Obligation to pay tax on Global Income by PR parents after child turns 18 year
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Posted on: 12-04-13 00:19:39
Hi Folks,
I am new to this forum, but reading the inputs from members which are quite helpful. I (main applicant, wife & two children 17 & 15 years - current age) applied for PR almost 6 years back and now submitting PPs for visa stamping and then will to do landing by mid-July '13. Since, it has taken a considerable time for getting PR visa and in last quarter unfortunately my situation changed and I can not for sure come & live in Canada for atleast one year-best estimate or two years.
My daughter (17 year) this year finished 12th class board exam (result will come in May). So, she plans to get admission in Canadian University and joins from Sept. '13 (We all after landing return back) & she joins University from the academic session in Sept. '13.
1. For Year 2013 - I understood from CRA web that I am obliged to pay tax (as my dependent - my daughter will be studying in Canada - residential ties) on my Global Income from the day we became PR.
2. Next year (in year 2014), my daughter turns 18 years and if I am not be able to come to Canada - Am I still liable to pay taxes on my Global Income to CRA OR next year Only my daughter is responsible for her tax (on her zero income).
My question is for Point#2 above, that after the child turns 18 years (I think 18 years - pl correct me) weather he/she is responsible to pay their own taxes and no more treated dependent by CRA for taxation purpose. It will help me to do my tax planning and I would highly appreciate your valuable feedback.
Quote:
Originally posted by GeoPilot
Hi Folks,
I am new to this forum, but reading the inputs from members which are quite helpful. I (main applicant, wife & two children 17 & 15 years - current age) applied for PR almost 6 years back and now submitting PPs for visa stamping and then will to do landing by mid-July '13. Since, it has taken a considerable time for getting PR visa and in last quarter unfortunately my situation changed and I can not for sure come & live in Canada for atleast one year-best estimate or two years.
My daughter (17 year) this year finished 12th class board exam (result will come in May). So, she plans to get admission in Canadian University and joins from Sept. '13 (We all after landing return back) & she joins University from the academic session in Sept. '13.
1. For Year 2013 - I understood from CRA web that I am obliged to pay tax (as my dependent - my daughter will be studying in Canada - residential ties) on my Global Income from the day we became PR.
2. Next year (in year 2014), my daughter turns 18 years and if I am not be able to come to Canada - Am I still liable to pay taxes on my Global Income to CRA OR next year Only my daughter is responsible for her tax (on her zero income).
My question is for Point#2 above, that after the child turns 18 years (I think 18 years - pl correct me) weather he/she is responsible to pay their own taxes and no more treated dependent by CRA for taxation purpose. It will help me to do my tax planning and I would highly appreciate your valuable feedback.
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Both your children are MINORS. if you are leaving them here for studies, or one of them for an University course and she will live in a DORMITORY or with friends, then she will be alright. There are many more students like her here who are studying at these Universities whose Parents DO NOT hang their hats in here.
YEA, we are suckers, at least some of us are. More on it here. We come in and open a Bank account, apply for SIN Card and Health Card and get driver's licence and want to show off. But they forget that these are the items that link them with Canada. Or get their wards and children well settled into an apartment. YEA, who the hell signs the lease for it. The PARENTS. That is where the crunch is. **
So, avoid all of these frills and thrills till you find out what it is that YOU SHOULD NOT DO.!
Now, Do you have good friends living in here, near by where she/he will take up a course. (The University that is) If so, then see if they will take her as a ward and keep a roof over her head and give her a couple of meals, a day. Pay for it or alternately get her into the HOSTEL/Dormitory at that location. AND when you do that make sure you are not signing any lease or papers that ties YOU to Canada.
Do drop in here with your family, and ALL OF YOU apply and get your PR cards. (You will have an address to which it can be sent.) OR ask your daughter to open up a MAIL BOX with SDM/UPS and check it from time to time. $150 or less for that, per year. Mail Boxes is also another outlet, they seem to be better, because they call their boxes SUITE's. Check with them after you land here.(Only if you have need for it.)
Do not file a tax return for Canada for this year. It ends on 31st Dec. You have no Canadian Income. Also, you will be leaving after settling your Daughter in Canada. You can return back anytime here. If you want to renew your PR Card, you will need 730 days from the date of landing AND with in the Next Five years. If you do not want to renew, then, come and go as you please, initially on the PR.
At the age of 18 years one becomes a Major in Canada. Your daughter does not file a tax return, if she makes no salary or income here or in any other part of the world. She has to apply for her Medical Card and will become effective after 90 days. The University also has a plan for the initial stay. See if it is available from the first day. The charges are nominal, so take it.
Having a dependent here in Canada constitutes a Primary Tie to Canada.
If you have EVEN a very small deduction out of your salary there, you can show that there is a withholding there, where you live and work. If it gets taxed, then, you do not have to report.
FH
** http://www.hutcheson.ca/articles/severing-ties-with-canada/
Hi Full House,
Thank you very much for your valuable time & inputs, to clear my doubts.
1. I do have a good friend in Calgary, but not sure where my daughter will get admission. My friend can look after her. As such, I opted to settle in Alberta due to nature of my job. In any case, I prefer her to live in University hostel (as you said for apartment lease etc to be signed).
2. We plan to come and ONLY apply for our PR cards. Organise for my daughter & return back.
3. When my daughter will join University, she will open a bank a/c (with Debt card) to get funds from me to pay for her studies & stay etc. Is it OK to open a bank a/c by my daughter OR there are other ways to transfer her money. If it is not possible, then I may ask my friend to take care for local funds and I will remit to him. Pl. advice on it.
4. Thanks, I did not know about P.O. Box and will enquire about it near to her University. As such, plan to get PR cards at my friend's address.
5. I understood that this year or the next I do NOT need to file tax as do not have any Canada source income. And I need to file tax return once we come & start living in Canada.
6. My daughter does not have any income in India and will file Tax return in Canada next year (as applicable). Please advice, if she files with 'no income', will she get credit for her tution fee and can use in future.
7. My company do deduct fixed percentage withholding tax on my monthly salary, irrespective of my location of work (whether it is Income tax charged or free country). It is on my payslip. Also I have withholding tax deduction on dividends declared on my company's share in US. I work as International Commuter and maintain my NRI status, so do not have any tax obligation in India (all my Mutual fund investments or Insurance policies from NRE a/c). Only my wife, a resident Indian files her Indian IT return,but it is not much.
8. I do have Global medical & dental coverage for my family and have monthly deduction for it. So, medical part is already covered.
I would highly appreciate your advice.
Note: Link under your signature did not work, can you quote it.
Quote:
Originally posted by GeoPilot
Hi Full House,
Thank you very much for your valuable time & inputs, to clear my doubts.
1. I do have a good friend in Calgary, but not sure where my daughter will get admission. My friend can look after her. As such, I opted to settle in Alberta due to nature of my job. In any case, I prefer her to live in University hostel (as you said for apartment lease etc to be signed).
2. We plan to come and ONLY apply for our PR cards. Organize for my daughter & return back.
3. When my daughter will join University, she will open a bank a/c (with Debt card) to get funds from me to pay for her studies & stay etc. Is it OK to open a bank a/c by my daughter OR there are other ways to transfer her money. If it is not possible, then I may ask my friend to take care for local funds and I will remit to him. Pl. advice on it.
4. Thanks, I did not know about P.O. Box and will enquire about it near to her University. As such, plan to get PR cards at my friend's address.
5. I understood that this year or the next I do NOT need to file tax as do not have any Canada source income. And I need to file tax return once we come & start living in Canada.
6. My daughter does not have any income in India and will file Tax return in Canada next year (as applicable). Please advice, if she files with 'no income', will she get credit for her tution fee and can use in future.
7. My company do deduct fixed percentage withholding tax on my monthly salary, irrespective of my location of work (whether it is Income tax charged or free country). It is on my payslip. Also I have withholding tax deduction on dividends declared on my company's share in US. I work as International Commuter and maintain my NRI status, so do not have any tax obligation in India (all my Mutual fund investments or Insurance policies from NRE a/c). Only my wife, a resident Indian files her Indian IT return,but it is not much.
8. I do have Global medical & dental coverage for my family and have monthly deduction for it. So, medical part is already covered.
I would highly appreciate your advice.
Note: Link under your signature did not work, can you quote it.
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These are general pointers and these are my views.
1) Boarding & Lodging : You have it under control.
2) Your Trip : Brief and to the point.
3) Bank Acct: Your Daughter should have one plus their Credit Card also. Keep yourself out of any transaction for the current year and for a few months of the next. Make your remittances through your friend (Arms length). Cash only, if you can load it.
4) Mail Boxes Etc.,: Only if you need it. Assess your needs. Not a Street Address. See UPS. United States Postal Services, here in Canada...
http://www.mbe.com/ps/pages/ms.aspx
5) That is my understanding. File a tax return only if it calls for one.
6) Your Daughter should not file a tax return. First of all she is a minor.That will implicate you and you would not know what hit you and how. She will be a Major next year. She can do it then and for herself, only if she gets a few bucks back.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/menu-eng.html
7) I am sure you do have your taxes well taken care of. Try to centralize all of the financial activities from ONE Country, if you can. One central location, from which you can control and with one phone call to one person should take care of it. Provide a POA to the spouse to operate and Vice versa. Plan well, plan ahead and CYA.
8) I think most of the policies do cover children who are under 22 years of age and studying. Call and confirm for your own benefit, this is just to make sure. Also see the limits in the policy and the coverage in each country.
FH.
See if this works. :
Note: <http://www.hutcheson.ca/articles/severing-ties-with-canada/>
With regards to filing of tax returns:
1. Your daughter should file her taxes once she turns 18, 'cause once she turns 19, she'll start getting GST and that will be based on her tax returns for the year she turns 18.
2. When filing taxes, she must include her tuition fees. These will accumulate for her to use in one of the two situations: (a) when she starts earning, or (b) she can transfer it to her parents to reduce their taxes owing, only if they have earnings in the country.
With regards to university admissions, the applications forms (at-least in Ontario) are completed no later than January of the year you're seeking admission for. The process may be different in Alberta, and you should find out what it is.
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SS
Reiki Grand Master
Thanks Full House & Sudesingh,
Your advice is really useful and streamlined the process. As advised, I plan to work accordingly:
1. After her admission she can open a bank account with Debt or Credit Card and funds can be deposited either by friend in Canada or any other NRI friend, it is not an issue. Additionally Visa travel card in C$ can be loaded from India.
2. I will not file tax return in Canada until we start residing and obliged to pay.
3. My daughter will file tax return only after she turns 18 (in May next year), so tax file would be in April 2015 only, with Tuition fee details etc.
4. Our Medical / Dental / Vision policy covers children upto 19 years in general case, but extended upto 25 years, only if they are unmarried, dependent and attending full time academic course. It is global, but only in US it has some first 'out of pocket' expanse, but for rest part of the world it is almost full and cashless. The policy has only annual limit for vision (frame specs etc), but has overall total lifetime limit per person. So, it is taken care very well.
5.I do not require Mail box in coming days, but it is good to know and you never know when it will became handy. Thanks.
I also have few more questions for my future Canada tax obligation:
a. Is that all stock & rental investments made by PR / Canada citizen have rebate/non-taxable and any income out of these are tax-exempted - applicable for investments only in Canada or in any part of the world. Reason being I have my company's stock in US and other fund investments in India.
b. I have monthly voluntary deduction for Pension fund (it is not 401k), which is matched by my company and invested in US stock. Does this deduction qualify for rebate? If yes, then my part only OR total investment in stock (including company's share too).
c. I have few on going Insurance policies in India, is that premium paid in India or US also qualify for tax rebate.
d. Also, I have monthly deduction for Medical insurance (and also major part of premium paid by my company) and this medical policy is taken from US company. Does this also qualify for rebate.
f. My wife has PPF account in India, after PR future contributions are not allowed but should we leave it as it is, as still time for maturity. Does any accumulated interest has tax burden in Canada, as it is exempted in India.
I have above additional questions because when two children studying in University and anticipated more tax burden plus it is expected that I may not immediately get job in Canada and in such case would continue in my current job after our final arrival - (as I can commute to job from any part of the world) until I get job in Canada. The only disadvantage would be that I will remain only on PR and only job in Canada can fulfil residency requirement for my Canada citizenship. It is always prudent to plan and then face the truth..........
Looking forward to receiving your advice.
I hope I am not repeating anything but all the posts above were fantastic. I just want to clarify/emphasize some things.
1) taxation in Canada is based on residency for tax purposes. You can be a resident for the full year or part of the year. When you are a resident of Canada for tax purposes, you will have to report and pay tax on your world income.
2) filing a tax return doesn't become a requirement exclusively because of an age, per se. It is a good habit to get into to take advantage of some credits, like the tuition tax credit, or the GST/HST credit. If she earns income, for example, then she must file an income tax return to report that income.
I hope I addressed your questions adequately.
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Madan Chartered Accountant team
http://www.madanca.com" rel="nofollow">LINK
