Tax Obligations for a Non-Resident of Canada
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Are you a Non-Resident of Canada?
You’re a non-resident of Canada for tax purposes if you: normally, customarily, or routinely live in another country and are not considered a resident of Canada. You don’t have significant residential ties in Canada, or you lived outside Canada throughout the year, or your stay in Canada was less than 183 days.
Significant residential ties with Canada include:
- a home in Canada.
- a spouse or common-law partner in Canada.
- dependents 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 organizations
- economic ties in Canada, such as Canadian bank accounts and credit cards
- a Canadian driving license
- a Canadian passport
- health insurance with a Canadian province and territory
The information mentioned is general. For further clarity on residential ties to determine your status for tax purposes, see Income Tax Folio S5-F1-C1, Determining an Individual’s Residence Status.
Declaration of your Residency Status
Under Canada’s tax system your income tax obligations to Canada are based on your residency status. Understanding your residency status is preliminary to determine your filing requirements to Canada. A non-resident must share his residency status with the Canadian payers so that an accurate tax amount can be deducted.
Tax Obligations for a Non-Resident of Canada
A non-resident of Canada is only liable to pay tax on income or gains from Canadian sources. For example, Canadian employment income and income from business operating in Canada.
Canadian income received by a non-resident is subject to Part I tax or PART XIII tax.
As a non-resident of Canada if you receive any of the following income from sources in Canada, your income is subject to part I tax deduction:
- Employment income in Canada or income from a business operating in Canada.
- Employment income from a Canadian resident for your employment in another country.
- Certain income from employment outside Canada, if you were a resident of Canada when the duties were performed.
- The taxable part of Canadian scholarships, fellowships, bursaries, and research grants.
- Taxable capital gains from disposing of certain Canadian property.
- Income from providing services to Canada other than in the course of regular and continuous employment.
As a non-resident of Canada if you receive any of the following income from sources in Canada, your income is subject to part XIII tax deduction:
- Dividends.
- Rental or royalty payments
- Pension payments and Canadian Pension Plan (CPP)/ Quebec Pension Plan (QPP) benefits.
- Old age security.
- Retiring allowances.
- Registered Retirement Saving Plan (RRSP).
- Registered Retirement Income Fund (RRIF).
- Annuity payment.
- Management fees.
Obligation to file a Tax Return for a Non-Resident of Canada
If you paid Part I tax, you must file a Canadian income tax return if:
- You carry on a business in Canada or
- You sell or transfer, or plan to sell or transfer taxable Canadian property.
Even if your payer has deducted Part I tax from your other income, you have to file a Canadian income tax return to determine your final tax obligation to Canada.
If you paid Part XIII tax on your Canadian income, there is no need to file an income tax return as the tax obligation is already met. Note that Part XIII tax is not refundable.
However, as a non-resident you can elect to file a Canadian tax return on income from which Part XIII tax was deducted if you received:
- Canadian rental income real or immovable properties or timber royalties.
- Certain Canadian pension income.
If you elect to file a Canadian tax return, you may be able to claim a refund on a portion or all of Part XIII tax paid. If you received rental or pension income, you won’t be filing a general T1 but will be elected under section 216 and section 217of the Income Tax Act, respectively.
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 towards 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.
