One of the most common questions I am asked is “do I have to pay Canadian Income Taxes?” The answer is always the same. If you are a resident of Canada then you must declare and pay tax on your worldwide income. If you are not a resident of Canada, then you only pay tax on Canadian source income.
Residency for Canadian Tax Purposes
There are a number of factors that must be considered to determine if you are a resident of Canada for tax purposes. Typically anyone visiting (“sojourns”) Canada for 183 days or more may deemed to be a resident of Canada for tax purposes and is subject to Canadian income tax on their worldwide income for the entire year.
There are a number of other factors that can establish residency for tax purposes even if you are in Canada less than 183 days. These can include maintaining a home in Canada, having relatives in Canada, having bank accounts in Canada or other social or economic ties to Canada.
Non-Residents and Tax
Non-residents are required to pay Canadian income tax on their Canadian source income. Since most income tax is withheld at the source, many non-residents do not have to file a Canadian income tax return. However, in some cases they may be required to file a Canadian income tax return.
The types of income that would be Canadian source income and included in a Canadian non-resident income tax return may include:
- Employment income earned in Canada,
- Business income from a business carried on in Canada,
- Capital gains from the sale of taxable Canadian property, and
The non-resident must pay the federal tax rates applicable plus a premium, or surtax of 48%. This surtax is roughly equivalent to the provincial taxes that would be paid by a resident.
- CRA – Interpretation Bulletin, IT-221, regarding the determination of an individual’s residence status
- CRA – International and Non-Resident Taxes
- CRA – Leaving Canada