Tax Basics

The various levels of Government that are tasked with providing services to its citizens fund those services through taxation. There are taxes with many names, some general taxes and some for special purpose taxes. Income Tax is for general tax purposes, where as gasoline tax is for road infrastructure purposes. Some revenue generated by the governments are called taxes while others are calle fees. The end result is the same, revenue generation for government to provide services.

In Canada, taxpayers are assessed for income tax purposes primarily based on residency rather than citizenship. The test for residency is factual with the outcome being specific to a particular taxpayer and it is possible for a person to be resident in more than one country for tax purposes. Dispositions of taxable Canadian property are one way to trigger exposure to Canadian income tax for non-residents.

By contrast, the United States taxes primarily based on citizenship although there are also rules for certain classes of residents. Care should be taken if you own US situs assets as this can also trigger US tax obligations in addtion to those in Canada for which the Canada-US tax treaty may or may not offer relief.

Other countries may tax based on residency, citizenship, asset location or some combination. To avoid unanticipated liability, it is important to obtain advice from practitioners experienced and licensed in each jurisdiction to which you may have exposure.





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