My 26 year old daughter is a dual Canadian/UK citizen. Up to and including tax year 2018, she has completed annual Canadian tax returns. She has RRSP’s, a Canada bank account with credit card, an Ontario health card and driver’s licence, but no primary ties (spouse, children, house) in Canada.
She no longer receives Federal or Provincial benefits or credits (GST, etc).
She worked in Canada from Jan. to Apr. 2019. In May 2019 she entered the UK using her UK passport and began work there on June 1st, 2019. She continues to work there, has a UK NI number and contributes to an employee pension plan. She has not returned to Canada since. She likes her work in the UK but her future plans are undetermined at this time. She is renting accommodation there.
Because her salary is modest, and because the UK PAYE tax system is graduated and runs May 1 to Apr 30, she paid little UK tax in 2019. However, under the UK/Canada reciprocal tax agreement, I figure she would need to buy approx. $6,000 RRSP’s to reduce her 2019 Canada tax liability to zero.
I am concerned that if she decides to purchase a house in the UK and needs to use her RRSP savings, she will have to pay Canadian taxes all in the same year upon her withdrawal, instead of over 15 years if she bought a home in Canada.
Is it better for her to declare Canadian Non-Resident status, to pay UK taxes as normal, to make no further RRSP contribution, and only declare her Jan. to Apr. 2019 Canada employment income on her 2019 Canada tax return? I am bewildered. Please help me so I can help her. Thank you.