Global Law Experts Logo

Find a Global Law Expert

Specialism
Country
Practice Area
awardsr

Awards

Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.

David Rotfleisch: Determining Your Tax Residency Status & What it Means to Be a Tax Resident in Canada

posted 3 years ago

Your residency status plays a large role in determining how much tax you’ll pay in Canada. So, what makes you a resident of Canada? If you’re an emigrant or immigrant, the answer is more complicated than you might think.

The Canadian courts and the Canada Revenue Agency (CRA) agree you need significant residential ties to the country. Things like having a home, a spouse, or a dependent in Canada increase the likelihood you’ll receive resident status. However, case law reveals that these supposed significant residential ties are far less significant for immigrants than natural-born Canadians.

Why Does Your Residency Status Matter?

Despite what many people may believe, your tax status has nothing to do with your citizenship as an immigrant or emigrant. Instead, your tax status and obligations are tied to your residency.

Your residency status determines how much income you have to report and how much tax you ultimately must pay on this income. It also establishes what kind of taxes apply, as residents are not subject to the non-resident speculation tax.

Residents of Canada: Canadian residents must declare all world income and pay Canadian taxes on it, according to subsection 2(1) and section 3 of the Income Tax Act.

Non-Residents of Canada: Under subsection 2(3) of the Income Tax Act, non-residents must only declare and pay taxes on income from sources inside Canada. This may include income from Canadian employment, carrying on a business in Canada, or disposing of taxable Canadian property. Non-residents are also usually subject to non-resident withholding tax in Canada.

3 Subtypes of Resident Status

Moving beyond the binary above, let’s focus on the different ways one may be categorized as a resident of Canada.

1. Factual Resident

To be a factual resident of Canada means you’re considered a resident of Canada because you have enough significant residential ties to the country. Therefore, you’re obligated to pay taxes on worldwide income — even if you don’t spend the entire year in the country. On paper, you get taxed as though you do. This may include Canadians who are temporarily working or vacationing in another country.

2. Deemed Resident

If you spend 183 days or more in Canada during one calendar year, you may be deemed to be a resident of Canada. While you may not have the same residential ties as a factual resident, you will share similar tax obligations.

3. Deemed Non-Resident

Under subsection 250(5), you may be deemed to be a non-resident of Canada if you’re simultaneously a factual resident of Canada and another country with which Canada has a tax agreement or tax treaty. Subsection 250(5) applies a tiebreaker clause between these two countries to determine your country of tax residence.

Depending on the results of the tiebreaker, a deemed non-resident might be considered a resident of another country. They will only have to pay non-resident income tax in Canada on Canadian-sourced income.

Residential Ties: Determining Your Residency

The tax implications of residency can be significant, so it’s crucial you understand where you fall.  

Here’s where it can get tricky. What does it mean to be a resident of Canada if you’re an immigrant or emigrant? If you split your life between two countries, do you have significant residential ties?

Normally one could look to the Income Tax Act for guidance, but while it uses the terms “resident” and “ordinarily resident” interchangeably, it fails to define them. One must look beyond the Income Tax Act to the Supreme Court of Canada for answers.  

According to Thomson v Minister of National Revenue, [1946] SCR 209, a taxpayer’s residence is defined as:

  1. “The place where in the settled routine of his life he regularly, normally or customarily lives”; and
  2. “The degree to which a person in mind and fact settles into or maintains or centralizes his ordinary mode of living.”

While these definitions provide some clarity on the matter, it does so by using very broad language that leaves a lot of room for interpretation. As a result, the courts must examine your particular circumstances to determine your residential ties to the country.

These circumstances may include but are not limited to the following factors:

  • Past and present life habits
  • Regularity and length of visits
  • Ties within Canada
  • Ties elsewhere
  • The permanence or purposes of a stay abroad

What Are the Most Significant Residential Ties to Canada?

While the courts and CRA may consider all the jurisdictional ties listed above, some carry more weight in their decision making. The most significant residential ties for the purpose of determining resident status include the following three factors:

  • A dwelling space (either owned or leased)
  • A spouse or common-law partner
  • Dependents

According to the CRA, these factors almost always constitute significant ties with Canada. Meanwhile, landed immigrant status and provincial health coverage usually constitute significant residential ties as well.

Note the language used above. With qualifiers such as “almost always” and “usually” bookending these ties, these factors are not guarantees someone will become a Canadian tax resident. They’re guiding principles, not black-and-white rules, that give the courts and CRA have considerable latitude in determining a taxpayer’s residency status.

Tax Case Examples That Show the Significant Ties “Rule” Only Applies to Emigrants

Numerous tax cases suggest that these jurisdictional ties are only significant when applied to an emigrant of Canada. Immigrants, on the other hand, may be considered a non-resident despite satisfying all significant ties listed above.

Here are five such cases that expose this double standard.

Thomson v M.N.R. (supra)

In 1946, the Supreme Court found that Thomson, a Canadian-born individual, was a resident of Canada, despite living in the United States. Thomson had built a vacation home in New Brunswick for his family but claimed he had otherwise cut ties with the country.

Despite spending fewer than 183 days at this dwelling each summer, the Supreme Court thought it was significant enough of a tie to make Thomson a resident. He settled into a routine where his family normally lived in New Brunswick for a portion of the summer, even though he lived in the U.S. for the rest of the year.

Shih v R. (2000 DTC 2072 (TCC))

Roughly 55 years later, the Tax Court of Canada ruled the other way despite a taxpayer owning a home in Canada and spending roughly the same amount of time there.

Shih, an immigrant from Taiwan, brought his wife and three sons to Canada. While his spouse and dependents lived in Canada in the house he purchased, Shih returned to Taiwan to work.

Shih worked in Taiwan and had several ties to the southeast Asian country, but he also satisfied all the usual factors that would be considered significant ties to Canada. Not only did his wife and sons live in Canada while Shih lived in Taiwan, but Shih also owned a home, had Canadian investments, had a Canadian driver’s licence, and made frequent visits to see his family in Canada.

Despite having many significant ties to Canada, the TCC decided Shih was not a resident because he was not in Canada “often enough or long enough to establish any personal connections with the various communities [in Canada] whether they be commercial, educational, cultural, recreational, or social.”

Mahmood v The Queen (2009 TCC 89)

If you think having the addition of a cultural connection in Canada could be a tipping point, you’re mistaken. In 2009, the TCC ruled Mahmood, a Guyanese taxpayer who attended a Canadian mosque, was not a resident in Canada.

At the time, he owned a condo in Canada, relied on Canadian banks to facilitate business transactions, and had a son who lived in Canada. Additionally, Mahmood would regularly live in his condo and attend a mosque in Canada, presumably where he established personal connections within the local Muslim community.

Ultimately, the TCC deemed his day-to-day activities were based out of Guyana, despite having significant ties to Canada.

Song v The Queen (2009 FCA 278)

Another immigrant to Canada was ruled a non-resident by the Federal Court of Appeal. The FCA believed Song’s settled daily routine to revolve around her job in Japan, even though her spouse lived in Canada.

Yoon v The Queen (2005 TCC 366)

Lastly, we look to Yoon, a Korean-born taxpayer who met and married her spouse in Canada in 1975 and later became a Canadian citizen. Together, they had a child and lived in Canada until 2001, at which point she moved back to Korea for work while her husband remained in Canada. During that time, she visited Canada but spent roughly two-thirds of the year in Korea.

The TCC referred to the Shih decision from five years before to determine she was not a resident in 2001 simply because she didn’t spend enough time there. In Yoon’s case, her spouse and child living in Canada, and even her Canadian citizenship, did not offset her time out of the country.

Determining Your Status with the CRA

After comparing these four cases against Thomson v M.N.R. (supra), you can see how the CRA’s purportedly significant residential ties are far less significant when an immigrant has become a Canadian tax resident.

If you aren’t sure what your status might be for the tax year, the CRA can provide its opinion on your status. As an emigrant, you can fill out Form NR73 (Determination of Residency Status — Leaving Canada) and Form NR74 (Determination of Residency Status — Entering Canada) if you’re an immigrant.

You may not be able to predict how the CRA will rule. While the CRA forms its opinions using the details you provide in these forms, its administrative view may not always align with Canada’s tax law.

In many cases, the CRA bases its decision on past CRA publications. With this in mind, it’s a good idea to bring attention to the appropriate case law that supports your position to avoid an unfavourable decision.

The Takeaway:

Tax residency is a grey area of the courts and CRA when determining your tax liability in Canada. Rather, the CRA determines residency on a case-by-case basis, and their process may not align with Canada’s tax law.

This leeway can complicate your next filing and may even result in costly tax consequences if you erroneously determine your status and under- or over-report your Canadian taxable income.

To avoid these penalties, you can speak with tax lawyers in Toronto for advice on residency status. Toronto tax lawyers ensure your residence determination application (Forms NR73 and NR74) contain the necessary information to render a favourable decision.

Credit: freepik via FreePik

Author

Find the right Legal Expert for your business

The premier guide to leading legal professionals throughout the world

Specialism
Country
Practice Area
LAWYERS RECOGNIZED
0
EVALUATIONS OF LAWYERS BY THEIR PEERS
0 m+
PRACTICE AREAS
0
COUNTRIES AROUND THE WORLD
0

Join

who are already getting the benefits
0
Sign up for the latest legal briefings and news within Global Law Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox. Naturally you can unsubscribe at any time.

Online Casino Reviews

  • Freeroll Poker Tournaments For Real Money
  • Australian Online Casino Real Money
  • Best Slot App To Win Real Money
  • Online Casino Real Money Australia
  • Best Paying Online Pokies
  • Wizard Of Oz Online Slots
  • All Slots Casino Mobile
  • Best Online Poker App Real Money
  • Best Online Casino To Play Roulette
  • Is Online Casino Legal
  • Online Casino That Accepts Paypal
  • Play Roulette For Real Money
  • Slot Apps To Win Real Money
  • Real Money Slots Online Usa
  • Safe Online Casino
  • Wizard Of Oz Slots
  • Real Online Pokies Nz
  • Biggest Online Casino In The World
  • Online Casino Pay With Paypal
  • Online Casino That Accept Paypal
  • Online Casino Canada Real Money
  • 3 Card Poker Online Real Money
  • Online Slots Real Money Canada
  • Best Online Poker Sites For Real Money
  • Real Money Poker App Android Usa
  • How To Make Money From Online Casino Bonuses
  • Real Money Poker App Iphone
  • How To Play Blackjack Online For Real Money
  • Best Slots To Play
  • Top 10 Online Pokies
  • Best Poker Apps Real Money
  • Online Casino Legal
  • Best Payout Online Casino Uk
  • Win Money Online Slots
  • Online Poker Nj Real Money
  • How To Win Online Slots
  • Casino Gaming License
  • Play Real Pokies Online
  • Blackjack Sites For Real Money
  • Real Money Casino Games For Android
  • Best New Online Slots
  • Flaming 777 Slots Games
  • Online Blackjack With Live Dealers
  • How To Play Online Slots
  • Facebook Casino Games Real Money
  • Online Casino With No Minimum Deposit
  • How To Beat Online Slots
  • Online Casino License
  • The Big Payback Slots
  • Royal Vegas Online Casino Withdrawal
  • Online Casino Minimum Deposit 5
  • Online Pokies Real Money Australia
  • Las Vegas Usa Online Casino
  • Real Money Poker App Android
  • Wheel Of Fortune Slots
  • Game Of Thrones Slots
  • Online Poker Real Money Usa Legal
  • Best Online Casino European Roulette
  • Blackjack Online Real Money Paypal
  • Online Video Poker Real Money Usa
  • How To Create An Online Casino
  • Lucky Nugget Online Casino Mobile
  • How To Withdraw Money From Online Casino
  • Platinum Play Online Casino Download
  • Online Casino For Usa Players
  • Best Online Casino Usa Real Money
  • Online Roulette Real Money Usa
  • Best Real Money Poker Sites
  • Android Slots Real Money
  • How To Start An Online Casino Business
  • How To Start An Online Casino
  • How To Start An Online Gambling Site
  • Best Online Casino For Blackjack
  • Play Baccarat Online For Money
  • Online Pokies New Zealand
  • Best Slots To Play At Golden Nugget
  • Slots Of Vegas Online Casino
  • Best Online Pokies Site
  • How To Beat Online Roulette
  • New Zealand Online Pokies
  • Online Poker Mobile Real Money
  • Which Online Slots Payout The Most
  • Is Online Casino Legal In India
  • Online Casino Software For Sale
  • Best Online Casino For Craps
  • Hard Rock Casino Slots
  • Win Real Money Online Pokies
  • Online Casino With Highest Payout Percentage
  • Poker Apps With Real Money
  • Online Roulette Real Money Review
  • Full Tilt Poker Real Money
  • Online Casino 5 Dollar Minimum Deposit
  • Online Roulette With Real Money
  • Best Online Roulette For Real Money
  • I Migliori Casino Online Italiani
  • Best Payout Online Slots
  • How To Play Baccarat Online
  • Play Casino Card Game Online
  • Play Blackjack Online For Real Money
  • Best Paying Online Slots
  • Casino License Cost
  • Online Poker Real Money California
  • Safe Online Casino Australia
  • Online Roulette Australia Real Money
  • Online Poker Real Money Texas
  • Online Roulette Real Money Paypal
  • Online Slots Australia Real Money
  • Golden Nugget Online Casino Review
  • Casino Games To Win Real Money
  • Online Pokies Australia Real Money
  • Online Gambling Blackjack Real Money
  • Win Real Money Playing Slots
  • How To Win Roulette Online
  • Aristocrat Pokies Online Real Money
  • Hollywood Casino Online Slots
  • Play Online Keno For Real Money
  • What's The Best Online Casino
  • Triple Double Diamond Slots
  • Play Roulette Online With Real Money
  • Roulette Online For Real Money
  • Play Roulette Online Real Money
  • Best Online Pokies Real Money
  • Big Red Pokies Online
  • How To Win At Online Blackjack
  • What Is The Best Online Roulette Site
  • Real Money Online Pokies
  • Spin To Win Slots
  • Ruby Slots Online Casino
  • Wheel Of Fortune Online Casino
  • Spin Palace Flash Casino Online
  • Online Poker Real Money App
  • Online Casino With Paypal Deposit
  • How To Win At Online Roulette
  • Can You Win Real Money On Slot Apps
  • Is Ignition Casino Safe
  • Online Casino Blackjack Real Money
  • Online Casino Win Real Money Usa
  • How To Make Money Online Casino
  • Online Casino Real Money Reviews
  • Slot Games To Win Real Money
  • Jackpot City Online Casino Download
  • Online Pokies Real Money
  • Casino War Online Real Money
  • Online Casino No Minimum Deposit
  • Play Wheel Of Fortune Slots Online
  • Best Online Casino Game To Win Money
  • Online Casino Without Wagering Requirements
  • Online Slots For Real Money Usa
  • Legal Online Casino Australia
  • How Do Online Slots Work
  • Best Online Casino For Us Players
  • Online Play Casino Roulette Game
  • Online Blackjack Real Money Australia
  • Real Casino Games Real Money Online
  • Online Slot Machines Real Money Paypal
  • The Best Online Casino For Roulette
  • What Online Casino Pays Out The Most
  • Start Your Own Online Casino
  • Legal Online Casino
  • Online Live Roulette Casino Game
  • Playing Blackjack Online For Real Money
  • Online Penny Slots Real Money
  • Best Online Blackjack For Money
  • How To Win Online Roulette
  • Real Money Poker Sites Usa
  • Best Time To Play Slots
  • Online Keno For Real Money
  • Best Payout Online Slots Uk
  • Online Slots Real Money Reviews
  • Best Online Pokies Nz
  • What States Allow Online Gambling
  • Best Real Money Poker App
  • Online Slots To Win Real Money
  • Real Money Slots App Iphone
  • Jackpot City Flash Casino Online
  • Ignition Casino Legit
  • All Star Slots Casino
  • How To Play Online Casino
  • Real Time Gaming Slots
  • Online Video Poker Real Money
  • How To Play Roulette Online For Money
  • How To Win On Online Slots
  • Age Of Gods Slots
  • Online Real Casino Money Games
  • Best Online Slots To Play
  • Online Poker California Real Money
  • Is Jackpot City Casino Legit
  • How To Win At Online Slots
  • Play Poker For Real Money
  • Safe Online Pokies Australia
  • Best Way To Play Slots
  • How To Play Casino Online
  • Play Online Roulette For Money
  • Online Casino Australia Real Money
  • Which States Allow Online Gambling
  • Play Keno Online Real Money
  • How To Win Online Blackjack
  • Online Blackjack With Real Dealers
  • How To Open Online Casino
  • What Are The Best Online Slots To Play
  • Big Win Casino Slots
  • Spin Palace Online Casino Australia
  • Best Slots To Win On
  • Casino Slots Win Real Money
  • Slots Magic Online Casino
  • Blackjack Online For Real Money
  • Slot Machine App Win Real Money
  • Online Casino Not Paying Out
  • Slots That Pay Out Real Money
  • Online Pokies Australia Reviews
  • Online Casino Minimum Deposit 1
  • Jackpot City Online Casino Review
  • Live Dealer Baccarat Online Casino
  • Online Casino Apps For Android
  • Online Casino Paypal Deposit Australia
  • Online Casino With Live Dealer
  • How To Play Blackjack Online
  • Slots To Win Real Money
  • Wheel Of Fortune Online Slots
  • Play Quick Hit Slots Online
  • Can You Count Cards In Online Blackjack
  • Palace Of Chance Online Casino
  • How To Play Roulette Online
  • Good Slots To Play
  • Which Online Casino Pays Out The Most
  • Heart Of Vegas Casino Slots
  • Best Online Casino For Canadians
  • Australian Online Pokies Real Money
  • Mohegan Sun Online Casino Nj
  • Online Casino Live Games Best Uk
  • Best Online Casino Australia Reviews
  • Play Pokies Online Real Money
  • Best Online Casino For Usa Players
  • How To Win Online Casino
  • Play Blackjack For Real Money
  • Best Slots On Bovada
  • Online Keno Real Money Usa
  • Online Slots Real Money Paypal
  • Best Poker Sites For Real Money
  • Safe Casino Sites
  • The Best Online Slots
  • Play Keno For Real Money
  • Real Online Pokies Australia
  • Queen Of The Nile Slots
  • Mummys Gold Casino Online Casino
  • Play Keno Online For Real Money
  • Best Poker Websites Real Money
  • Lucky Nugget Online Casino Download
  • Best Online Casino For Roulette
  • Play Roulette For Money Online
  • Video Slots Mobile Casino
  • Best Time To Play Online Slots
  • Best Real Money Online Poker
  • Play Blackjack Online With Friends
  • Play Baccarat Online For Real Money
  • Is Silver Oak Casino Legit
  • Big Fish Casino Real Money
  • Can You Win Real Money On Caesars Slots
  • Game Of Thrones Slots Casino
  • Best Online Slots Payout Percentage
  • Play Online Pokies For Real Money
  • Play Pokies Online Australia
  • High 5 Casino Real Slots
  • The Best Online Pokies
  • Online Pokies That Accept Paypal
  • Heart Of Vegas Slots
  • How To Play Online Roulette
  • Best Poker App Real Money
  • Best Online Casino Fast Payout
  • Best Slots At Wind Creek Casino
  • Online Casino 10 Minimum Deposit
  • Play Roulette Online For Money
  • Us Real Money Poker Sites
  • How To Win In Online Casino
  • Best Online Pokies Australia Review
  • Where To Play Roulette Online For Real Money
  • How To Beat Online Casino Slot Machines
  • Highest Payout Online Slots
  • Best Paying Online Casino Slots
  • Golden Tiger Online Casino Review
  • Online Casino With Live Dealers
  • Play Roulette Online For Real Money
  • Best Slots To Play At Casino
  • Slot Machine Games Win Real Money
  • Most Popular Online Casino Games
  • Casino Slots App Real Money
  • Online Casino Real Money Canada
  • Online Real Money Pokies
  • Online Roulette Game Real Money
  • Online Casino Roulette Real Money
  • Best Place To Play Roulette Online
  • Online Casino Book Of Ra Paypal
  • Online Blackjack With Real Money
  • Play Online Blackjack For Real Money
  • Is There A Slot Machine App For Real Money
  • Royal Vegas Online Casino App
  • Best Casino Slots To Play
  • Most Popular Online Slots
  • Best Way To Win At Slots
  • Slots You Can Win Real Money
  • Play Roulette Online Real Money Usa
  • Online Casino Real Money Paypal
  • Online Casino Australia Legal
  • Treasures Of Troy Slots
  • Online Casino For Us Players
  • Where Can I Play Blackjack Online For Real Money
  • Online Casino Paypal Book Of Ra
  • Online Roulette For Real Money
  • Best Online Blackjack Real Money
  • Poker App For Real Money
  • Jackpot Magic Slots Facebook
  • Best Online Casino Real Money Usa
  • Best Online Casino New Zealand
  • The Four Kings Casino And Slots
  • How To Play Slots Online
  • Best Online Pokies Australia
  • Usa Online Slots Real Money
  • Real Money Casino Android App
  • Online Slot Machines That Pay Real Money
  • Online Pokies Real Money Nz
  • Online Pokies Real Money App
  • Play Igt Slots Online
  • Best Casino Slots To Win Money
  • Online Casino Business For Sale
  • Play N Go Slots
  • Poker Apps For Real Money
  • Lucky Slots Real Money
  • All Slots Online Casino
  • Best Online Pokies Real Money Australia
  • Online Pokies Win Real Money
  • Best Online Casinos For Roulette
  • Pay Slots For Real Money
  • Best Online Poker Real Money
  • Slots App Win Real Money
  • Play Online Roulette For Real Money
  • Is Ignition Casino Legit
  • Wheel Of Fortune Slots Online
  • Lotsa Slots Real Money
  • Video Poker Online Real Money
  • Online Slots Usa Real Money
  • Play Blackjack Online Real Money
  • Jackpot City Online Pokies
  • Video Slots Online Casino
  • Is 888 Casino Legit
  • Online Slot Games That Pay Real Money
  • Prepaid Visa Card Online Casino
  • How To Stop Online Gambling
  • Best Slots To Play Online
  • Online Blackjack For Real Money
  • Slot Apps For Real Money
  • Mobile Slots Win Real Money
  • Newsletter Sign Up

    About Us

    Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.

    Social Posts

    See More:

    Contact Us

    Stay Informed

    Join Mailing List

    GLE