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Every Canadian resident is typically taxed on their worldwide income, which means that all the money you make both inside and outside of Canada needs to be reported on your income tax returns. There is an exception for Non-Residents of Canada for income tax purposes, in which they are subject to only Canadian taxes on their Canadian sourced income. In this case all income earned outside of Canada is not subject to tax in Canada.

The CRA has rules and guidelines to determine if a Canadian citizen is a Non-Resident of Canada for income tax purposes. Residency for income tax is different than what common sense may tell you. Your tax residency status is determined on a case-by-case basis where all circumstances and relevant facts relating to each person has to be considered.

The CRA looks at multiple factors when making a residency determination.

Primary residential ties to Canada include:

  • A home in Canada
  • A spouse or common-law partner in Canada
  • Dependents in Canada
  • Assets in Canada

Secondary residential ties that may be relevant include:

  • Personal property in Canada, such as a car or furniture
  • Social ties on 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
  • Health care insurance with a Canadian province or territory

Corporate residency is determined differently through using common law principles because the Income Tax Act does not define residency. It has been established by the courts that companies are considered a resident in the country in which houses its central management and control.

Considering leaving Canada and thinking about becoming a Non-Resident of Canada for income tax purposes? Make sure to contact a lawyer at Invictus LLP today.

Entering Canada and unsure of your income tax filing obligations? Make sure to contact a lawyer at Invictus LLP today.

CRA Resources

Determining your residency status

Corporate residency

Invictus LLP’s website contains information of a general nature, was not created to provide legal advice, and you must not rely upon it for legal advice. All tax related matters are fact-driven and will differ from the scenarios we have provided. If you have questions and need tax and legal advice, please contact our office for help!