Conrad Black and His Dual Citizen Tax Trouble

The colorful character and once media mogul Conrad Black is fighting a Canada Revenue Agency Tax Assessment of $5 million income from a 2002 tax review.

It all started with the Citizenship status.

Though Mr. Black was born in Canada and was appointed an Officer of Canada in 1990, he renounced his Canadian Citizenship in 2001, so that he can receive the title Baron Black from Queen Elizabeth II. Since then he filed taxes in Canada as a non-resident Canadian, because he had only UK citizenship.

But the problem is many tax payer frequently fail to understand that a Tax Citizenship and Political Citizenship are two different status and falls under different jurisdiction of law.

A foreign person living in Canada more than 183 days in a tax year will become a Canadian Tax Resident, even though he is not a Canadian Citizen. He has to pay tax to Canada like a citizen pays tax.

Specific to Mr. Black’s case, he claims that in 2002 he was a U.K. tax resident and Canadian non tax resident and his lawyers filed taxes with the same tax status since 1992 to 2005.

But CRA is claiming that in 2002, Mr. Black was a Canadian Tax Resident. Confirming a Tax Resident for someone who has a dual tax citizenship status is a very complicated subject. You must follow the specific tax treaty between the two countries to confirm Tax Resident and Non-Resident status. You also have to provide support to your claim. In this case maybe CRA know some information, that we don’t know.

The tax resident status of a foreign person changes every year. Once you have filed as a tax non-resident that does not mean you are a non tax resident in the country for other years. It must be decided every year, which country’s tax resident are you.

If CRA can justify that Mr. Black was a Tax Resident of Canada in 2002, he will have to pay tax on $5 million of income and benefits that he received and did not report. The case will be heard in Canada Tax Court in May, 2013.

Dual Citizens of USA and Canada are facing the same problem. If you fall into this category, it is absolutely necessary that you consult with a professional to determine your tax resident status and file tax correctly.