Taxation for Non-Residents

If you live outside of Canada or spend most of the year travelling internationally, your tax obligations vary based on how much time you spend in Canada, your ties to Canada and the type of income that you collect. In some cases, you do not need to file at all; in other cases, filing a return is essential.

Non-Resident Status

If you normally live in another country, you are automatically considered a non-resident of Canada.

If you live partly in Canada and partly in another country, you are considered a non-resident as long as you live in Canada for less than 183 days of the year and have no significant residential ties to the area.

• If you spend 182 days in Canada and have few ties to the area, you will likely be considered a non-resident.
• In contrast, if you spend 182 days in Canada but have a spouse, a home and a car in the country, you may be considered a resident.

It is always a good idea to contact CRA prior to filing your return to ensure you are declaring the proper status.

Part I Tax

If you own a business in Canada or if you earn money from a job in Canada, your income is subjected to part I tax.

• Part I tax also applies to Canadian scholarships and research grants, as well as money earned from selling Canadian property.
• Part I taxes are typically held at the source by the payer.

However, your end-of-the-year tax obligation may vary based on other factors, and you need to file a tax return reporting these payments.

Part XIII Tax

Part XIII tax applies to dividends, rental payments, old age pensions, retirement income payments and annuity payments as well as other types of investment income.

Unless the country you are living in has a tax treaty with Canada, these part XIII items are taxed at 25 percent. In most cases, part XIII tax is non-refundable, and there is no obligation or benefit to filing a tax return. However, Old Age Security payments are the exception to this rule.

OAS Payments and Recovery Taxes

If you are a non-resident and receive OAS, you must file an Old Age Security Return of Income.

This form does not calculate your income tax, but it calculates your recovery tax. If you are a high-income pensioner, you may be required to repay some of your OAS payments in the form of a recovery tax.

This 15 percent tax only applies to income over a preset threshold amount. However, if you live in one of the countries that has a tax treaty with Canada, such as the United States, you are not charged this recovery tax, and you do not have to file the additional form.

Filing Non-Resident Tax Returns

If you are a non-resident, you need to file a special tax return – Form 5013-R T1 (Income Tax and Benefit Return for Non-Residents and Deemed Residents of Canada).

Most filers use their Social Insurance Number on these forms, but if you don’t have one, obtain an Individual Tax Number using Form T1261 (Application for a CRA ITN for Non-Residents). You may have to file additional forms depending on the type of income you earn.

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Resources:

• CRA: Determining your residency status
• CRA: Non-residents of Canada
• CRA: Old Age Security Return of Income (OASRI)
• TurboTax: Filing Income Tax Returns in Canada As a Non-Resident