Under the Canadian income tax system, an individual’s liability for income tax is based on his or her status as a resident or a non-resident of Canada.
An individual who is resident in Canada during a tax year is subject to Canadian income tax on his or her worldwide income from all sources. Generally, a non-resident individual is only subject to Canadian income tax on income from sources inside Canada.
You are a non-resident for tax purposes if you:
- normally, customarily, or routinely live in another country and are not considered a resident of Canada; or
- do not have significant residential ties in Canada and you live outside Canada throughout the tax year; or
- you stay in Canada for less than 183 days in the tax year
The most important thing to consider when determining your residency status in Canada for income tax purposes is whether or not you maintain, or you establish, residential ties with Canada.
Significant residential ties to Canada include:
- a home in Canada;
- a spouse or common-law partner in Canada; and
- dependents in Canada;
Secondary residential ties that may be relevant include:
- personal property in Canada, such as a car or furniture;
- social ties in Canada, such as memberships in Canadian recreational or religious organizations;
- economic ties in Canada, such as Canadian bank accounts or credit cards;
- a Canadian driver’s license;
- a Canadian passport; and
- health insurance with a Canadian province or territory.
The residential ties you establish or maintain in other countries may also be relevant.
The 183-day rule
When you calculate the number of days you stayed in Canada during the tax year, include each day or part of a day that you stayed in Canada. These include:
- the days you attended a Canadian university or college;
- the days you worked in Canada; and
- the days you spent on vacation in Canada, including on weekend trips.
If you lived in the United States and commuted to work in Canada, do not include commuting days in the calculation.
As a non-resident of Canada, you pay tax on income you receive from sources in Canada. The type of tax you pay and the requirement to file an income tax return depend on the type of income you receive.
You are a deemed resident of Canada for tax purposes if you are in one of the following situations:
- You are a government employee or a member of the Canadian Forces including their overseas school staff.
- You sojourned in Canada for 183 days or more (the 183-day rule) in the tax year and are not considered a resident of another country under the terms of a tax treaty between Canada and that country.
If you are deemed to be a non-resident of Canada, the following would apply:
- You are not eligible to receive the Canada child tax benefit (CCTB) unless you are the spouse or common-law partner of a deemed resident and you meet the CCTB eligibility requirements.
- You are not eligible to receive the universal child care benefit (UCCB) unless you are the spouse or common-law partner of a deemed resident and you meet the eligibility requirements. The UCCB payments are usually taxable to the spouse or common-law partner with the lower net income.
- You are not entitled to provincial or territorial credits unless you were a resident of Canada on December 31.
- The amount of federal non-refundable tax credits is limited up to the part of the year that you were a resident of Canada
For more detailed information please call KWB at 780-466-6204 or email us by clicking here.
Thanks to David Wickenberg of KWB Chartered Accountants for providing this content.