It is important to determine a Canadian emigrant’s residency status, because Canadian residents are taxed on their world income. If a Canadian is intending to emigrate to a foreign country for an indeterminate period of time, he or she may want to consider a non-resident status for tax reasons. A Canadian is deemed to be a resident unless he/she severs all ties in accordance to the rules laid out by the Canadian Revenue Agency. It is important to consult an Accountant to make sure that you understand the applicable rules.
Leaving Canada (emigrants)
You are considered to have disposed of almost all your property at its fair market value on the day you emigrate from Canada.
Generally, you are an emigrant of Canada for income tax purposes if you leave Canada to settle in another country and you sever your residential ties with Canada.
This Web page provides basic information about the income tax rules that apply for the year you leave Canada and helps you understand your tax obligations.
Severing residential ties includes:
- disposing of or giving up a home in Canada and establishing a permanent home in another country to which you move;
- having your spouse or common-law partner (see the definition in the General Income Tax and Benefit Guide) and dependants leave Canada;
- disposing of personal property and breaking social ties in Canada and acquiring or establishing them in another country.
Other ties that will be taken into account in determining your residency status include:
- a Canadian driver’s license;
- Canadian bank accounts or credit cards;
- health insurance with a Canadian province or territory.
If you want an opinion about your residency status, complete and submit Form NR73, Determination of Residency Status (Leaving Canada).
When do you become a non-resident?
When you leave Canada to settle in another country, you usually become a non-resident of Canada for income tax purposes on the latest of the following dates:
- the date you leave Canada;
- the date your spouse or common-law partner and dependents leave Canada;
- the date you become a resident of the country to which you are immigrating.
If you lived in another country before living in Canada and you are leaving Canada to re-establish a residence in the other country, you usually become a non-resident on the date you leave Canada. This applies even if your spouse or common-law partner temporarily stays in Canada to dispose of your home.
Note
Generally, you become a deemed non-resident at a time when your residential ties in the other country are such that, under the tax treaty between Canada and that country, you are considered to be a resident of that country and not a resident of Canada.
It’s important that you tell us the date you leave Canada because your residency status affects your eligibility to receive:
- the GST/HST credit (goods and services tax/harmonized sales tax);
- Canada Child Tax Benefit payments (and any similar provincial program payments);
- Universal Child Care Benefit payments.
If you receive such credits or payments after you emigrate, contact us at once
Your tax obligations
For the part of the tax year that you are a resident of Canada for tax purposes, you must report “world income” (income from all sources, both inside and outside Canada) on your Canadian tax return.
After you leave Canada, you pay tax to Canada only on income you receive from sources in Canada (see “After you leave Canada“).
Notes
If you emigrate from Canada and hold a tax-free savings account (TFSA), you can keep your TFSA and continue to benefit from the exemption from Canadian tax on investment income and withdrawals. However, no contribution will be allowed and no contribution room will accrue while you are a non-resident of Canada. For more information, see Tax-Free Savings Account (TFSA) or Guide RC4466, Tax-Free Savings Account (TFSA).
If you emigrate from Canada and are participating in the Home Buyers’ Plan or the Lifelong Learning Plan, see Guide RC4135, Home Buyers’ Plan (HBP) or Guide RC4112, Lifelong Learning Plan (LLP), as required, for the special rules that apply.
If you live in Canada for only part of a tax year, you must file a Canadian tax return if you:
- owe tax; or
- want to receive a refund because you paid too much tax in the tax year.
For more information, see “Do you have to file a return?” in the General Income Tax and Benefit Guide.
For the tax year that you leave Canada and are an emigrant for tax purposes:
- use the General Income Tax and Benefit Guide and the forms book for the province or territory where you lived on the date you left Canada.
If you emigrated from Quebec in the tax year, you may need to file a separate provincial return. For information about your provincial tax liability, contact Revenu Québec.
Your income tax return must be filed on or before:
- April 30 of the year after the tax year; or
- if you or your spouse or common-law partner carried on a business in Canada (other than a business whose expenditures are mainly in connection with a tax shelter), the return must be filed on or before June 15 of the year after the tax year.
Note
A balance of tax owing must be paid on or before April 30 of the year after the tax year, regardless of the due date of the tax return.
After you leave Canada
After you leave Canada, you are a non-resident for tax purposes provided you have severed residential ties with Canada. As a non-resident, you pay tax on income you receive from sources in Canada.
- This applies in the year you leave Canada and for each year afterwards, provided you remain a non-resident for tax purposes.
- The type of tax you pay and the requirement to file a Canadian tax return depend on the type of Canadian income you receive.
Generally, Canadian income received by a non-resident is subject to Part XIII tax or Part I tax. If the income you receive is:
- subject to Part XIII tax, you do not file a Canadian tax return, except in two situations when you can elect to file a tax return;
- subject to Part I tax, you may have to file an tax return.
Part XIII tax is deducted from the types of income listed below. To make sure the correct amount is deducted, it’s important to tell Canadian payers:
- that you’re a non-resident of Canada for tax purposes;
- your country of residence.
The most common types of Canadian income subject to Part XIII tax are:
- dividends;
- rental and royalty payments;
- pension payments;
- Old Age Security pension;
- Canada Pension Plan and Quebec Pension Plan benefits;
- retiring allowances;
- registered retirement savings plan payments;
- registered retirement income fund payments;
- annuity payments;
- management fees.
Note
The interest that you receive or that is credited to you is exempt from Canadian withholding tax if the payer is unrelated (arm’s length) to you. For more information, see our Non-resident tax calculator or contact the International Tax Services Office.
If you receive Canadian income that is subject to Part XIII tax:
- Canadian payers, including financial institutions, must deduct Part XIII tax when the income is paid or credited to you.
- The Part XIII tax deducted is your final tax obligation to Canada on this income (if the correct amount is deducted).
- Part XIII tax is not refundable. Therefore, do not file a tax return to report the income, except in two situations when you can elect to file a Canadian tax return.
- The usual Part XIII tax rate is 25% (unless a tax treaty between Canada and your home country reduces the rate).
If you think an incorrect amount of Part XIII tax was deducted from your income, contact the International Tax Services Office.
For more information, see IC77-16, Non-Resident Income Tax.
The payer usually deducts Part I tax from the types of income listed below. However, if you carry on a business in Canada, or sell or dispose of taxable Canadian property, you may have to pay an amount on account of tax.
- If you carry on a business in Canada, see T4002, Business and Professional Income, to find out if you must pay tax by instalments.
- If you sell or transfer, or plan to sell or transfer taxable Canadian property, see Disposing of taxable Canadian property, below.
Even if the payer deducts tax from your income or you pay an amount of tax during the year, you may have to file a Canadian income tax return to calculate your final tax obligation to Canada on:
- income from employment in Canada or from a business carried on in Canada;
- employment income from a Canadian resident for your employment in another country if, under the terms of a tax treaty between Canada and your country of residence, the income is exempt from tax in your country of residence;
- certain income from employment outside Canada, if you were a resident of Canada when the duties were performed;
- taxable part of Canadian scholarships, fellowships, bursaries, and research grants;
- taxable capital gains arising from the disposition of taxable Canadian property;
- income from providing services in Canada other than in the course of regular and continuous employment.
Disposing of taxable Canadian property
For the procedures you must follow if you sell, transfer, or plan to sell or transfer taxable Canadian property (such as real estate, business property, or unlisted shares of a Canadian corporation), see Disposing of or acquiring certain Canadian property, or IC72-17, Procedures Concerning the Disposition of Taxable Canadian Property by Non-Residents of Canada-Section 116.
There are two situations in which you can elect to file a Canadian income tax return for income from which Part XIII tax was deducted:
- when you receive Canadian rental income or timber royalties;
- when you receive certain Canadian pension income.
If you elect to file a Canadian income tax return, you may be able to claim a refund for part or all of the Part XIII tax deducted.
For more information:
- To elect to file for Canadian rental income or timber royalties, see the Income Tax Guide for Electing Under Section 216.
- To elect to file for certain Canadian pensions, see Electing under section 217.
Forms and Publications
- T4056, Emigrants and Income Tax
- NR73, Determination of Residency Status (Leaving Canada)
- IT-221, Determination of an Individual’s Residence Status
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