New Cross-Border Tracking Rules Have Tax Implications

Thinking of leaving Canada for extended vacations or visits? You will now need to be more careful about your absences if you want to remain eligible to collect social benefits, like the Canada Child Tax Benefit, Old Age Security or Employment Insurance.  That’s thanks to the Perimeter Security Pact between Canada and the United States, which was initiated back in 2011 and has been undergoing four phases of implementation.

A web of complexity enshrouds this initiative. Since June of 2013, for example, data has been exchanged on third-country nationals, permanent residents of Canada who are not U.S. citizens and lawful permanent residents of the U.S. who are not Canadian citizens, at all major land border crossings.

However, in future phases, more information will be exchanged between the two countries: names, date of birth, and nationality/citizenship for all travellers at all common land ports of entry; as well, Canada has committed itself to collecting exit records from those travelling by air. This will require airlines to submit passenger manifest information on all outbound international flights. Canada needs to pass a bill before this is authorized. More information can be found at the following link: http://actionplan.gc.ca/en/content/beyond-border-implementation-report-march-2015

Once all the provisions are enacted, Canada will be able to determine which travellers will lose their status as Canadian residents as a result of spending too much time out of the country; that is, more than 182 days. Travellers who spend too much time in another country may find themselves subject to departure taxes in Canada, and they may lose certain social benefits. For example:

• Child Tax Benefits are lost when residency in Canada ends.
• OAS may be reduced if extended travel takes place before age 65. You must be a resident of Canada for a minimum of 10 years before age 65 to qualify for OAS; but to qualify for full OAS benefits, you must be a resident of Canada for 40 years between age 18 and 65.
• EI benefit entitlements will be lost unless the traveller is authorized to work in the U.S. (and actively seeks work there).

For more information, attend the January Advanced Personal Tax Update. 

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