I am a Canadian non-resident in the Czech Republic. I plan to return to Canada in two years’ time to finish working and eventually retire. I filed a T1 General form for 2015 as I had a small amount of interest income from a bank account I hold in Canada. Must I always report interest income? I also want to transfer money into a Canadian investment account.
Michael Atlas of TaxCA.com answered this question.
What you have been doing is wrong. There is no reason for you to file a Canadian tax return if you are a non-resident receiving interest from Canadian sources.
Up until 2007, non-resident receiving Canadian source interest were generally subject to withholding tax under Part XIII of the ITA at 25%, unless subject to a lower rate under a tax treaty. However, even then there was no return to file. However, after 2007, such interest is generally exempt from Canadian tax as a result of changes to the ITA.
It is not likely that opening an investment account would make you resident again. Furthermore, if you are a Czech resident, even if it did, you would likely be a deemed non-resident of Canada as a result of the application of the ‘tie-breaker’ rule in Canada’s tax treaty with the Czech Republic.
There are no Canadian tax issues with moving money into Canada.
If you invest in Canadian mutual funds, there will be non-resident withholding tax under Part XIII of the ITA on income distributions from the funds. Again, no tax return required. That would not be the case with foreign funds, but there may be taxes applicable to the foreign jurisdiction.