Filing taxes in Canada can seem challenging when you’re new to the country. Part of that may have to do with understanding what determines your province or territory of residence for tax purposes, which can be a little amorphous (to say the least!). Because the way Canada defines your residential status goes beyond just your physical address in a place.
In most countries, your residence is based on whether you’re a citizen there and where you live. In Canada, that’s not the case; rather, a “series of facts” about your life determines whether you are a resident and where you live for tax purposes (which is actually more truthful overall, no?).
But it’s really not as vague as it sounds. You just need to know the common list of items that determine what your residential province or territory is. This article will help clear all that up, so you can file your taxes like a pro.
- Your province of residence for tax purposes depends where your significant ties are on December 31 of the given tax year.
- Significant residential ties include where you, your spouse, and your dependants live.
- The tax implications of moving between provinces can be substantial.
How do you determine your province of residence?
For tax purposes, the Canada Revenue Agency (CRA) uses terms like enduring ties and significant residential ties to figure out your province or territory of residence. Granted, this is not so cut-and-dried, but it makes sense. That’s because factors include not only where you live, but where your spouse and dependants live and where you have other important ties, such as bank accounts, car registration, and personal property.
So, as odd as it may seem, moving during the year or working in another province or territory does not affect your province of residence when you file taxes.
However, if you moved—and subsequently changed all of your significant ties by December 31—that would have an impact.
What kinds of ties establish your residential status?
If you’re new to Canada, it’s important to understand that there’s a difference between being a citizen and being a resident. You can be a resident without being a citizen—if you have personal ties, known as significant residential ties, within the country. But you also have to consider secondary residential ties, which are related to other important personal factors. To figure out your residential province or territory for tax purposes, you need to declare your significant and secondary residential ties.
Here’s what they include:
Significant residential ties:
- Where you live—regardless of whether you own or lease
- Where your spouse and dependants live
Secondary residential ties:
- Where you maintain bank accounts
- Where you own personal property such as furniture or recreational vehicles
- Where your cars are registered
- Where your driver’s license is issued
Let’s say you work in Ontario, but your common-law wife lives in Alberta. You also live in Alberta with her and commute between the two places for work. You find a great investment property near where you work and decide to purchase it. Buying this property does not change your residential province. Since you continue to live in Alberta with your wife, your car is registered there, you get your mail there, maybe you even belong to the local golf club. All of these personal attachments are what matter on your tax return for listing your province or territory of residence.
How long do you have to live in a province to be considered a resident?
Technically, you need to live in a province or territory for only one day to be considered a resident. As noted earlier, if your significant residential ties exist in a province on December 31 of the tax year, it does not matter if you moved there and established those ties the day before. Occasionally, the CRA may require you to submit documents proving that you changed all of your significant ties by the last day of the year. But that isn’t always the case.
What proves your province of residence for the CRA?
Proof of provincial or territorial residency includes many things, such as a lease or rental agreement. Proof of other enduring or significant residential ties include:
- Where your spouse and dependants live
- Your bank account statements
- Your driver’s license
- Vehicle registrations
- Hospital or medical insurance statements or bills
Are there tax impacts if you live in one province and work in another?
Living in one province or territory and working in another is certainly allowed. But for tax purposes, the CRA province of residence is based solely on where you live and have the most significant ties.
So, what happens if you’re temporarily living somewhere else because of work or school? Or your job takes you out of town for several months? Do situations like these change your province or territory of residence?
No. Despite the seemingly complicated living arrangements, it’s still quite simple. Even if you’re temporarily living elsewhere for work or schooling, the CRA will determine your province or territory of residence based on which location has the strongest residential ties (which you need to provide proof of). Again, these are things like where your spouse and/or children live, where you bank, where you receive mail, and so on.
How do you change provincial residency?
Changing provincial residency can be a matter of simply moving between provinces. According to the CRA, moving provinces or territories changes your provincial residency almost automatically.
That’s because, by nature, moving typically involves finding a new place to live and changing important aspects of your life, like your mailing address, your driver’s license, buying new furniture, and maybe joining a local gym or club. Each of these steps establishes significant residential ties in the new province.
You should also call the CRA to report the change of address directly, which has the added benefit of making sure everything is updated quickly.
What are the tax implications of moving provinces?
Moving provinces or territories can have a significant impact on the amount of taxes you must pay. Since provinces and territories have varying tax rates, you may move from a high tax province to a low tax province or territory, or vice versa.
According to the CRA’s rate page, for example, Alberta’s 2023 tax rate is 10% on taxable income up to $142,292 (not accounting for any personal deductions, credits, or other potential deductions and not including federal taxes).
But the tax situation in Manitoba is a little different, see below, with lower taxable income thresholds. (Note: There are thresholds for Alberta that don’t apply to this example):
Tax Rate | Taxable Income Threshold |
10.8% | on the portion of taxable income that is $36,842 or less, plus |
12.75% | on the portion of taxable income over $36,842 up to $79,625, plus |
17.4% | on the portion of taxable income over $79,625 |
This means that if you were earning $35,000 in taxable income and moved your province of residence from Alberta to Manitoba, you could pay $280 more in provincial taxes (not accounting for personal deductions, credits, or other potential deductions, and not including federal taxes).
Alberta: $35,000 x 10% = $3,500
Manitoba: $35,000 x 10.8% = $3,780 (difference of $280)
Provincial or territorial residency is also vital to determining what social and economic benefits you’ll receive. Multiple tax credits and incentives change based on where you live—including GST, climate incentives, and sales tax credits. All of these tax changes and implications are reasons why it’s important for you to notify CRA when you move to a new province or territory.
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