Tax residency

Ties matter more than paperwork

The CRA treats your residential ties with Canada as the most important factor. Significant ties are a home in Canada, a spouse or common-law partner in Canada and dependants in Canada. Secondary ties can also be relevant, such as a car or furniture, memberships in Canadian organizations, Canadian bank accounts or credit cards, a driver’s licence, a passport and provincial health insurance.

No single tie settles the question. The CRA looks at every relevant fact, including how long you stay in or out of Canada, why, and whether the stay is continuous. Citizenship and visa status do not decide residency on their own.

The main categories

A factual resident keeps significant ties in Canada while living or travelling abroad, and is taxed as if they never left. A deemed resident has no significant ties but stays in Canada for 183 days or more in the year and is not treated as a resident of another country under a tax treaty. A non-resident normally lives in another country and has no significant ties here.

A deemed non-resident is someone who would otherwise be a factual resident but is also a resident of a treaty country under that treaty’s tie-breaker rules, and is then taxed like a non-resident. In the year you arrive or leave you can be a resident for only part of the year, and you report world income for that part.

An illustrative example

Suppose an Ontario engineer is sent abroad for 18 months. Their spouse and children stay in the family home in Ontario. Because the home and family remain here, the engineer is likely a factual resident, reports income from inside and outside Canada, and pays federal and Ontario tax.

If the family later joins them and the house is sold, the ties that held the residency in place may be gone, and the engineer could be an emigrant for that year. This example is illustrative only, and the CRA decides on the actual facts.

Common mistakes

The usual error is assuming that boarding a plane ends residency. Keeping a home, a Canadian health card and local bank accounts can point the other way. A second error is not recording the date ties were cut or created, since that date drives which income is reported in Canada.

If your position is unclear, the CRA offers Form NR73 for people leaving Canada and Form NR74 for people entering, to give its opinion. If you are leaving, tell your Canadian payers and financial institutions your new status.

What to discuss with your accountant

Bring a timeline of travel, a list of ties on each side of the border, lease or sale documents and details of any foreign tax residency. Ask which category you are likely to fall into, whether a treaty applies, and what your return, benefits and reporting duties look like. See our new-to-Canada guide if you are arriving.