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Thanks Allan Sir for replying promptly to our previous message.
1. We departed in April, 2021 with the intention of coming back, but could not. We thought we are factual residents of Canada.
2. So for 2021, 2022, 2023 - we filed as resident of Canada. Yet to file for 2024. So we got Carbon Rebates, GST/HST qtrly credit, Ontario Trillium Benefits. We are low income.
3. Some bank interest from Canadian bank account. No withholding tax was held as we did not notify them about non resident status.
4. We also get very nominal OAS and CPP. Less than $400 combined for both of us. No withholding tax was held on that either.
5. I guess we have to pay back the benefits and credits like OTB, GST/HST credit, Carbon Rebates. So what penalties are we looking at here? For 2021,2022,2023 & 2024. Can Voluntary Disclosure Program be applied here?
6. No withholding tax was held back on our OAS, CPP & Bank interest as we thought we are factual resident. What penalties and interest are we looking at here? Can this go through Voluntary Disclosure Program?
7.So whatever Capital gains tax we might have to pay will depend upon how much the house appreciated in value from April 2021 to August 2022 Right? So if the house has appreciated by $100,000. 50% of that i.e $50,000 will be added to our income for that year - and taxed accordingly to our income tax slab.
Hi TJ,
Thank you for reaching out. I appreciate the detailed background, and I’ll do my best to clarify your situation. Here’s a breakdown of key considerations and next steps:
- Residency Status & Filing Corrections
Since you departed Canada in April 2021 but continued filing as a resident for 2021, 2022, and 2023, you will need to correct your tax filings if you were actually a non-resident.
- Non-Residents of Canada are generally not eligible for benefits such as GST/HST credits, Ontario Trillium Benefits (OTB), and Carbon Rebates.
- If you need to correct your residency status, you may be required to repay these benefits for 2021–2024
- Repayment of Benefits & Penalties
- The CRA will likely request repayment of the benefits received as a non-resident.
- Interest may apply to amounts owed. However, penalties are typically not imposed on incorrect benefit claims unless there was intentional misrepresentation.
- You may be able to apply under the Voluntary Disclosures Program (VDP) to correct your residency status and reduce potential penalties.
- OAS, CPP, and Canadian Bank Interest – Tax Implications
- OAS & CPP for Non-Residents:
- Non-residents are subject to 25% withholding tax (or a lower treaty rate) on OAS and CPP payments. Since no withholding tax was deducted, CRA may assess tax owing, plus interest on unpaid amounts.
- Canadian Bank Interest:
- If you did not notify the bank of your non-residency, no withholding tax was applied. Canadian bank interest is generally exempt for non-residents, but this needs to be corrected with the financial institution.
- VDP Eligibility: Yes, the VDP may help in correcting this situation, potentially reducing penalties.
- OAS & CPP for Non-Residents:
- Capital Gains on Principal Residence Transfer
- Since you transferred your principal residence to your son, capital gains tax may apply. However, you can claim the principal residence exemption for the years that you ordinarily inhabited the home.
- Actual Sale in August 2022: The capital gain for your son will be based on the increase in value from April 2021 to August 2022.
- Taxable Capital Gain Calculation:
- If the property appreciated by $100,000, then 50% of the gain ($50,000) is taxable.
- This amount is added to your son's taxable income in the year of sale and taxed at his marginal tax rate.
Next Steps
- Residency Correction: Consider filing adjustments or applying under the Voluntary Disclosures Program to correct your residency status and tax filings.
- Repayment of Benefits: Be prepared to repay GST/HST, OTB, and Carbon Rebates for years you were a non-resident.
- Tax on OAS, CPP, and Bank Interest: Expect CRA to reassess taxes owed, and we can explore options to minimize interest and penalties.
I’d be happy to assist you with the VDP application, tax adjustments, and ensuring everything is filed correctly.