Non-resident eligibility of child tax benefits and GST/HST rebate

Non-residents - Child Tax Benefits

Non-residents – Child Tax Benefits

Tracking Canadians emigrating to other parts of the word has become a serious challenge for the Canada Revenue Agency (CRA). Over the past several years the CRA has begun targeting non-residents claiming child tax benefits and GST/HST rebates. This has created confusion among taxpayers in determine if they qualify for these benefits while they are residents/non-residents. Although a taxpayer files tax returns as a resident, they still may not be eligible for the child tax benefits and GST/HST.

This is exactly what happened with a Calgary family living in China for the past several years and filing tax returns as residents. Although the tax returns were accepted by the CRA, they have still assessed the family with $18,000 tax bill for child tax benefits and gst/hst rebates for which the CRA claims they did not qualify for.


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CRA Auditing – HST New Housing Rebates

Goods and Services Tax/Harmonixed Sales Tax (GST/HST) New Housing Rebate

Goods and Services Tax/Harmonized Sales Tax (GST/HST) New Housing Rebate

The Canadian Market

The housing market in Toronto and the suburbs has been booming over the last several years. This has allowed investors from all over the world to cash in. The strategy was to purchase a newly constructed home or condominium unit from the builder and sell it a few months later for profit. This strategy seemed like people had finally figured out how to pull ahead in this struggling economy. For some this had even become a full time job with endless rewards. With the Canada Revenue Agency (CRA) only taxing half of the capital gain this was the right way to retain your money.

HST New Housing Rebate

With the CRA looking to increase tax revenues they started reviewing the New Housing Rebate applications  and determined a large number of people had claimed the GST/HST New Housing Rebate incorrectly. They were able to determine a large number of investors never even moved into the newly constructed property but they had sold it few months after they took possession. In this case they would not qualify for the rebate and they would be required to pay the HST balance to the CRA. A lot of investors had already sold the property and had failed to collect HST on the sale, which would mean they were still required to pay back the HST. This was a sticky situation with some investors on the hook for over $24,000. In some instances the CRA waited 3 years to reassess the taxpayer. Read more

CRA uses Facebook to audit

Why did the CRA audit me?

Why did the CRA audit me?

CRA uses Facebook to audit

The CRA only provides a generic description on how they select files for audit. According to the CRA website, they select files based several different conditions, such as “the potential for errors in tax returns or indications of non-compliance with tax obligations.”

Techniques used by the Canada Revenue Agency (CRA) are never clearly disclosed. Over the years the CRA has adapted and developed unconventional audit techniques in hopes of catching tax evaders. One of these techniques is called Indirect Verification of Income, where the CRA tries to match a taxpayer’s lifestyle to their reported income. In order to do this the CRA has relied on sources such as Facebook and other social media outlets to build cases against taxpayers.

With falling tax revenues and increasing deficits governments will continue to use unconventional audit techniques if it results in more taxes being collected.