Before filing your tax return, you need to determine your residential status in Canada to file the proper forms and determine which income you have to report. There are significant ties and secondary ties list that determine your status.
Significant Residential Ties
You have to establish and maintain significant ties to Canada to be considered a resident. Having any of the following ties, you will automatically be considered a resident:
- A home in Canada: you have to own the dwelling or lease it for a long term.
- A spouse or common-law partner who lives in Canada.
- Dependents in Canada: children under 18 years of age or infirmed dependents.
Secondary Residential Ties
If you have enough secondary residential ties to Canada, you are a resident:
- personal property in Canada, such as a car or furniture
- real property in Canada other than a house: land, cottage, etc.
- social ties in Canada, such as memberships in Canadian recreational or religious organizations: the membership has to be in your name, using your spouse’s or dependant’s membership is not sufficient.
- economic ties in Canada, such as Canadian bank accounts or credit cards
- a Canadian driver’s license
- a Canadian passport
- permanent residency status in Canada (PR card)
- health insurance with a Canadian province or territory
- employment or business in Canada
For new immigrants, a PR card and a valid health card are enough ties for an individual to be considered a resident regardless of how long they stayed in Canada.
It is possible to be considered a resident in more than one country at the same time. Without tax treaties with other countries, you will be taxed on your world income in multiple countries. With the tax treaties, CRA looks into the tie-breaker rules to determine if you are entitled to claim the foreign income tax credit to avoid double taxation. The following tie-breaker rules are looked at in the following order:
- permanent home: you might own a home in two countries that make you a resident in both countries for tax purposes. The home has to be a dwelling that you own for your personal use not for renting or business use.
- Centre of Virtual Interest: if you don’t have a permanent home, CRA will look at your relationships (spouse, dependants, social ties, etc.) and financial ties in Canada.
- Habitual Abode: if you cannot determine the center of your virtual interest, CRA will look into the country where you spend most of the year and where is your normal life activities take place.
- Citizenship: if the residency can’t be determined by the habitual abode rule because you spend the same amount of time in two countries, CRA will look at your citizenship status.
- A decision by a Competent Authority: if you have citizenship status in more than one country, the Minister of National Revenue of CRA, will look into your status to reach a decision on your residency status.
If you have USA citizenship, you will have to file a US return regardless of your residency status. USA tax requirement is based on citizenship, not residency. If you live in Canada as well for more than 183 days, you will have to file a Canadian tax return. But in this case, you will be able to claim a foreign tax credit for the taxes you paid in the USA.
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