Who pays income tax on a joint saving account with a foreigner? | General financial discussion | Discussion forum

depositsavings said
I have a joint saving account with my mom who is a foreign resident and the sole contributor to the account. The only reason I'm on the joint account is that the bank wouldn't open an account to a foreign resident. I don't report the interest income since I don't contribute at all. But recently I got a Notice of Reassessment taxing me on the full interest. I'm planning to dispute, but don't know if I have the grounds for that. She's in Asia, no tax treaty with Canada.

It sounds like you are the primary account holder of the joint account. The T5 slip would be issued in your name and SIN.

CRA likely noticed that neither you nor your Mom reported the interest on that T5 on your returns!

I think you could dispute your reassessment on the grounds that the funds are 100% your Mom's and that your Mom should be the one reassessed for the interest on those funds.

Lack of a tax treaty doesn't mean lack of taxation. For example, the US foreign tax withholding on dividends is generally 30%. With the Canada-US tax treaty, that withholding is cut in half to 15% for Canadian taxpayers.

GICinvestor said
Why should there be a free ride?

Appeal it.
Or
Pay it and take the payment funds out of the account.  

Agreed. If it truly belongs to Mom she needs to include it in a Part XIII non-resident tax return.

Does the bank also not have your mother's foreign address on record to issue a non-resident tax slip?

If not, pay the tax as if it is your income and take it out of the account. You cannot have it both ways.

I would say.......

Pay the tax
Take that cost out of the joint account to compensate.
To do an appeal will only open up a can of worms and put yourself on radar for a long time. Not to mention the Mom may have difficulties when entering Canada for a visit.

I think you did the right thing by paying it because of the risk of further penalties.
Bill's argument makes sense to me, but you can't depend on the sense of the Tax Court being the same as one's own. There is the possibility that they would regard it as similar to tax evasion since, assuming your mother predeceases you and does nothing with the funds in the interim, the money, including the interest, will be yours automatically, upon presentation of a death certificate.

I hope your mother can find some other place to put her money, but it will be next to impossible if she is not in Canada to do so. It would help if she is a Canadian citizen probably, as she will then have a SIN.
Perhaps other forum members will know where she could open an account.

depositsavings said the bank would not give his mother an account as she is a non-resident, apparently Canadian citizenship is not the issue for the bank.

No need to go to Tax Court, file an objection with CRA Appeals division, they're pretty good at being "fair" - I've heard some exasperated CRA auditors call Appeals "the gift shop", as they give back many reassessments that the auditors hastily propose. Again, there is no such concept that A can be assessed for B's personal taxes, related or not.

I suppose if Mom doesn't report this income, and CRA doesn't go after her for it now or in the future, at least you're not being double taxed, and if you're in the same tax bracket it makes no difference in amount. And as Mom will reimburse you, if you're ok with the whole situation, i.e. every year going forward you'll be paying someone else's taxes, then I guess no use wasting time opposing it.

depositsavings said
… And like Loonie said, the joint account does go to me if she dies, maybe that's CRA's grounds for me liable to the tax. …

You're not really liable for the tax until after the money is yours.

The actual motivation may be much simpler than that.

CRA noticed that no-one reported the interest on that T5 slip on their return. T5 slip mailed to taxpayer was perhaps lost in the mail or was overlooked when the tax return was done. It happens.

CRA allocates the interest to and re-assesses the primary holder of the joint account. Hopefully, that will jog the primary holder's memory or kick start a conversation between the joint holders of the account.

I don't understand the impliacations of what Norman has written.

I don''t think the OP has made a contradictory statement.

Upon re-reading the OP, I am wondering if you did not report the T5 at all. This would definitely have triggered a reaction at CRA. I think that what you probably should have done was to report it and then count it as 100% mom's and 0% yours. There is a place on the form where you can do this. What you probably should have done is sent in a revision when you realized you should have reported it; I don't know if you can still do this once you have been reassessed.
That being the case, if it were me, I might appeal the reassessment, pleading that you failed to include the T5 due to a misunderstanding of what you were supposed to do with it and then ask for it to be attributed 100% to mom (or something along those lines), assuming there is clear documentation that the money is mom's.
Then, for 2019, I would declare it but again list it as 100% mom's and 0% yours. I have read that this will still trigger a response from CRA, as they tend not to believe this ratio is credible, but you can produce your documentation again when they ask for it and it may not require an appeal. At least you would not be in trouble for failing to report income if you did it that way. I have heard that if you fail to report income twice, then you get a lot more scrutiny from them for your entire return, but I can't verify that.
You might have to go through this every year.

It doesn't seem right to me to voluntarily declare it as your income in subsequent years when it isn't your money. It seems to me that if you do that, and then she moves the money somewhere else, they may still think it's actually yours! Who needs the complications?
So you would need to appeal it in order to set the record straight for future years.

Perhaps she can find a bank that will open an account for her among the banks that frequently deal with people who have personal connections to other countries. I'm thinking of maybe HSBC, Habib Bank, ICICI Bank or the Korean one whose name I forget. If they require her to appear in perosn to open an account, this could be tricky, especially with current travel difficulties. Perhaps "Doug" knows if HSBC will do this.
Other than that, I would consider putting it into a non-interest-bearing chequing account until she can find a better place for it, just to get the issue out of your hair. Then there is nothing to report or dispute and she still has her money in Canada, the main goal..

If I appear to be contradicting what I said earlier, it's because i re-thought the issue.