Top Non-Resident Taxes
Are you a non-resident of Canada for tax purposes?For some people, it can be a little confusing to first figure out if you are a resident of Canada or not. To make it a little easier we have broken it down for you. According to the CRA, you are a non-resident of Canada if the following situations apply to you:
- You live in Canada from time to time but you do not have any residential ties* in Canada and
- You stayed in Canada for less than 183 days in the previous year or
- You live outside Canada throughout the entire tax year.
*What are residential ties?If you have ties in Canada then you are considered a resident for tax purposes. There are primary ties and secondary ties. Primary residential ties: If you have a primary residence in Canada, a spouse or common-law partner in Canada, or a dependent living in Canada then you are considered a resident for tax purposes. Secondary ties: if you have a Driver’s license, Health Card, Furniture and Clothing, Bank account, Credit card, vehicles, pets, memberships in clubs, Pension plan, RRSP’s and TFSA, or other personal possessions in Canada then you MAY be considered a resident of Canada for tax purposes. Secondary ties are always considered similar to a weighing scale, you are considered a resident depending on whichever country you have more ties.
What are the different types of residency status?
If you don’t qualify to be a proper resident or an ‘ordinarily’ resident/deemed resident then you may fit into the other categories. You may either be a factual resident or a deemed non-resident.
Who is a factual resident?
A factual resident is a person who does not live in Canada (he/she is traveling etc) but he or she at least maintains residential ties (house, family, etc) with Canada. The residential ties were mentioned in detail earlier in this article.
Some people who may be categorized as factual residents include individuals teaching outside Canada, those vacationing outside Canada, those studying outside Canada, or those working outside Canada as well.
Who is a deemed non-resident?
This is where most people get confused. A deemed resident of Canada or Factual resident of Canada may be a person who maintains residential ties in Canada and they are also considered a resident of a country which has made a tax treaty with Canada. So if you have ties with a country which has made a treaty with Canada, and you also have residential ties in Canada then you may be considered a deemed non-resident. A deemed non-resident generally follows the same tax rules as a regular non-resident.
Who is deemed-resident?
Anyone who lives in Canada more than 183 days even though he/she does not have ties with Canada but they will become deemed non-resident of Canada and they will be subject to tax on Canadian and worldwide income.
Resident tax consequences on worldwide income
So what does being a deemed resident, a factual resident, or a deemed non-resident of Canada actually mean for your worldwide income? The answer can vary from case to case but the general ruling is:
Deemed resident: naturally, you will report all of your worldwide income to the CRA and be eligible for all tax credits, refunds, and benefits depending on your qualification.
Factual resident: As a factual resident you will be treated exactly like a deemed resident and will report all of your worldwide income to the CRA and be eligible for all the tax credits, refunds, and benefits depending on what you qualify for.
If you are a non-resident or a deemed non-resident then you only have to report your Canadian income to CRA and file your taxes, You do not have to report your worldwide income to CRA for the year.