Families

How Does Residency Status Impact Your Tax Return?

In Canada, your tax status is based not on your citizenship, but on your residency status. There are a number of factors that the Canada Revenue Agency observes in order to determine your residency status and associated tax obligations.

Determining Your Residency Status

The CRA determines an individual’s residency status on a case-by-case basis. The most important thing to understand is that the CRA will review your residential ties to Canada. The ownership of a home in Canada or the residence of a spouse or dependants are examples of primary ties to the country.

Secondary ties might include the following: personal property in Canada, social ties such as memberships, economic ties such as bank accounts, a Canadian driver’s licence, a Canadian passport, as well as possibly health insurance coverage within a Canadian province or territory. If you have established similar residential ties to another country, these could be considered relevant to the CRA’s consideration of your status too.

Types of Residency Status

If you have left Canada permanently and severed your residential ties with the country, you might be considered a non-resident.  That said, even if you maintain significant residential ties to Canada but are considered to be a resident of a new country with which Canada has a tax treaty, you may be considered a deemed non-resident of Canada.

Individuals who leave Canada temporarily for purposes such as work, vacation, or to attend school, are often considered factual residents of Canada. Immigrants to Canada who have established significant residential ties with Canada may be considered residents. However, immigrants who have not established significant residential ties with Canada may be considered deemed residents of Canada should they stay in the country for 183 days or more per year.

You can complete form NR74: Determination of Residency Status (Entering Canada) or form NR73 Determination of Residency Status (Leaving Canada) to ask for a ruling to confirm your status in the opinion of the CRA.

Tax Obligations

If the CRA considers you a permanent resident, a factual resident, or a deemed resident, then you have an obligation to file income tax in Canada, as well as to report all of your worldwide income. You are also required to claim all deductions and non-refundable tax credits that apply to you.

In the year that you become a resident of Canada after immigrating from another country, be sure to review whether or not there is a tax treaty between your former country of residence and Canada in order to determine your specific tax obligations.

If you have left Canada and are no longer considered to be a resident, you may still have an obligation to file a tax return in the year of your departure, covering the period of time up until the date you were no longer considered to be a resident.

References & Resources