Who Is Required to Pay Canadian Income Taxes?

by Tax Guy - Burlington Accountant on May 13, 2010 Print This Post Print This Post

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 Resources

  • CRA – Interpretation Bulletin, IT-221, regarding the determination of an individual’s residence status
  • CRA – International and Non-Resident Taxes
  • CRA – Leaving Canada

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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