A new policy will be implemented this summer that will significantly affect Canadians who travel to the U.S. This program is known as the Entry/Exit Initiative of the Perimeter Security and Economic Competitiveness Action Plan. This plan is just one component of a larger strategy that was initially announced on February 4, 2011.
This larger strategy, termed Beyond the Border: A shared Vision for Perimeter Security and Economic Competitiveness is meant to promote security and economic competitiveness. This initiative is a joint project between both the U.S. and Canada.
The Entry/Exit Initiative of the Perimeter Security and Economic Competitiveness Action Plan will begin its final phase on June 30, 2014. This final step will require the U.S. and Canada to share information related to people entering and leaving either country.
This information will lead to each country having the ability to independently determine the number of days an individual has spent in either the U.S. or Canada. This means that visitors to either country must track the amount of days they have spent there. Prior to this regulation, a country would count an individual's amount of days only when he or she would enter the country.
Further, the two countries rarely shared this information with the other. This meant little knowledge about how long an individual had actually been visiting the U.S. or Canada.
Currently, in order for an individual to receive a full and accurate accounting of the days spent in either country, he or she will need to contact the U.S. Customs and Border Protection (CBP) and the Canadian Border Services Agency (CBSA). He or she must request border entry data from both agencies and then compare the data in order to get a precise number. Not only is this a burdensome task, but it takes between 30-60 days to obtain the information from the agencies.
Once the law takes effect on June 30, any violations may lead to serious consequences. There are basically five penalties that a Canadian will face when staying in the U.S. (or out of Canada for too long):
- Banned from travel to U.S. if unlawfully present. Here, if Canadians are found to be unlawfully present because of an overstay, a travel ban will be implemented. A three-year travel ban is instituted if the individual is unlawfully present for a period between 180 and 365 days and a five-year ban is implemented for an individual who is unlawfully present for more than 365 days.
- Liability for U.S. income tax on worldwide income. If a Canadian traveler is in the U.S. for too many days, he or she may be deemed a U.S. resident and be subject to tax on worldwide income.
- Liability for U.S. estate tax on fair market value of worldwide assets. The U.S. taxes its citizens and other U.S. residents on the fair market value of their worldwide assets at death. The definition of “U.S. resident” is different for estate tax purposes than it is for U.S. income tax purposes. This means that the heirs of a Canadian traveler can have their inheritance taxed.
- Liability for Canadian departure tax. In Canada, a resident is taxed on his or her worldwide income. If a Canadian is no longer considered a resident, the Canadian government assumes that the individual has disposed of his or her assets, recognized a gain on those assets, and must now pay taxes on that gain. A Canadian will no longer be considered a resident if he or she has spent too much time abroad.
- Loss of provincial health care. Canadian residents are able to take advantage of the country's health care program. If the government determines the individual is no longer a resident because of the length of time spent abroad, he or she will lose access to the country's health care services.
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