David A. Altro is a frequent contributor to Paul Delean’s business column in the Montreal Gazette, please scroll down to read David’s answers from Paul Delean’s article on tax strategy.
Tax Strategy: Canadian working abroad must still pay tax here
Monday, July 30, 2012
Taxes on overseas income and on a U.S. condo were among the topics raised in the latest batch of reader letters. Here’s what they wanted to know.
Q: “I have been working on a passenger cruise ship for the past few years. It’s an American company, but since we are always in international waters, I am not taxed on-board. I declare my income to the Canadian and Quebec government and stay with my parents in Montreal when in town. Each year, I pay an increasingly higher amount of taxes. The total seems absurd for someone who spends most of her year working abroad and only a few months at home on vacation. Is there any sort of option to reduce my tax bill?”
A: Not unless you’re prepared to establish residence elsewhere, which would entail costs of a different sort. “The only option for those working abroad to avoid Canadian taxes on their worldwide income is to become a non-resident of Canada,” notes Jamie Golombek, managing director of tax and estate planning for CIBC Private Wealth Management. If you have a home, bank accounts, vehicle, dependants, driver’s licence and/or health card here, you likely won’t be considered a non-resident.
Q: “If a person dies without a will, can their RRSP still be rolled over to their wife/husband, and if so, are there any tax consequences?”
A: A deceased person’s RRSP can be transferred to a surviving spouse even if there is no will, provided they’re a recognized beneficiary, but there are steps to follow. The first is for the surviving spouse and liquidator to complete form TP-930 and forward it to Revenu Québec. He or she must then report all or part of the transferred RRSP assets as income on their tax return; they’ll be eligible for an equivalent deduction for amounts transferred into their own RRSP, making the exercise tax-neutral. If the RRSP already has been converted into an RRIF, the surviving spouse can apply to become the designated recipient of the RRIF payments, but form TP-930 must be completed and there have to be sufficient other assets in the estate to cover all other obligations and distributions.
Q: “My husband I jointly purchased a condo in the U.S. We are in our late 70s, and wonder how potential changes in American law in 2013 might affect us. This is our second marriage, and we both have two adult children. Should one buy out the other, so there are only two children inheriting the property?”
A: David Altro, who is both a Quebec notary and Florida attorney, said there’s no simple answer. Your best option depends on a variety of factors, including current value and whether both parties contributed to the original purchase. “Did you contribute to the purchase price? If so, transferring to your husband might trigger a U.S. gift tax. Has the value increased? If so, and he buys it from you, that might cause a capital-gain tax. If he is to own it alone, there would be an expensive and time-consuming Florida probate procedure required upon his death, and possibly U.S. estate tax.”
The Gazette welcomes reader questions on tax, retirement and investment matters.
Send queries to Paul Delean, Montreal Gazette Business Section, Suite 200, 1010 Ste. Catherine St. W., Montreal, Que., H3B 5L1, or by email to email@example.com