Canadian income tax revolves around your residency status. The requirements differ significantly for residents and non-residents. CloudTax Pro helps Canadians filing tax as a non-resident online, from wherever in the world you live.
The Definition of Non-Resident for Tax Purposes
First, the CRA defines non-resident as Canadians who “normally, customarily, or routinely live in another country.” Plus, “are not considered a resident of Canada.” And still, they say you only may be classified as a non-resident.
The CRA also considers:
- Significant residential ties like a home or permanent residence. It could be that your spouse or dependants still live in Canada.
- Personal property in Canada like furniture, vehicles or anything else that the CRA classifies.
- Additional ties like social memberships, driver’s licenses, provincial medical, or bank accounts in Canada.
- Staying in Canada less than 183 days a year.
There are only guidelines and interpretations, no strict rules. So, ultimately, only CRA determines your residency status for filing tax as a non-resident.
See also ‘How to file your taxes while living abroad‘
Once classified as a non-resident of Canada, you pay tax only on income received from sources within Canada. Generally, this includes
- Rentals or royalty payments
- Old Age Security (OAS) pension
- Canada Pension Plan (CPP) and Quebec Pension Plan benefits
- Retiring allowance
- RRSP payments
- Annuity payments
- Registered Retirement Income Fund (RRIF) payments
- Management fees
Notify anyone who pays you that you are a non-resident of Canada for tax purposes. Also, tell them your country of residence. Then, the payers deduct the tax directly. Usually, the deduction is 25 percent, unless there is a tax treaty. This is non-refundable, so you don’t need to file any Canadian tax returns. If you think the wrong amount tax was deducted, then contact the CRA.
If you receive OAS, you may need to file the Old Age Security Return of Income (OASRI).
Tax deducted for some types of income – Filing tax as a non-resident
If you receive employment or business income, file to calculate the final obligation when you stop being resident.
Note: If you lived outside Canada and you are:
- a government employee
- member of the Canadian Forces
- overseas school staff
- working under Global Affairs Canada assistance programs
Check Government employees outside Canada to see the rules applicable to you. These rules also apply to dependent children and family members.
Note: Usually, any interest is exempt from Canadian withholding taxes. That is if the payer is at arm’s length from you.
Example: Alex lives in England. During the year, his bank in England paid interest on his deposits, and his business in Canada earned income. As a non-resident of Canada, Alex files a Canadian return that reports only the business income from Canada. The interest income from the bank account in England does not get entered into his Canadian return.
Electing to file
You can elect to file your Canadian income tax return for two reasons.
- if you receive Canadian rental income real or immovable properties or timber royalties
- if you receive certain pensions
When you elect to file, you may claim a refund for some of the tax deducted when filing tax as a non-resident.
- Electing to file for Canadian rental income real or immovable properties or timber royalties. T4144, Income Tax Guide for Electing Under Section 216
- Electing to file for pensions. Electing under section 217
Note: If you elect to file because you receive Canadian rental income or timber royalties, report on a separate tax return. Do not include any other income on this return. This is the only situation when you file more than one tax return in a tax year.
Filing tax as a non-resident – Tax treaties
Canada has tax treaties with many countries. These treaties avoid double taxation. Also, tax treaties work out how much each country taxes income like wages, pensions, salaries, or interest. For more details, see Tax treaties on the CRA website.
Some income is tax-exempt in Canada because of a tax treaty. If you receive tax-exempt income, ask the payer not to withhold the taxes. You need a waiver letter from the CRA before the payer stops withholding. Send a request for your waiver letter to the International Waivers Centre of Expertise. If CRA says you qualify, give the waiver letter to give to the payer. Here’s where to send waiver applications:
Individuals – Leaving or entering Canada and non-residents, then select “Rendering services in Canada,” and then choose “Where to send waiver applications.”
CloudTax Pro lets you file your taxes online from anywhere in the world. No reading through pages and pages of CRA websites. Filing tax as a non-resident with CloudTax Pro makes doing your taxes less stressful.