Canadian Taxation

Hi There,


My husband and I are considering a move to HK next year. We're trying to determine financially if it will be feasible (and by feasible I mean if we go for two years, will we be able to travel to the places we want while there and come home with enough to get set back up here in Canada with a house/car, small investment etc) Background: we have two boys who will be 9&4 at the time of the move.


So, my question is, can anyone advise on how the canadian taxation would work? I presume we would still file a canadian tax return, do we have to claim our world wide income? If we are gone for 2 years does this help us at all? WE plan to sever all financial ties here. Any advice would be welcome and appreciated.


Thanks,

The taxation part is easy. When you can show that you live in Hong Kong (you've rented a flat, have furniture, credit cards and bank accounts, maybe a HK driver's licence, etc), you and your spouse need to establish non-resident status by each filling out a form and submitting it to Revenue Canada. The decision is made on a case-by-case basis - they decide where you live. A very basic requirement is that you do not have a residence in Canada - if you own a property, it must be rented at arm's length (ie someone is acting as your agent for the property and it is not available to you for holidays). More information is available here: http://www.cra-arc.gc.ca/tax/nonresidents/individuals/leaving-e.html


Regarding making enough money to travel here and to return to Canada and get set up again: if you are transferring with a company and get a hefty expat package, then it might be possible. If you are going to be looking for your own jobs, I'd say it's quite unlikely.


Having school-aged kids creates another problem as schooling is difficult here. Unless they speak and look Chinese, your children will not be able to attend local schools (except for kindergarten). If you do get them in, you'll have to be able to read and write Chinese in order to help with homework. You'll be paying big fees to send them to either international or English Schools Foundation schools - plus the cost of uniforms, meals, transport, books, etc. If you are on a package that guarantees a space for your child or has an adequate education allowance, you'll only have to struggle with waiting lists which most int'l and ESF schools have.


To get more information, look for schooling threads on the Moms and Dads forum here.


Good luck in your decision-making.

With the current exchange rate to canadian, you will need to save alot more to achieve what you wished to have when returning to canada, I came out here 8 years ago with exchange rate of 1 cdn - 5.0 HKD, and now 1 cdn - 8.3. At the time, I cash out on all ties in canada including properties... Started a life here with owning a flat, car, boat and other toys. If I do a reverse process now, everything will be discounted by about 70%. So earning 100K a year in Canada now is equal to 83,000 canadian, but nevertheless, HK do still have the advantage of better tax benefit. Other than that, everything is cost more for expat life style...

Certainly the currency exchange rate - we are pegged to the US $ - is the biggest concern for us right now... I too came when it was 5 to 1 and when the Cdn $ hit 83cents it was like a punch in gut... 93cents like being shot, and yesterday it hit $1.10... you get the point. Of course if you are negotiating a corporate package that pays you in Canadian dollars or factors this in then fine, but many sectors simply pay in Hong Kong Dollars and tell you "sometimes it's low; sometimes it's high...". All you can do is compare your salary there, with what is offered here, factor in tax rates (say 30-odd or 40% in Canada vs. 10-17% here), the sky-high rents here right now (definitely check this out relative to your salary/housing allowance before you commit), school costs and availability school places (long waiting lists and rigorous entrance tests are the norm - particularly in Primary schools), cost of living, the pollution problems, etc. and go from there.


Re the previous advice: The determination of residency... The gov't likes this to be a somewhat 'fuzzy' thing as it allows them some subjectivity in deciding... many people do still talk of the 2-year 'rule', but it would certainly be dependant upon a number of other factors/ties you may maintain in Canada - owning property, a car, bank accounts, credit cards etc. A tax accountant/lawyer would be obliged to give the 'official line', but in practice I know more Cdn expats who have not done it that way and are very thankful, than I do ones who followed the advice and are now lamenting it...


We have been here 8 years and still have maintained all of these things (except no car in Canada) and visit once a year for about a month. We do not file any returns in Canada and have never had any issues. We do not rent our property out - you would certainly want to do this through arms length if you were to do it, and file a return based on capital gains...


Many Cdn's here certainly do lament having sold their properties in Canada 2, 5 or 10 years ago as they have definitely lost out on the appreciation - and have to buy back in upon their return... I couldn't say what is best legally, but common sense would say hold onto it in some way.. transfer to a relative, rent out at arms length, incorporate it... whatever.


Either way, those are some factors you might want to consider...

Agree with all the above being a Canuck here for just over 4 years. It will basically all depend on if you have a strong offer to move here. Housing, Schooling is expensive. Rents have increased by 30%+ in last 12 months as well.


If you can avoid selling your property as described above do it but you will have to manage it properly. If you can get paid in CAD then even better but honestly this was never an option for us.


After arriving here we had a 5 year plan to return to Canada. With a year left we have changed our plans as we are doing very well and really not looking at Canada unless for retirement.


Again will depend on your situation. Anything right now less than a superior package OR if both of you can work in high level positions locally I would stay in Canada.