although, as it is, under the terms of the double tax agreement between NZ and Canada the first taxing rights on the sale of property located in Canada goes to Canada so you shouldn't be worse off in the end anyway!

[Super_BQ]

What the poster is complaining about is the with-holding of funds on the sale of their property because the realator & lawyers is treating the transaction as if she was a non-resident (and thus a foreigner). Anotherwords, she is being treated as an overseas resident owning a vacation home in Canada and wanting to sell it later - where capital gains tax would apply. The CRA is very clear and strict about this to the point that if there's any such capital gains tax to pay, the real estate agent AND lawyer will be held accountable if an overseas person were able to get all 100% of the proceeds from the sale of the property and flee away.

I can not speak about UK's tax system. But I can vouche that Canada's taxation system is by far one of the most evolved tax systems in all the western nations. Their powers with their tax act would be similar to the powers the IRS in the US so they share a common ground and strategy.

To 4togo: You need to demonstrate to the real estate agent or acting lawyers in conveying with the sale of the property that you are still a Canadian resident. I'm assuming this property was your principal residence? If so, then you can demonstrate that you have not extinguished all ties in Canada and thus still a resident of Canada. Remember, you can be a resident in more than 1 country around the world. The time you departed Canada is not truly the deciding factor that you've become a non-resident. res ipsa loquitur applies here in that the facts speak for themself. I'll give you some examples below what the CRA uses to determine your residency: Do you still :

- hold bank accounts in your name in Canada
- own a house in Canada
- a member of an organisation, clubs, churches, or hold membership cards like a golf club association.
- own a vehicle and driver's license
- clothing and personal belongings in Canada
- have family ties like dependant children or relatives dependant to you but living in Canada
- sojourned back to Canada on an annual basis (ie. repeated visits for?)
- have your name registered with health care Canada and listed as a voter for election purposes

The 183 day rule isn't a deciding factor at all in determining one's residency status, nor keeping or giving up Canadian citizenship. As i've mentioned in the past years regarding Canadian residency in this forum, there has been court cases where a person who has tried to live in Canada for years by claiming to be a Canadian resident (for beneficial reasons like free medical care, etc) but the courts ruled he was not a resident of Canada and had to pay the medical costs of the surgery. On the other hand, there's a landmark case where a person has not even stepped foot into Canada but was "deemed" as a resident of Canada because of his social and family ties he had with the country. Therefore, was taxed on a world basis in Canada too.

When I became a non-resident of Canada, I had a letter in writing from the CRA (formerly called Revenue Canada) that clearly stated I was a non-resident of Canada. It was a form you fill out and submit in (but i'm not sure if they still follow this formality today - you're best to ask around). I do know that from my tax prof at uni taught us that res ipsa loquitur always applies regardless of what letter you get. The facts do change over time and that becoming a non-resident of Canada was actually work - you had to be very careful in not "re-establishing any ties". Like renewing your Costco membership. Little things that you wouldn't think would matter at all but they do.

Your real estate agent / lawyer doesn't want to take chances so naturally they're would want to with-hold the funds. Flying back to Canada may not mean you're an automatic resident if you've been declared a non-resident. As again, you'll need to show res ipsa loquitur .

Lastly, i'm not a lawyer or a tax specialist. But I do know from experience that tax laws in Canada aren't spelled out in black and white ink but rather, based on numerous examples.

[Super_BQ]

This is a very long post goes to shows that what the CRA website says is not always absolute.

OUT OF CANADA AND RESIDENT - IN CANADA AND NON-RESIDENT
It is possible to be physically "in Canada" and be treated as a Non-Resident
and it is possible to be out of the country for seven years, or never have
even lived in Canada, but wanted to, and be taxed as a Canadian resident as
the following three cases show:

http://www.centa.com/article.php/UsC...205003156.html

[4togo]

Thank you for the detailed information and examples. It sure seems a murky matter to me. We are not trying to dodge having to pay our dues, but we sure would not like to mangled by having to pay 25% over our capital gain (which are our live savings) and standing a fair chance that the purchaser lawyer will withhold 50% of the purchase price to forward to the CRA(as they seem to be allowed to do this). Our situation is as follows:

We have Canadian citizenship and received NZ PR in june 2010. Yes, the intent to leave Canada and to reside in NZ is there of course. But this intent is open ended as we keep the option open to returning at some point. We have a short term rental agreement here till november 2011.

Spouse got a job offer from NZ in March 2011 with a start date of june (her Canadian job technically ended 3rd of june). Principal property went on the market shortly after. Shipper collected our household goods 11th of may and we left for NZ the day after. At this time our property was still for sale. Although we had hoped to sell it before leaving for NZ, this did not happen and so the problem emerged that we had the intent of selling our property while in Canada but now had to deal with the sale of our property at an unknown point in time. I guess we could have prevented this situation by declining my spouse's job offer, but that didn't seem to be a good plan. Neither the option for me to stay behind in an empty house till it would sell at an unknown point in time.

We have an offer in now with a closing date of the end of august. It is conditional though and could technically fall trough. It just seems all a bit weird. We tried to dispose of our property before leaving, and if we would have been successful this would have been free of tax. Since we were unsuccessful before leaving for NZ, now we would have to pay 25% capital gain.

We still have ties with Canada:
- more friends there;
- bank account;
- credit cards;
- principal property;
- property insurance (insurer not willing to renew after certificate runs out in november because vacant);
- pension plans
- driver's licences;
- provincial health cards;
- citizenship.

It is not about us making a decision to sell our principal property after leaving the country to take up residence in NZ. Our intent was to dispose of our Canadian property before leaving. The time of sale of a property is arguably not in our hands. We are waiting for our lawyer to advise us on this, but we cannot believe we would be deemed non-residents for tax purposes by the CRA. Certainly the short time frame of a couple of months this all took place should not warrant such a situation in our opinion. But it sure increased our stress levels and I will go back to Canada for the closing of the sale if that is what I have to do to avoid a financial blow like that. Even though this, of course, means substantial extra cost.

Thanks to all who responded and we will post back how this ends.