Canadian citizens are normally taxed on their worldwide income. What this means is that all of the money you make inside and outside of Canada must be reported on your income tax returns. However, there is an exception for Non-Residents of Canada for income tax purposes. These Non-Residents for income tax purposes are only subject to Canadian taxes on their Canadian sourced income. As a result, any and all funds earned outside of Canada would not be subject to tax here in Canada.
The CRA has strict guidelines and rules when it comes to declaring a Canadian citizen a Non-Resident of Canada for income tax purposes. The trick is to remember that residency for income tax purposes is very different than the every day definition thought of by most Canadians. An individual’s tax residency status is determined on a case-by-case basis and all of the individual’s circumstances and relevant facts must be considered.
The CRA will look at a variety of factors in making a residency determination.
For individuals, the seminal primary residential ties include:
- A home in Canada;
- A spouse or common law partner in Canada; and
- Dependants 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 licence;
- A Canadian passport; and
- Health insurance with a Canadian province or territory.
Corporate residency is determined using common law principles since the Income Tax Act does not define residency. The courts have established that a company is considered resident in the country that houses its central management and control.
Have more questions? Read our article found here.
If you are considering leaving Canada, and you are thinking about becoming a Non-Resident of Canada for income tax purposes, contact a lawyer at R&A Tax Law to see how we can help!
If you are entering Canada, and you want to know your income tax filing obligations, give R&A Tax Law a call today.
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This posting provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All taxation situations are specific to their facts and will differ from the situations in the articles and postings. If you have specific legal questions you should consult with a lawyer.