Residency Considerations for Filing Canadian Taxes as a Non-Resident

If you file a tax return in Ontario, Canada, for a year that you were not a resident of Canada, you may not owe any taxes, but there are significant reasons to consider. One of the key aspects is documenting your residency status accurately. This article covers the intricacies of determining tax residency and the implications of filing as a non-resident.

Determining Your Residency Status

Residency for tax purposes in Canada is not always clear-cut. There are two main criteria used to determine if you are a resident:

Spending more than 183 days physically present in Canada during the year. Having significant residential ties to Canada such as a home, spouse, dependents, and other factors.

This determination can be complex and may require professional advice, especially if you have assets, income sources, or significant ties to Canada.

Non-Residency and Day Counting

A common misconception is that leaving Canada for a significant period can automatically make you a non-resident for tax purposes. However, this is not the case. The Canada Revenue Agency (CRA) uses a day count method to determine residency status. You can be considered a traveller for up to 186 days in a calendar year without being taxed in Canada. Beyond this period, you are presumed to be a resident for tax purposes.

Income, Taxes, and Reporting Obligations

If you earned any income in Canada, you will be required to declare and pay tax on that income, regardless of your residency status. This can complicate your tax returns, especially if you have dual obligations in other jurisdictions.

For example, let’s say you went to France for 185 days, then to Italy and earned income there. Even if you stayed in France only one additional day, your income earned in Italy would be subject to Canadian tax due to the Tax Convention Treaty. These treaties help avoid double taxation and ensure compliance with international tax laws.

NR73 Form and Professional Advice

The NR73 Determination of Residency Status leaving Canada form is optional and not required to become a non-resident. However, completing it may give the CRA unwarranted information. Most tax professionals recommend avoiding this form and instead focusing on eliminating significant residential ties and relying on a position in your terminal tax filing.

It is critical to seek professional advice, especially if you have Canadian assets, intellectual property, or ongoing business operations. This includes Registered Retirement Savings Plans, pensions, or situs property in Canada.

Conclusion

Filing Canadian taxes while not being a resident is a complex process that requires careful consideration of your specific circumstances. Contacting a qualified tax advisor can help ensure your tax filings are accurate and in compliance with Canadian tax law.

Key Takeaways

Residency in Canada is determined by physical presence and residential ties. The NR73 form is not a necessity and may expose you to unnecessary scrutiny. It is crucial to establish ties in a new jurisdiction to become a non-resident. Seek professional advice, especially if you have significant Canadian assets or income sources.

For more detailed information, visit the Canada Revenue Agency (CRA) website.