For many international students, traveling overseas or to a non-native country is a great experience. It provides foreign citizens studying abroad with the opportunity to meet new people, as well as learn about a different culture and the laws of that nation. This extends to learning about the country’s tax system.
Residency Status Requirement
The length of your stay and the residential ties you establish while studying in Canada are factors that the Canada Revenue Agency considers in order to determine whether you count as a Canadian resident for tax purposes.
The CRA makes its residential ties determination on a case-by-case basis, using relevant factors such as home ownership, renting arrangements, memberships in clubs, and accounts and credit cards from Canadian banks. It can also include having a valid driver’s licence and a mandatory provincial health insurance coverage. Other factors such as owning a business may influence the decision too.
In addition to these ties, the CRA may analyze the residency status of international students based on your length of stay in Canada.
There are four types of residency status: resident, non-resident, deemed resident, and deemed non-resident.
If you are an international student, you can be considered a resident or deemed resident of Canada for tax purposes if you have residential ties and the total length of your stay is 183 days or more. The length of stay does not have to be in a single entry or exit; multiple entries and exits are counted. If you are a non-resident or deemed non-resident, your length of stay in Canada must be less than 183 days.
The CRA will also consider your residency to another country that has a tax treaty with Canada.
Tax Obligations and Credits
Depending on your circumstances, you may be obliged to pay taxes as an international student once you are considered by the CRA as a resident or deemed resident of Canada.
If you worked while studying in Canada, and you have been considered as a resident or deemed resident, the CRA requires you to report all sources of income earned in Canada or abroad. You must include your world income on your Canadian tax return.
If you are a non-resident or deemed non-resident, you only have to report the Canadian source income that you earned during employment or self-employment.
A tax treaty avoids double taxation for taxpayers who work in multiple countries and who are only be accounted as a resident for one country for tax purposes. If you are a non-resident or deemed non-resident from a country that has a tax treaty with Canada, qualified income taxes deducted from your pay during your employment or self-employment in Canada can be claimed as foreign tax credits.
Any excess of withholding taxes by your employer are refunded by making a formal request to the CRA.