Tax Residency

In the context of Canadian income tax, residency status is crucial because it determines how and on what income you are taxed. Here's a breakdown of the different residency types recognized by the Canada Revenue Agency (CRA):

Definition: This is someone who lives in Canada on a regular, continuous, or habitual basis.

• Indicators: Primary ties (home in Canada, spouse or dependants in Canada), and secondary ties (driver’s license, health card, social connections, etc.).
   
• Tax Impact: Taxed on worldwide income.
   
• Typical Example: A Canadian who lives and works in Canada year-round.
   

Definition: Someone who lives outside of Canada during part or all of the year but maintains significant residential ties to Canada.

• Indicators: Same as for ordinarily resident.
   
• Tax Impact: Also taxed on worldwide income.
   
• Typical Example: A Canadian on temporary work assignment abroad who keeps a home and family in Canada.
   

Definition: Someone who does not have significant residential ties to Canada, but is still deemed a resident for tax purposes due to presence in Canada for 183 days or more in a calendar year.

• Key Points:
   
  • Does not reside in another country with a tax treaty tie-breaker clause.
     
  • May include government employees posted abroad.
     
• Tax Impact: Taxed on worldwide income.
   
• Typical Example: A foreigner who spends more than half the year in Canada and isn’t a resident of another country under a tax treaty.
   

Definition: Someone who is otherwise a factual or deemed resident, but is also considered a resident of another country under a tax treaty with Canada.

• Tax Impact: Treated the same as a non-resident — taxed only on Canadian-source income.
   
• Typical Example: A person who qualifies as a resident of both Canada and another country (like the U.S.) but is considered a resident of the other country under the tie-breaker rules in a tax treaty.
   

Definition: Someone who ceases to be a resident of Canada for tax purposes — i.e., someone who leaves Canada and severs residential ties.

• Effective Date: The date you leave Canada or sever your residential ties.
   
• Tax Impact:
   
  • Deemed disposition of certain assets (capital gains tax on exit).
     
  • Taxed only on Canadian-source income after departure.
     
• Typical Example: A Canadian who sells their home, moves abroad permanently, and cuts ties to Canada.

To emigrate from Canada, a Canadian must meet certain conditions, especially for income tax purposes. You are considered an emigrant if:

1. You leave Canada to live in another country, and
    
2. You sever your residential ties with Canada.
    

To be considered a non-resident, you must give up significant residential ties such as:

• Owning or renting a home in Canada
   
• Having a spouse or common-law partner in Canada
   
• Having dependants in Canada
   

Other secondary ties that are also considered include:

• Personal property in Canada (e.g., a car or furniture)
   
• Social ties, like memberships in Canadian recreational or religious organizations
   
• Economic ties, such as Canadian bank accounts, credit cards
   
• Holding a Canadian driver’s licence
   
• Holding a Canadian passport
   
• Having provincial or territorial health insurance