Are You Still A Canadian Tax Resident If You Live Outside Of Canada?

Are You Still A Canadian Tax Resident If You Live Outside Of Canada?

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated March 22, 2022

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. 

Note: If you have serious tax concerns or are unsure about your tax obligations, please speak to a tax expert.

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 

Check out all the ways you can immigrate to Canada.

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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:

Factual Resident 

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)   

Do you often visit the U.S? Simplify your finances with these best banks for snowbirds.

Government Employer

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).  

Deemed Resident 

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). 

Are you a landlord? Check out these tax deductions for landlords in Canada.

Seasonal Workers

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?

Once you end all residential ties to Canada and move away, the CRA will likely consider you a “non-resident” or “emigrant” for income tax purposes. Then, you just need to file a departure tax return (NR73) within the year you leave to declare any final world income you made during your last days as a Canadian, like pensions or the sale of your home.  Keep in mind that there may be certain implications when filing your departure tax return, such as the deemed disposition of your assets (based on fair market value) and the allocation of the personal tax credits for your residency term. However, after you’ve officially become a non-resident, you’re no longer required to file a Canadian tax return.   

Do I have to pay taxes if I’m an international student?

If you’re studying in Canada for a lengthy period, you may have to file a federal tax return. Once again, the way you get taxed depends on your residency status, which can change according to your residential ties (if any). Here, the CRA could consider you a: resident, non-resident, deemed resident or a deemed non-resident.  If you spend less than 183 days in Canada during a calendar year or move to another country when you’re not attending university and don’t make income or residential ties here, you’ll probably remain a non-resident and won’t have to file a Canadian tax return.  

What types of Canadian tax residents are there?

Although there are several subcategories that you may fall into under specific personal or financial circumstances, you can qualify as 1 of 3 types of tax resident in Canada: 
  • 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?

As a non-resident, you may not have to file a tax return. Then again, there are some situations where you’ll be obligated to pay two types of tax if you earn income in Canada. The first is Part XIII Tax; this refers to the income you make on certain earnings, such as dividends, rental payments, annuity payments and Canadian pensions (for a full list, please check out the CRA’s website). The other is Part I Tax; this section can include any income you collect such as employment income, business income, income from a sale of property in Canada (capital gains tax) or income from Canadian scholarships, bursaries or research grants.  Generally speaking, both Part XIII and Part I tax will be deducted at their sources before you receive an income payment that the CRA deems as taxable.

Is it better to be taxed as a Canadian resident or non-resident?

This depends on which country you’re coming from or moving to. For instance, if you’re living in a country that has better tax rates than Canada, it may be smarter to retain your non-resident status so you only get taxed on Canadian income. 

Bottom Line

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.    

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Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.

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