Canadians travelling extensively, live or working abroad are often still obliged to pay Canadian and provincial or territorial income tax. Whether you are a citizen of Canada who is considering making the move or if you have already have, it is important that you are aware of your residency status and the income tax rule that apply to you whilst you are outside of Canada.
Your residency status is determined by why and for how long you are outside the country. As well as what ties you have to Canada.
Factual residents of Canada for income tax purposes
You are a factual resident of Canada if you keep significant residential ties in Canada while you are living or travelling outside of the country. You could be a factual resident of Canada if you are:
- working temporarily outside Canada
- teaching or attending school in another country
- commuting (going back and forth daily or weekly) from Canada to your place of work in the United States, or
- vacationing outside Canada.
This is also the case if you spend part of the year in the United States for health reasons or on vacation, and you still maintain residential ties to Canada.
Deemed residents of Canada for income tax purposes
People who live outside Canada and who sever their residential ties with Canada can sometimes be may be considered to be deemed residents of Canada for tax purposes.
You may be a deemed resident of Canada if you are:
- A federal, provincial or territorial government employee who was a resident of Canada just before being posted abroad or who received a representation allowance for the year
- A member of the Canadian Forces
- A member of the Canadian Forces overseas school staff who chooses to file a return as a resident of Canada
- Working under a Canada International Development Agency assistance program if you were a resident of Canada at any time during the three-month period just before you began your duties abroad
- A dependent child of one of the four persons described above and your net income for the year was not more than the basic personal amount (line 300 in the General Income Tax and Benefit Guide) or
- A person who, under an agreement or convention (including a tax treaty) between Canada and another country, is exempt from tax in that other country on 90% or more of their income from all sources because of their relationship to a resident (including a deemed resident) of Canada
Non-residents of Canada for income tax purposes
When you leave Canada to live in another country (emigrate), you generally become a non‑resident of Canada for income tax purposes.
You are a non-resident of Canada for income tax purposes if you:
- Normally or routinely live in another country and are not considered a resident of Canada
- Do not have significant residential ties to Canada, and
- Live outside Canada throughout the tax year, or
- Stay in Canada for less than 183 days in the tax year
Non-residents of Canada are required to pay taxes only on certain income from Canadian sources.
Deemed non-residents of Canada for income tax purposes
As a factual resident or a deemed resident of Canada who is considereda resident of another country that is within a tax treaty with Canada, you might be considered a ‘deemed non‑resident of Canada for income tax purposes’.