Immigration and Tax

Most, but not all, immigrants to Canada become tax residents. In this sense Canada is different from the USA where all immigrants (ie. “green card” holders) and all citizens are automatically tax residents even if they do not live or spend time in the USA. In Canada some immigrants can legally avoid paying income taxes provided they have minimal ties with Canada or have stronger economic and social ties to some other country. Of course such persons (if they are immigrants and not citizens) will have to consider how non-payment of tax might impact their ability to keep their immigration status.

Canada’s Income Tax Act does not make reference to citizenship or immigration status. It simply provides that Canadian tax “residents” are bound annually to pay tax on their world-wide income and to declare the existence of substantial foreign assets located outside Canada. This latter obligation is called “foreign asset disclosure”.

Who is a tax resident? Well, normally anybody (immigrants, citizens, students, holders of work permits -- even illegal immigrants who are out of status) who spends more than 183 days in any calendar year is a tax resident. Some people spend much less time in Canada but are still considered tax residents. For example, people whose home base in terms of social connections and economic ties is Canada will usually be regarded as tax residents even if they are elsewhere most of the time. Time is not the critical factor. Moreover, normally anyone with a house and/or spouse in Canada will usually be deemed to be a tax resident even if he/she spends most of his time elsewhere.

There are certain exceptions to this principal. Sometimes immigrants to Canada, especially wealthy ones who retain substantial economic and social ties in their countries of origin and who come from countries that have a tax treaty with Canada, can legally avoid becoming tax residents. This is a particularly complex matter where expert advice should be obtained before making any decisions as to how to report taxes in Canada. Many wealthy families decide to set up an “Immigrant Trust” -- a legal structure that provides immigrants with a tax exempt 5 year tax holiday on certain income generated outside Canada.

What does a tax resident have to do? As mentioned above, all Canadian tax residents have to report their and pay taxes on their annual income. Income includes worldwide revenue from employment, interest, rent, dividends (subject to tax credits), and ½ of capital gains. Failure to report and pay taxes can lead to penalties, interest and even criminal charges.

There is a complex interplay of issues linking immigration, citizenship and tax status. There is no formal obligation on an individual to maintain tax resident status so as to maintain immigration status and there is no formal obligation on a person to maintain their immigration status so as to maintain their tax status. The same can be said of tax status and Canadian citizenship. For instance, it is entirely possible for an individual to maintain permanent resident status (730 days in Canada in a five year period) or Canadian citizenship while at the same time NOT becoming a tax resident. Careful planning supported by professional advice can help a new immigrant walk the line between tax, immigration and citizenship status without jeopardizing one form of residency or the other.

By Peter Scarrow and Ryan Rosenberg

Ryan Rosenberg is a Partner and Peter Scarrow is Associate Counsel with Larlee Rosenberg, Immigration Lawyers, in Vancouver. Contact Ryan or Peter at 604-681-9887 or visit their firm website at www.larlee.com.

Protecting PR Status: Humanitarian and Compassionate Considerations

Over the last several months, I have been writing about how a permanent resident of Canada can maintain their permanent resident status. I’ve written about how physical presence in Canada, overseas employment by a Canadian company and accompanying family members under certain circumstances may all satisfy the residency obligation. Remember, a permanent resident of Canada will satisfy the residency obligation if they meet one of these tests for 730 days in a five-year period.

But what if they can’t?

Permanent residents who cannot meet one of the residency obligation tests set out above will get one last kick at the can – humanitarian and compassionate grounds. If an applicant falls short or doesn’t even come close to the 730 day requirement, an Immigration Officer must consider humanitarian and compassionate considerations relating to the permanent resident, taking into account the best interests of a child directly affected by the officer’s decision. These considerations must justify the permanent resident keeping their status even though they have failed to meet the residency obligation.

There is no definitive list of what types of factors an officer will consider. Each case is judged on its own merit, making it very difficult to predict when an applicant will be successful in an application based on humanitarian and compassionate grounds and when they will fail. Some of the factors which may be important include family medical situations overseas which have kept a permanent resident out of Canada (sick children or elderly parents, for example), custody battles or family breakdown outside of Canada, schooling or even mandatory military service. The options are endless.

Whatever the reason, the onus is on the applicant to supply the officer with compelling evidence in support of their request for humanitarian and compassionate relief. This evidence may include letters from doctors, letters from schools, court documents, expert reports, old passports, bank statements, and guardianship documents and so on. Again, the options are endless.

The one area we are routinely asked about is economic factors. If a permanent resident is outside of Canada only because they have a better job lined up than in Canada, that reason alone is not likely to sway an officer to decide in a permanent resident’s favour.

At the end of the day, the onus is on the applicant to convince the officer that they deserve relief on humanitarian and compassionate grounds. It is considered an ‘exceptional response’ to a particular set of circumstances. The hardship resulting from loss of status must meet the standard of “unusual an undeserved, or disproportionate.” This is a legal standard and applicants are strongly recommended to seek qualified advice before relying on this type of exemption.

Watch for an upcoming article on appeal rights. Just because an officer refuses an application, that doesn’t mean that the decision will stand.

Ryan Rosenberg is an Immigration Lawyer and partner at Larlee Rosenberg in Vancouver. Contact Ryan at 604-681-9887 or Ryan.Rosenberg@larlee.com or visit his blog at www.immigrantlaw.ca.

New Citizenship Test Study Guide - DISCOVER CANADA

For those of you gearing up for your citizenship exam or are contemplating an application for Canadian citizenship, you will be interested in knowing that CIC has issued a new study guide for the citizenship test.

Download a copy of of the new guide here: http://www.cic.gc.ca/english/pdf/pub/discover.pdf

Proposed Changes to Regulations Regarding Temporary Foreign Workers

The Minister responsible for Citizenship, Immigration, and Multiculturalism recently announced proposed changes to the Immigration and Refugee Protection Regulations which will affect temporary foreign workers.

 

The proposed changes include the following: 

• setting out assessment criteria for the genuineness of the job offer:
• whether the offer is made by an employer that is actively engaged in the business in respect of which the offer is made;
• whether the offer is consistent with the reasonable needs of the employer;
• whether the terms of the offer are terms that the employer is reasonably able to fulfil; and
• the past compliance of the employer, or any person who recruited the foreign worker for the employer, with the federal or provincial laws that regulate employment and recruitment;
• limiting the cumulative time a temporary foreign worker may work in Canada to four years, after which the worker will not be authorized to work in Canada for a period of six years (unless the foreign national intends to perform work pursuant to an international agreement or work that would create significant benefits);
• prohibiting employers from hiring temporary foreign workers if the employers have, in the two-year period preceding the offer, provided wages or working conditions or employed a foreign national in an occupation significantly different from the wages or working condition or occupation offered to the foreign national; and
• establishing a publicized list of employers who are not eligible to hire temporary foreign workers for a two-year period.

These proposed changes are meant to protect temporary foreign workers from exploitation, promote employer compliance with the terms of job offers, and to emphasize that the Temporary Foreign Worker Program is intended to fill short-term labour shortages only.

Managing Permanent Resident Status: The Family Connection Option

Last month I wrote about, the Employment Option, how employment outside of Canada can help a permanent resident of Canada satisfy residency obligation. The response has been tremendous and the one question that was common to almost all of the inquiries I received from the article was, “Can’t I maintain my residency status if I am married to a Canadian, even if we live outside of Canada?” The answer in short is yes, but it isn’t quite that easy.

Before I get into what I call the Family Connection Option, a quick refresher on the residency obligation rules is in order. Section 28 of the Immigration and Refugee Protection Act, requires a permanent resident of Canada to satisfy with the “residency obligation” on an ongoing basis by complying with one or more residency obligation “options” for 730 days in every five year period. The starting point is that if you physically reside in Canada for 730 days in every five year period, that is, your feet are on Canadian soil (the “Residence Option”), you will satisfy the obligation and maintain status as a permanent resident. If you can’t satisfy the Residence Option and want to maintain PR status, you will have to rely on either the Employment Option, the Family Connection Option or humanitarian and compassionate grounds.

Next to the Residence Option, the Family Connection Option is by far the most reliable mechanism by which a permanent resident of Canada can satisfy the residency obligation. It is worth clarifying at this point that each PR who is the member of a family must satisfy the residency obligation independently. There are no “family applications” for PR card renewals nor does an entire family lose their PR status only because a single member of that family loses their status.

The Family Connection Option provides that a PR can count every day spent outside of Canada (feet not on Canadian soil), accompanying a Canadian citizen who is their spouse (common-law or married) towards the 730 day obligation. In the case of children, if a PR child can count every day outside of Canada accompanying a Canadian citizen who is their parent in the same manner. By “accompanying”, I mean residing with under the same roof outside of Canada and by “child” I mean a person who has never been married or in a common-law relationship and is under 22 years of age.

The Family Connection Option also extends to children and spouses of permanent residents who accompany their parent or spouse outside of Canada, so long as that parent or spouse complies with the Employment Option. Basically, if a PR lives and works outside of Canada satisfying the Employment Option, that PR’s spouse and children can count the days spent residing with that permanent resident outside of Canada towards their own residency obligations.

As with all dealings with Citizenship and Immigration Canada, it is incumbent on a PR to prove their case, that is, to satisfy CIC that they have met the residency obligation, whether it is by the Family Connection Option or any other option. I strongly encourage PRs to keep a folder with detailed records of their compliance with the residency obligation. Although there is no definitive list of required documents to include, I generally advise people to keep marriage licenses, birth certificates, school records, boarding passes, copies of old passports, home rental agreements, credit card and bank statements, proof of cohabitation, lots of photographs of time spent with family outside of Canada and proof of a spouse or parent’s employment outside of Canada if that is the means by which a person hopes to satisfy the residency obligation.

Compliance with the residency obligation on the whole is carefully scrutinized by CIC. As such, PRs are strongly encouraged to seek qualified advice prior to planting their feet in non-Canadian soil for any extended period of time.

Managing Your Canadian Resident Status: The Employment Option

In what I have always seen as an ironic twist, the first question often asked by many of my newly immigrated clients is, “how do I go back to my home country but keep my Canadian PR status?”

Section 28 of the Immigration and Refugee Protection Act, requires a permanent resident of Canada to comply with the “residency obligation” on an ongoing basis, so long as that person wishes to retain their permanent resident status. The basic rule is that the residency obligation can be satisfied as long as a permanent resident complies with at least one (or a combination of two or more) residency obligation “option” for 730 days in every five year period. The options range from physical presence in Canada to accompanying a Canadian citizen spouse outside of Canada and humanitarian and compassionate grounds as a last resort.

The option getting the most attention these days is the employment option. If a permanent resident accepts is employed on a full-time basis by a Canadian business and that employment requires the permanent resident to spend time outside of Canada’s borders, those days spent employed under such conditions will count towards the 730 day residency requirement. Sound simple? It isn’t.

The first challenge is determining whether or not the Canadian employer meets the definition of “Canadian business.” A Canadian business is defined three different ways. First, a business is a Canadian business if it incorporated in Canada and has an ongoing operation in Canada. If it isn’t incorporated in Canada, the business can be some other form of enterprise (a partnership, for example), that has an ongoing operation in Canada, is capable of generating revenue in anticipation of earning a profit, and where the majority of the controlling parties of the enterprise are either Canadian citizens, permanent residents or a business that meets the definition of “Canadian business”. The third alternative is an organization created by the laws of Canada or a province. This third group is designed to cover off public sector employees.

Organizations or companies which are set up for the primary purpose of allowing a permanent resident to comply with the residency obligation are excluded from the definition of “Canadian business”.

The second challenge is determining whether the employment satisfies the definition of “employed on a full-time basis by a Canadian business.” To satisfy this requirement a permanent resident must be an employee of a Canadian business or under contract to provide services to a Canadian business for at least 37.5 hours per week (to be safe as full time is not clearly defined in the regulations) where either the permanent resident’s position is outside of Canada working for either the Canadian business directly, an enterprise affiliated with the Canadian business or a client of the Canadian business.

If a permanent resident is certain that his or her employment outside of Canada will satisfy these definitions, that person’s spouse and/or dependent children who are permanent residents and will also get credit towards the 730 day residency obligation for every day that they are accompany the permanent resident outside of Canada.

The third challenge is proving compliance. I strongly encourage permanent residents to keep meticulous records of their employment outside of Canada as when applying for a new permanent resident card, a permanent resident may be called upon for proof of employment. Although there is no definitive list of required documents, I generally advise people to keep pay stubs, bank records, employment contracts, documents evidencing the assignment of the permanent resident to the position outside of Canada, time sheets, tax records, correspondence with the Canadian business, e-mails, passport stamps, airline tickets (boarding passes) and any other documentation unique to their employment which could assist in the analysis.

This area of residency obligation requirement is closely scrutinized by Citizenship and Immigration Canada. As such, one is strongly encouraged to seek qualified advice prior to accepting employment overseas after becoming a permanent resident of Canada.

Rosenberg Named Immigration Law Expert by National Magazine

The Canadian Immigrant Magazine has named Ryan Rosenberg an Immigration Law Expert and has invited him to join their panel of experts, fielding questions from the magazine's readership on a monthly basis. Visit Ryan's expert blog at: www.canadianimmigrant.ca/asktheexperts/columnist/3471

Implied Status

The summer months are an interesting time at Citizenship and Immigration Canada’s (“CIC”) case processing centre in Vegreville, Alberta. As you may know, CIC Vegreville is responsible for processing applications to extend temporary status in Canada. All work permit, study permit and visitor record extension applications are processed by this office.

An already busy office gets even busier in the summer because of a number of factors. Many foreign students in Canada extend their study permits in the summer months between semesters, while at the same time, many visitors wish to extend their status so as to enjoy what this beautiful country has to offer when it isn’t covered in six feed of snow and ice. At the same time, CIC staff, just like the rest of us, tries to take some time off over the summer. The consequence of this perfect storm is longer processing times for extension applications.

According to CIC, as of 22 June 2009, visitor extensions are taking 111 days to process, work permits are taking 108 days and study permits are taking 60 days. Notwithstanding these lengthy service times, CIC encourages applicants to file extension applications a mere 30 days prior to the expiration of their current immigration document. The natural question to follow is, what rights does an applicant have while their extension application is in process? The answer is found in current immigration regulations and a recent policy update.

Regulations 183(5), 186(u) and 189 of the Immigration and Refugee Protection Regulations (“IRPR”) each offer solutions for visitors, workers and student respectively. The common theme between these three regulations is what is known as “implied status”. Basically if a worker, student or visitor files an application to extend their status in Canada, they may remain in Canada on the terms of the original status until a decision is made on their application to extend. That is, a worker can continue to work, a student can continue to study and a visitor can continue to visit until they get an answer on their extension application, so long as they remain in Canada.

Note that two items are absolutely imperative. First, it is a deal-breaker if the applicant does not file their extension application before their current immigration document expires. This means that the application to extend must be post-marked at least the day before a given permit expires. While I know that the CIC website says you have to file at least 30 days prior to expiration, they will accept applications postmarked as late as the day prior to expiration. The better practice is to extend as early as possible.

Second, an applicant will lose the benefits of implied status if they leave the Canada while their application is in process. Despite this requirement, if an applicant does leave the country, immigration officers at the ports of entry do have some discretionary tools to either allow an applicant to re-enter Canada as a temporary resident, pending a decision on the renewal of their application to study or work in Canada, provided they have a temporary resident visa, are visa exempt or have a multiple-entry visa. However, even if granted re-entry, an applicant may not resume work or study in Canada until their application for renewal has been granted. For those not able to resume work, they must satisfy the officer that they have sufficient funds to support themselves until their new permit is issued. Alternatively, an immigration officer at the port of entry may allow an applicant to apply for a new work or study permit at the port of entry provided they have a right to do so under law.