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jerrygaca
  8/3/2016 22:25 EST

I am thinking of claiming non residence of Canada while I am working in Bermuda. I am single in my early 20s. I will cancel my bank account, credit card etc. But I would like to keep my driver license. I am wondering if this will affect my non residence status. Please advise. Thanks in advance.

OldPro
  8/6/2016 12:16 EST

How long are you planning to be in Bermuda for?

Becoming non-resident for tax purposes is not easy. Canada Revenue doesn't let go of you if they can help it. So unless this is going to be a long term (as in multiple years) absence from Canada, it probably isn't worth the hassle. You have said nothing that would indicate that it makes sense for you to pursue becoming legally non-resident for tax purposes.

Frankly, the average 20 year old is not likely to be on the CRA's radar if you just stopped filing a tax return.

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jerrygaca
  8/6/2016 18:03 EST

Thanks OldPro for your reply. My contract is 3 years. After that I may pursue opportunities in the States. Do you think it make senses for me to claim non-residency? Because it is unlikely for me to own a car in Bermuda, I probably won't need to get a driver license. But I will need to drive sometimes like renting a car in the States while on vacation or visiting Canada..

OldPro
  8/7/2016 12:19 EST

This isn't simple jerry and so there is no simple answer.

Suppose you quit work in Canada and decided to just bum around the world playing a guitar on the streets to earn enough money to exist. If you filed a tax return in Canada that covered your last year in which you were working in Canada, what would you do after that?

Would you file a return saying I earned $2k on the street in the UK and $1k when I stayed in Paris, etc. etc. I don't think so. You would do what everyone else does, you would simply not file a return at all. And guess what, Canada Revenue would not come looking for you. If you then returned to Canada 4 years later, got a job and the next spring filed a return for what you had earned since returning, do you think Canada Revenue is going to ask, 'hey, where have you been for 4 years and did you earn money?' They probably wouldn't even ask but if they did, all you would have to say is, 'I was bumming around the world and earned a few $ here and there but not enough to be taxed on.' The CRA does NOT require you to file a tax return if you earn less than the personal tax allowance for a given year. This year it's somewhere around $14k all in. So it is perfectly believable to not need to file a return.

Now suppose instead that you are in Bermuda earning $100k per year for 3 years and then return to live and work in Canada. In the spring, the same scenario might play out. You may hear nothing from the CRA or they may call you and ask, 'where have you been'. You can give them any answer you want and they will probably just accept it UNLESS there is some pretty obvious reason why they would find your answer suspect.

I returned to Canada after 15 years and filed a return the following spring. The CRA only keeps past returns for 7 years. So it was as if I suddenly got a first job in Canada at age 50! Did they ask me, 'hey, what's up with that?' No, they didn't contact me at all. They just took the tax on the income I declared and that was it.

But if on the other hand, the PERSON in the CRA who looked at my tax return had been curious and had checked to see if I had a Facebook page and it showed where I had been and what I had been doing, that might have been a whole other story. Or if I had returned and then out of the blue filed a return showing $250k income, they might have been curious enough to start asking questions about me. See what I am saying?

It is really only necessary to try to become legally non-resident for tax purposes if you are going to leave a trail or earn significant amounts of money that would tend to have them asking questions about you. Unless you are going to be doing the CRA out of significant amounts of money, no one cares. It's just not simple jerry.

What are you going to be doing in Bermuda? How much will you earn? Will you have a highly visible public profile that might turn up your name if someone did a Google search for you?

Re the driver's license. You can return to Canada and renew your license when it expires as long as you have an address to give them. You could give your parent's address for example. So it isn't hard to keep your license.

But again, it isn't that simple. Suppose you visit the USA and rent a car as you suggest. Then you are involved in a major accident. Being the USA, that could result in an insurance claim in the hundreds of thousands if people were hurt. So guess what, the insurance company covering your rental are likely to look for a reason to not pay. IF they discover you are not RESIDENT at the address on your license but instead are living in Bermuda, what will that mean? Well, it could mean your license is not VALID since you lied about your residence when you renewed it and if your license is not valid then the insurance is not valid.

Now how would they find that out? Well, do you have a return airline ticket to Bermuda or to Canada? Do you have travel insurance as a resident of Bermuda or Canada? Trails that lead to the answer.

Living in other countries for periods of time have all kinds of issues that people living in just one country continuously do not have to contend with.

The only truly safe way to deal with the license issue is to get one in each country you live in while you are living there. That can be a lot of hassle. So most people take the risk as they perceive it as minimal.

jerrygaca
  8/7/2016 21:45 EST

Thank you very much OldPro for your thoughtful input. It really help me to understand the Canadian tax and the consequence of without proper driver license. Highly appreciated!

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