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.
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.
- Temporarily outside of Canada for part of the year.
- If you work outside the country but come back off and on,
- If you are a teacher or attend school outside the country.
- If you commute back and forth, either daily or weekly to your place of work, such as crossing the USA border.
- If you vacation outside the country for part of the year.
Some other considerations are,
- property in Canada,
- memberships in recreational or religious organizations,
- employed with a Canadian business,
- Canadian bank accounts,
- Driver’s License
For more considerations, have a look at this link from the CRA – Point 1.14
You are taxed as if you never left the country, so you will continue to report your Canadian sourced income, as well as income earned in the country you work/live in, claiming all your credits and deductions. You can claim federal and provincial non-refundable tax credits.
You can also claim all Federal & Provincial refundable tax credits as well. You can still apply for the GST/HST credit and receive the Canada Child Benefit (CCB) if you have children that live in Canada.
Deemed Resident of Canada – If it has been determined by the CRA that you are not a factual resident, then you will be considered deemed. Liable for taxes on worldwide income throughout the year.
A person is a deemed resident of Canada for tax purposes if they:
- Lived outside of Canada during the tax year
- Are not a factual resident of Canada because they did not have significant residential ties and
- Government employee
- Member of the Canadian Forces including their overseas school staff or
- Are working under a Global Affairs Canada assistance program or
- Are a member of the family of someone who meets these conditions, see CRA: Government employees outside Canada
- Stayed in Canada for 183 days or more in the tax year and
- Do not have significant CRA: residential tieswith Canada
- Are not, under a tax treaty, a deemed non-resident of another country.
Because Quebec is the only province in Canada that requires that individuals file a Provincial return as well as a Federal one, the rules for deemed residents in that province are particular, so please review this link from Revenu Quebec to assist with your provincial obligations.
A deemed resident of Canada will use The Income Tax and Benefit Return for Non-residents and Deemed Residents of Canada. You will be subject to a federal surtax instead, as you cannot claim provincial or territorial tax credits. Alternately, you will be able to claim any federal deductions and non-refundable credits that may apply to you. Other types of income are not reported but must be entered on the Statement of World Income anyhow.
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, 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 provide all of the pertinent information regarding your day-to-day life. You will need to contact the International Tax and Non-Resident Enquiries page from the CRA.
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.