Flying South for the Winter: Canadian Senior Citizens Could Soon Enjoy More Fun in the Sun
The proposal to push this limit from six to eight months has been met with “wide support” from both Democratic and Republican representatives, according to Canadian Snowbird Association researcher, Evan Rachkovsky. Due to the limit increase, the U.S. stands to gain an additional bump to the economy due to tourism. However, the implications of such a move are not lost on the tax code.
Although Congress has showed support for the bill, there are still roadblocks that could prove troublesome. Healthcare migration is much less flexible than visa migration, and current Canadian provincial law differs on the amount of time citizens can be out of the country whilst remaining on their provincial healthcare plan. Many of these laws have restrictions less than eight months, creating external and uncontrollable limitations on any legislation passed by the U.S. Congress.
The biggest roadblocks to the potential benefits of the legislation, however, are major tax implications which need to be considered. Under current tax law, taking advantage of two extra months in the sun may subject Canadian citizens to IRS compliance laws. Under these laws, snowbirds would be subjected to worldwide taxation of income, and may impose additional taxes for those who own stakes in certain Canadian companies (passive foreign investment companies). Finally, these Canadian senior citizens could be subjected to heightened disclosure compliance in regards to foreign retirement funds and other off-shore investment accounts. These implications have the potential to nullify any increase in trade and tourism between the two countries due to the unwillingness of snowbirds to subject themselves to such stringent requirements and increased costs.
The sun may be warm, but the U.S. tax code is icy.
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If you have any questions about this World Business & Tax Update, please contact your WithumSmith+Brown professional, a member of WS+B’s International Services Group or email us at [email protected].
Kimberlee Phelan, CPA, MBA
Practice Leader, International Services Group
609.520.1188
[email protected]
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To ensure compliance with U.S. Treasury rules, unless expressly stated otherwise, any U.S. tax advice contained in this communication is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.
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