My husband and I have lived in Japan since April 1998 and immigrated to Canada in January 2007. (I am Indian and he is US.) However, he has returned to his job Japan as we haven't found jobs in Canada yet, but he is still applying for jobs in Canada. We bought a house, opened a bank account, and bought a car; all of this is in both our names. I resigned my job in Japan to move here and look for work.

Does anyone know what our tax obligation would be to Canada in 2007 if I remain unemployed, and he remains employed only in Japan? I know that Japan is a tax-treaty country. (http://www.fin.gc.ca/treaties/Japan_e.html) Article 15 of the Convention between Canada and Japan states: "1. Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State." On the other hand, the Income Tax Act "Determination of an Individual's Residence Status" (IT-221R3) says in paragraph 4: "The most important factor to be considered in determining whether or not an individual leaving Canada remains resident in Canada for tax purposes is whether or not the individual maintains residential ties with Canada..." However, in paragraph 25 and 26 of the same act, it indicates that tie-breaker rules apply and one country or the other would be deemed the permanent residence.

My questions are this a) does my husband have to file taxes in Canada for 2007? b) Does the Canada/Japan treaty mean that he would pay no taxes even if he filed? c) There would be about a 12% difference in the taxation rates between the two countries. (Japan has a lower tax rate.) Would he have to pay that 12% to Canada? d) Would it be worthwhile to transfer the house and car into my name, and for him to get a US driver's license instead of keeping his Canadian one?

Thank you for any help.
P.S: My husband is in compliance with US tax laws, and files taxes each year in the US.

Hello,

This case involves three countries. I may not claim myself an expert in Canadian Income Tax relating to international residents but helped so many persons who emigrated from Canada, who moved to US but had ties with Canada as a PR or as a Canadian citizen in filing their tax returns and representing their cases before CRA. if I get to know your overall situation may be I help you out in this matter.

You can send me a PM or email.

Thanks.

DP Jain

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