In my last article I wrote that it’s possible to stop paying income tax in Canada. The easiest way of doing this is to become a tax exile by leaving the country, though there are two other methods that are discussed in The Taxpayers Bible and neither one involves leaving Canada.
For the purposes of this article I’m going to write about the method I’m most familiar with, which is to leave the country. On the surface of it, that might seem like an easy task. Not so. The Canada Revenue Agency has a list of conditions that you must meet before they’re consider that you’ve left the country and are no longer subject to income tax.
This form should be approached with extreme caution. Here’s why. In the Statement of Residency section, there’s the question: Are you subject to income tax in that country on your world income?
This is where it gets sticky. Awhile ago I was on the website of Alex Doulis. If that name doesn’t ring a bell, Alex wrote the famous book: “Take Your Money and Run,” which is about how to get out of the Canadian tax system. It became a runaway hit and sold over 140,000 copies.
Getting back to Alex’s website. Alex had a client who moved to Dubai, which has no income tax. When the client filled out the NR 73 form, he received the response from the Canada Revenue Agency: “Since you’re not subject to income tax in that country, we consider you to be a factual resident while you’re away.”
This is insane. The CRA considers this guy to be a resident of Canada for tax purposes and they expect him to pay taxes in Canada even though he had severed all his ties. Worse, he’s not eligible for any Canadian services.
As soon as I read that I got on the phone and called Alex. I said, “Alex, this is entrapment, isn’t it?” “Yes,” he replied.
If you go to Alex’s web site you can read the full account. Since this is a concern for any Canadian leaving the country and especially one who no longer wants to pay income tax, the simplest solution is to refuse to fill out the form.
If the CRA sends it to you at your new address and requests that you fill it out, don’t. Don’t give the CRA any opportunity to harm you. Since you’re out of the country and not a resident of Canada this form doesn’t apply.
Another thing to consider if that if you’ve been out of Canada for longer than 182 days in two consecutive calendar years, you’re deemed to be a non-resident.
One other thought, it can be really tricky when dealing with the CRA, especially if your stay outside the country isn’t permanent. You could run into all sorts of trouble when you return and file your first income tax return.
Before you go on the road, check with an accounting professional to see what the requirments are and protect yourself. Beyond that, read The Taxpayers Bible. Without a doubt it’s the most complete source on Canada’s income tax system that I’ve ever seen. At 463 pages, it contains a huge amount of information and will give you some options that you might not have considered.
For far too long, the CRA has had the upper hand against the Canadian taxpayer. The Tax Collector’s Bible shows the reader how to level the playing field and how to win against the tax man. If you pay taxes in Canada, you need this book!