Under Canada’s tax system, residency determines how much worldwide income will be subject to Canadian income tax. Canadian residents are taxed on all worldwide income, whereas individuals who are not Canadian residents are subject to Canadian income tax only on certain types of income that have been earned in Canada.

Although there is no statutory definition of residency for tax purposes, individuals are typically described as ‘factual residents’, ‘deemed residents’, ‘non-residents’ or ‘deemed non-residents’.

Factual residents

According to legislation, individuals who are “ordinarily resident” in Canada are considered to be ‘factual residents’ of Canada. The most important consideration in determining whether someone is resident in Canada is their residential ties with Canada. Primary factors to consider include:

• A home in Canada
• A spouse or common law partner in Canada
• Children or other dependents in Canada

Other secondary ties that may be relevant include:

• personal property in Canada, such as a car or furniture
• social ties in Canada, such as memberships in Canadian recreational or religious organizations
• economic ties in Canada, such as Canadian bank accounts or credit cards
• a Canadian driver’s licence
• a Canadian passport
• health insurance with a Canadian province or territory

An individual who has left Canada may still be considered a factual resident if they maintain these types of residential ties. An individual who has recently arrived in Canada can be considered factually resident as of the date of immigration if they establish the above types of residential ties.

Deemed residents

Individuals who are not factual residents of Canada may still be deemed residents for tax purposes under the Income Tax Act. For example, individuals are deemed resident in Canada for tax purposes for a given year if they:

• Spent 183 or more days in Canada during that calendar year
• Served in the Canadian Forces during that calendar year
• Worked as an ambassador, minister, high commissioner, officer or servant of Canada

Non-residents

Individuals who do not have significant residential ties with Canada and who lived outside of Canada during a given calendar year, or who stayed in Canada for less than 183 days of a given calendar year may be considered non-residents. Non-residents are only taxed on certain types of income that has been earned in Canada.

Deemed non-residents

Individuals who have close connections to more than one country may qualify as deemed non-residents even if they would otherwise meet the criteria for residency in Canada.

Part-year residents

Individuals arriving in or leaving Canada partway through a calendar year are typically considered part-year residents in the year of immigration or emigration. If an individual is considered a part-year resident, they are taxed on worldwide income only for the part of the calendar year during which they are resident in Canada. Part-year residents are not generally taxed on worldwide income for the portion of the year during which they are not resident in Canada.

If you have any questions about whether you are a resident of Canada for tax purposes, please consult a TEP.