CRA & Revenu Québec

What Is the Difference Between Factual and Deemed Residency?

Residency is a crucial element of the Canadian tax system. Residents of Canada must declare their worldwide income and pay taxes on it, while non-residents are taxed only on their Canadian-sourced income. Therefore, it is your residency status that determines your liability to tax in Canada.

Basic Rules

Although residency is determined on a case-by-case basis by the Canada Revenue Agency, there are some common factors you can examine that may give you an indication of your status. Look at your global situation to determine where your most significant ties are. Analyze your day-to-day life and try to determine whether it is Canada or another country that you are more involved with. The following questions should to be considered:

  • Where is your home located?
  • Where do your spouse and children live?
  • Where is your personal property, such as your car, located?
  • Where was your driver’s license issued?
  • Where do your work?

The combination of these and other factors will be thoroughly reviewed. The country with which it has been determined you have the closest ties will be considered your country of residence.

Deemed Residency

Even if your day-to-day life does not make you a resident of Canada, the tax laws contain a rule that may nonetheless make you a resident of Canada for tax purposes called “deemed residence.” Under this rule, if you are physically present in Canada for a total of 183 days or more in any calendar year, you will be deemed to be resident of Canada for the entire year.

There are some provisions in the deemed residency law for specific groups of people, such as members of the Canadian Forces and some government employees.

If you are a considered to be a deemed resident of Canada under this rule and you are also considered resident of another country under its rules, a tax treaty between Canada and that country will contain tie-break rules to determine your status for taxation purposes.

Determination of Residence by the Canada Revenue Agency

When filing a tax return, you must take a position as to whether or not you are a resident of Canada. If you are immigrating to or emigrating from Canada, you need to know the date that you became or ceased to be a resident of Canada.

The CRA can give you its opinion on your status. If you would like access to such an opinion, you need to complete and file either form NR73 Determination of Residency Status (Leaving Canada) or form NR74 Determination of Residency Status (Entering Canada), as the case may be. The forms are rather lengthy and will require you to supply all of the pertinent information regarding your day-to-day life.

Once the CRA has analyzed your information, they will send you their opinion in writing. This opinion will clarify the treatment that the CRA deems appropriate for your case. However, it is not a binding legal document for you nor the CRA. The CRA’s opinion will be based solely on the facts that you have provided, so it is best to fill out the forms with as much detail and accuracy as possible.