Tax Residency-Canada

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  • Income tax is payable by all people who are resident in Canada for tax purposes.
    • Residency is a question of fact.
    • The most persuasive evidence of residency is where your home is, and where your spouse and children live.
    • If you arrive in Canada on a work permit or as a permanent resident, you normally will be considered a tax resident on the day you land.

  • Similarly, to cease being a tax resident you must leave Canada, and relinquish all residential ties.

  • In the year you enter or leave Canada, you pay Canadian income tax only on the income you earn during the part of the year that you are in Canada.

  • You should be aware that, if you are a tax resident of Canada and permanently leave the country, you may be liable to tax on the capital gain of certain property.
    • RRSPs are excluded from this tax.
    • For more information on the tax implications of selling a house when you leave Canada, please see the BE Wiki article entitled Tax and House Sales.

  • If you are tax resident in Canada, you pay income tax on your worldwide income.
    • If, after you move to Canada, you have residual income in the UK, such as interest or rental income, then this is taxable in Canada.
    • Income within a registered pension fund is exempt, however.

  • You generally will be given credit for any UK income taxes paid.
    • Canada has tax treaties with many countries, including the UK, which limits the possibility of double taxation on many types in income.
    • This is the Canada UK tax treaty.
    • This is the form you need to fill in [1]
  • If you are not tax resident in Canada by the home and family definition, but nonetheless spend more than 183 days in the country in any tax year, you will be deemed to be a tax resident for that year.
    • You will be subject to Canadian income tax on your worldwide earnings.
    • This could be an issue if you are working in Canada on a fixed term contract and intend to return to the UK.

  • The final group of people subject to Canadian income tax are non-residents who have property income (including interest and dividends) in Canada.
    • This income is subject to a withholding tax of 25%.
    • If the beneficiary is a UK resident, the Canada-UK tax treaty reduces this to 10% in most cases.

  • This is one in a series of BE Wiki articles about Taxation.