Staying in a country for 5.5 months with a tax treaty?
- Thread starter bnpsu
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While Thailand is quite loose, lenient, and lacking in enforcement, days spent is not a big focus in Canada to determine tax residence. You can be Canadian tax resident simply by having residence available in Canada or other vague connections. Days spent is more of a last resort in Canada, for people who don't tick any other boxes but still spend 183 days in Canada.
The Canada,Thailand tax treaty defines residence as:
In your case, you are probably tax resident in both according︂ to this clause.
Just follow those clauses to figure out️ where you are tax resident. It wouldn't hurt to have a tax lawyer help you figure out where you would fall in your case.
Based spending 5.5 months per year in Canada, I can see Canada insisting you are tax resident there under a, b, and c, making it up to Thailand to fight for you to be tax resident there instead of Canada.
The term permanent home isn't defined in the treaty. But if you manage to spend 5.5 months in Canada, wherever you've been living might qualify as permanent. And if you're spending nearly equal amounts of time in both countries, it might︀ be hard to convince Canada you have your centre of vital interests in Thailand (why︁ don't you live there all the time if it's your centre?). This takes us to︂ clause 2(c) and habitual abode. We're probably back to 5.5 months being long enough time︃ in Canada that wherever you were staying before counts as a habitual abode.
In the︄ end, you're left with clause 2(d) to save you.
The Canada,Thailand tax treaty defines residence as:
In your case, you are probably tax resident in both according︂ to this clause.
Just follow those clauses to figure out️ where you are tax resident. It wouldn't hurt to have a tax lawyer help you figure out where you would fall in your case.
Based spending 5.5 months per year in Canada, I can see Canada insisting you are tax resident there under a, b, and c, making it up to Thailand to fight for you to be tax resident there instead of Canada.
The term permanent home isn't defined in the treaty. But if you manage to spend 5.5 months in Canada, wherever you've been living might qualify as permanent. And if you're spending nearly equal amounts of time in both countries, it might︀ be hard to convince Canada you have your centre of vital interests in Thailand (why︁ don't you live there all the time if it's your centre?). This takes us to︂ clause 2(c) and habitual abode. We're probably back to 5.5 months being long enough time︃ in Canada that wherever you were staying before counts as a habitual abode.
In the︄ end, you're left with clause 2(d) to save you.
I just spoke to a Canadian tax lawyer about this topic yesterday
The wording of the treaty is important - although many contain the standard OECD stuff.
If you meet the local domestic criteria for residency in both countries then it goes to the tiebreaker rule in Article 4, which trumps domestic law.
The key is to HAVE a permanent home available in the other country and to NOT have one in Canada.
Hotels are not considered a PHA but if you were to stay in the same one for the whole time CRA might fight you on that. Airbnbs should be similar.
These standards︀ are a bit annoying bc they aren't well-defined
Avoid signing any leases or rental agreements.︁
Avoid having a storage locker in Canada.
The lawyer told me staying in a hotel︂ for 1 month would NOT be considered a PHA.
So if you can stay mobile︃ for 5.5 months it should work. It should not even get to the centre of︄ vital interests test.
The wording of the treaty is important - although many contain the standard OECD stuff.
If you meet the local domestic criteria for residency in both countries then it goes to the tiebreaker rule in Article 4, which trumps domestic law.
The key is to HAVE a permanent home available in the other country and to NOT have one in Canada.
Hotels are not considered a PHA but if you were to stay in the same one for the whole time CRA might fight you on that. Airbnbs should be similar.
These standards︀ are a bit annoying bc they aren't well-defined
Avoid signing any leases or rental agreements.︁
Avoid having a storage locker in Canada.
The lawyer told me staying in a hotel︂ for 1 month would NOT be considered a PHA.
So if you can stay mobile︃ for 5.5 months it should work. It should not even get to the centre of︄ vital interests test.
I misread what you wrote.
I thought you said that the treaty wasn't mentioning the permanent home criteria when instead you were looking for a definition of the term.
The definition in my experience is pretty standard, it could be something that you own or something that you rented for the entire year
I thought you said that the treaty wasn't mentioning the permanent home criteria when instead you were looking for a definition of the term.
The definition in my experience is pretty standard, it could be something that you own or something that you rented for the entire year
According to him, as long as you stay less than 6months and stay in accommodations that are not regarded as PHAs, like hotels the whole time, you would remain non-res of Canada and only be taxable on Canadian-source income, and not on your world-wide income for the whole year.
But there may be anti-avoidance (GAAR) clauses and the above may be nullified by these if CRA thinks you are just setting yourself up to avoid taxes. The whole issue is︀ complex and evolving - I believe there were some proposed changes in Freeland's latest budget.︁
So obviously, get an independent legal opinion based on your own circumstances before making any︂ decisions.
But there may be anti-avoidance (GAAR) clauses and the above may be nullified by these if CRA thinks you are just setting yourself up to avoid taxes. The whole issue is︀ complex and evolving - I believe there were some proposed changes in Freeland's latest budget.︁
So obviously, get an independent legal opinion based on your own circumstances before making any︂ decisions.
Yes that is correct,︁ make sure to document everything very well..
You can indeed stay in Canada 5.5 months︂ if you have a permanent home in the other country the whole year, however what︃ are you going to do the whole 5.5 months you are in Canada? If you︄ have a business and are a sole director and work from Canada the company could︅ be deemed tax resident in Canada.
You can indeed stay in Canada 5.5 months︂ if you have a permanent home in the other country the whole year, however what︃ are you going to do the whole 5.5 months you are in Canada? If you︄ have a business and are a sole director and work from Canada the company could︅ be deemed tax resident in Canada.
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