Moving to a new country unfortunately doesn’t always mean leaving your tax obligations behind. The Canadian tax authorities will tax residents on their worldwide income, so, in certain cases, you must make sure you’re still filing your Canadian taxes from abroad.
Filing your 2025 personal taxes in Canada when you live abroad requires understanding how Canadian tax laws apply to expatriates. This guide gives clear directions for the 2025 tax season. Here's a step-by-step guide to help you navigate the process:
1. Determining Your Residency Status for Tax Purposes
- Residency for Tax Purposes: The Canadian Revenue Agency (CRA) determines whether you are a "resident" or "non-resident" for tax purposes, and this status affects your filing requirements.
- Resident: If you maintain significant ties to Canada (e.g., a home, spouse, dependent children), you may still be considered a resident for tax purposes, and you will have to report worldwide income.
- Non-Resident: If you have severed most ties to Canada and are living abroad, you may be considered a non-resident for tax purposes. As a non-resident, you only report Canadian-source income.
Who is considered a Canadian resident for tax purposes?
There are three main types of Canadian residents:
- Permanent residents: Those who live and/or work in Canada permanently
- Deemed residents: Those who lived in Canada for 183 days or more during the tax year and are not considered a resident of another country that has a tax treaty with Canada.
- Factual residents: Those who lived in Canada for less than 183 days during the tax year but have significant residential tiesin Canada. For example, those who have left temporarily for work or study purposes.
2. Gathering Required Documents and Information
Get all your papers together before you start. It makes the whole thing much smoother. You will need to gather the same documents that a resident would typically need, including:
- T4s, T5s, T3s, and other forms related to Canadian income if you're earning Canadian-source income.
- Other income statements (foreign income, interest, etc.).
- Foreign tax documents (if you live abroad and earned income there).
- Receipts for any deductions or credits you are eligible for, like medical expenses, charitable donations, etc.
3. Consider Foreign Income
- Residents: As a resident of Canada, you must report your worldwide income, including income earned outside Canada.
- Non-Residents: As a non-resident, you only report income from Canadian sources (e.g., rental income, pension, or employment income from a Canadian employer). You will need to file T1 returns.
4. Foreign Tax Credit
- If you're living abroad and paying taxes in the country where you're residing, you might be eligible for the Foreign Tax Credit (FTC) in Canada. This allows you to offset some of the taxes you’ve paid to a foreign government against the taxes owed in Canada. This helps avoid double taxation.
- Form T2209 is used to claim the foreign tax credit.
5. Tax Treaties
- Tax treaties can change tax filing. Canada has tax treaties with many countries that can impact how you are taxed. These deals can affect your residency status and what taxes you owe. These treaties generally aim to avoid double taxation. You should check if there is a treaty between Canada and your country of residence to understand how your income will be taxed.
- Form T1248 is used to claim benefits under tax treaties.
6. File Your Return
- T1 General Form: If you are a resident of Canada, you will need to file the T1 General tax return. If you are a non-resident, you will generally need to file the T1 Non-Resident
- The due date for filing your tax return for 2025 will generally be April 30, 2026 (or June 15 if you're self-employed).
- If you're living abroad, you can file your taxes online via CRA's NETFILE system or through paper filing. You can also file with the help of a tax professional.
7. Consider Additional Reporting Requirements
- If you have foreign assets, you may need to file additional forms, such as Form T1135 (Foreign Income Verification Statement), which is required for individuals who own foreign property with a total value greater than $100,000 CAD.
8. Keep Records
- Keep records of your income, taxes paid abroad, and any other documents relevant to your tax return for at least six years, as the CRA may request to review them.
9. Get Professional Help
- If your situation is complex (e.g., you have income from multiple countries, tax treaties, or your own foreign property), consider consulting with a tax professional who specializes in international tax issues. They can ensure that you are complying with both Canadian tax laws and the tax laws of your country of residence.
10. Paying Any Taxes Owed
- If you owe taxes, the CRA will send you a Notice of Assessment. As a non-resident, you can pay online through the CRA website, by mail, or through your Canadian bank.
Special Considerations for Expats
Expats face some unique tax situations. Let's look at some common ones.
- Disposing of Canadian Property: Selling property in Canada while abroad? There are tax things you should know. You might have to pay capital gains tax. Get advice from a professional.
- RRSPs and Other Registered Accounts: RRSPs have special rules when you live abroad. Watch out for tax when you take money out. Think about this before you withdraw any funds.
- Departure Tax: Leaving Canada for good? You might have to pay a departure tax. The CRA treats this like you sold certain things, even if you didn't. Talk to a tax pro to learn more.
Important Dates and Deadlines
The deadline is usually April 30th. Self-employed? You and your spouse get until June 15th. But, you still have to pay by April 30th. Late filing? You'll pay penalties.
Late Tax Returns in Canada
The CRA will charge you a late filing penalty if you owe taxes and fail to submit your tax return by the deadline. The fine is 5% of the balance owed, plus another 1% of the balance for each full month that passes, up to a maximum of 12 months.
If you have already been charged a late filing penalty in previous years, you may be subject to additional fines.
There are also fines for false statements and omissions. The amount for this is a minimum of CA$100 but is usually 50% of the understated tax/overstated credits. If you voluntarily declare a false statement or omission to the CRA, they may waive the penalty.
How to pay your Canadian taxes from abroad
You can pay Canadian taxes in many different ways. These include:
- Online payment
- Credit or debit card
- Bank transfer
- In person at a tax office
- By check
- Using a personal tax service provider
If you don’t want to – or can’t – pay your tax bill in full, you can pay in quarterly installments on certain dates throughout the year.
How Can We Help?
Filing taxes from abroad sounds hard, but it's doable. Know your residency, report all income, and get organized. Need help? Hire a professional tax accountant. Taxes as an expat can feel tricky. But, with the right steps, it gets simpler.
Whether or not to file a non-resident tax return can be a complicated decision. There are situations in which a non-resident must file a tax return and there are situations when he can elect to file. Filing taxes is there to advise you on whether filing a Canadian Tax return may be beneficial to you as a non-resident. Feel free to reach out to Filing Taxes at 416-479-8532. Schedule an NTR engagement appointment with us and take the first step toward proper management of your finances.
Disclaimer: The information provided on this page is intended to provide general information. The information does not consider your personal situation and is not intended to be used without consultation from accounting and financial professionals. Salman Rundhawa and Filing Taxes will not be held liable for any problems that arise from the usage of the information provided on this page.