Under Canadian Tax Regulations, you only have to file a Canadian tax return if you live in Canada for a full year, part year or if you have a rental property in Canada.
If you move abroad you will no longer need to file a Canadian Tax Return providing that you have no Canadian business income or rental income. If you sever your Canadian residency for tax purposes you must file a ‘departure tax return’.
Canadians can be taxed on worldwide income and therefore it is important to be aware of the credits, deductions and exemptions that apply to you in order to avoid paying more tax than you need to.
Your residency status depends on why and how long you are staying outside of Canada. Your residential ties will determine whether you are considered a factual resident, deemed resident, a non-resident or a deemed non-resident of Canada. This will determine how much income tax you are required to pay.
Factual resident: You are a factual resident of Canada if you keep significant residential ties in Canada while you are living outside of the country.
Deemed resident: Those who live outside of Canada and sever their residential ties with Canada.
Non-resident: If you leave Canada to live in another country.
Deemed non-resident: If you are a factual resident or a deemed resident of Canada and are considered to be a resident of another country that has a tax treaty with Canada.
If you are planning to be outside of Canada for an extended period of time, you must inform the Canada Revenue Agency before you leave to determine your residency status.
Residential ties with Canada
Residential ties with Canada are separated into either primary or secondary ties. Maintaining any primary ties will be regarded as causing your residency to be maintained in Canada, and therefore you are likely to be required to continue filing a Canadian tax return even after departure.
Secondary ties are looked at collectively by the Canada Revenue Agency. No one secondary tie will be seen as maintaining your Canadian residency. However, efforts should be made to sever all ties.
Examples of primary ties:
· Leaving a spouse or common-law partner in Canada
· Supporting Dependants in Canada
· Ownership of property in Canada
Examples of Secondary ties:
· Personal property in Canada e.g. car or furniture
· Social Ties in Canada e.g. memberships in Canadian recreational or religious organisations
· Economic ties in Canada e.g. Canadian bank accounts or credit cards
· Canadian driver licence
· Canadian Passport
· Health insurance with a Canadian province or territory