Living or working outside Canada for part of the year can help you earn income and broaden your horizons. Nonetheless, before you take off, it’s important to understand that you may need to fulfill certain obligations to your federal and provincial/territorial government in order to retain your citizenship, like paying your income taxes on time.
Are you moving to another country temporarily or permanently but not sure what your obligations are and whether you are still a Canadian tax resident if you live outside of Canada? Keep reading to learn the answer and avoid future problems with the CRA.
The Canadian Tax System
Our country’s tax system is administered by the Canada Revenue Agency (CRA) and dictates that a portion of each resident’s yearly income be paid if they’re living within Canadian borders. The CRA is responsible for collecting information about all taxes in Canada and residents must pay income taxes no matter where they are in the world.
However, while non-residents must still file a self-assessment tax return, they only need to pay taxes on the income they’ve earned within Canada from January 1 to December 31 of the appropriate tax year. So, according to the terms of our country’s tax system, your obligations as a taxpayer will depend on what type of resident you qualify as.
Federal Income Tax Rates For Residents (For 2022)
- 15% on the first $50,197 of taxable income
- 33% of taxable income over $221,708
Although federal tax rates for Canadian permanent or temporary residents can fluctuate from year to year, non-residents are typically charged a flat rate of 25% on income such dividends, pensions, and rental payments.
How Do You Determine Your Residency Status?
Under Canada’s tax system, any applicable information about your citizenship must be evaluated before you can know your residency status and tax implications (if any). For example, the CRA will assess details like your residential ties and continuity of stay, as well as the length, purpose and intent of your time in Canada to calculate your tax rate.
Firstly, you’ll need to determine if you’ve created or maintained any official residential connections to the country during the length of your stay. Primary ties may include:
- A home located within Canadian borders
- Dependants who live in Canada (children, close family, etc.)
- A common-law partner or spouse who lives in Canada
Secondary properties in Canada may qualify as residential ties too, such as:
- A Canadian driver’s license and/or passport
- A health insurance policy with a specific province or territory
- Economic/financial connections (Canadian bank accounts, credit cards, etc.)
- Significant personal properties (vehicles, furniture, etc.)
- Social ties, like memberships to eligible Canadian religious or recreational groups
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Types Of Tax Residents In Canada
The next step in determining your tax obligations is to find out what type of tax resident you are. This part of your residency status is based on your total time in Canada.
Tax Obligations If You Leave Canada Temporarily
There are 3 kinds of tax resident that you may qualify as if you move abroad for a predetermined period of time while maintaining specific connections to Canada:
Residents who spend at least 183 days in Canada annually and have residential ties (families, homes, etc.) are typically deemed “factual”. As a factual resident, you must file a yearly tax return and declare all global income. Luckily, you may be able to claim a credit if you pay foreign tax on that income.
Live Part-Time In The U.S.
If you spend part of the year in the U.S. for things like school or vacation but keep residential ties to Canada, you’ll likely stay a factual resident, which means you must file taxes as if you never left (similar rules exist if you live in other countries). However, these specific tax laws don’t apply to you if:
- You’re a citizen of the United States
- You have residential ties in a country other than Canada or the U.S.
- USCIS has given you a “green card” (i.e. you’ve been granted permanent resident status by the United States Citizenship and Immigration Services)
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If you’re a government employee who has to work abroad, you’re usually considered a factual resident until you sever your residential ties. If you do, you may be considered a “deemed resident” for tax purposes. In that case, you only have to file a federal tax return (not a provincial/territorial one) and declare all world income. Eligible workers include:
- Various staff and school members of the Canadian Armed Forces
- Child dependents of employees who fall within certain income categories
- People working under Global Affairs Canada assistance programs who were Canadian residents in the 3 months prior to being posted abroad
- Canadian residents who are federal or provincial employees that have been posted abroad or given representation allowances during the year.
- People who are exempt from paying tax on 90% or more of income they earned in another country, due to their relationship to a qualifying resident
Check out the tax rates for each province in Canada.
Tax Obligations If You Live In Canada Temporarily
Similarly, there are several types of tax resident that you may be considered if you stay in Canada temporarily and live in another country for most of the year, such as a:
Non-Resident Of Canada
If you normally, routinely or customarily live outside Canada, don’t have any residential ties and/or stay here for less than 183 days annually, you aren’t a Canadian tax resident. That said, you must report any income you earn in Canada (which will be subject to Part XIII tax or Part I tax).
As mentioned, deemed residents often include government employees (missionaries can be eligible too). You may also qualify if you stay here for 183 days or more but don’t create residential ties and are not a resident of a country that has a tax treaty with Canada (only federal tax rules apply).
Non-Resident Of Canada With Rental Income
If you’re not a resident but you earn income from real/immovable property in Canada, your payers (tenants, etc.) or agents (property managers, etc.) must withhold a 25% non-resident tax on the gross rental income paid/credited to you (reporting rules vary from case to case).
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Various tax rules may also apply to seasonal agricultural workers, employers and the liaison officers who help them meet their Canadian tax obligations. These parties are to be considered as non-residents, deemed residents or deemed non-residents until they establish residential ties in Canada.
Canadian Tax Resident FAQs
Do I have to file my taxes if I leave Canada permanently?
Do I have to pay taxes if I’m an international student?
What types of Canadian tax residents are there?
- Permanent Resident – The CRA will typically consider you a permanent resident as long as you work and/or live in Canada for most of the calendar year.
- Deemed Resident – This means that you live here for 183 days or more during the tax year and aren’t a resident of a country that has a tax treaty with Canada.
- Factual Resident – This applies to anyone who stays in Canada for less than 183 days yearly (for work, studies, etc.) but has created residential ties here.
What are the tax obligations of non-residents?
Is it better to be taxed as a Canadian resident or non-resident?
If you’re thinking about living or working outside of Canada there may be important federal and provincial/territorial tax obligations that you must legally fulfill so that you don’t get penalized by the Canada Revenue Agency. After all, you want to make the most of your journey abroad and that starts by protecting your finances.