Tax Guide for Immigrants

Expat Tax Basics in Canada

Taxes are a confusing topic if you are an expat wondering about your tax obligations to the Canada Revenue Agency (CRA).

The tax system can be complicated for those living abroad. So, we have compiled the information you need to stay on top of your taxes no matter where you are.

Are You a Non-Resident?

Let's break down what makes you a non-resident in Canada for tax purposes. Living outside of Canada does not guarantee non-resident status.

Just because you have moved to another country does not make you a non-resident. The CRA is interested in whether you have any ties to Canada, such as a home, children, or a spouse. If you have severed those ties, you will likely be considered a non-resident. Don't forget the 183-day rule: if you spend more than that in Canada, you're considered a resident.

Let's talk about "deemed" statuses. Does living in another country with a tax treaty with Canada cut off your ties to real estate in Canada? If you own a home in, say, Ontario, you're considered a "deemed non-resident." Conversely, having no ties but staying in Canada for more than 184 days may make you a “deemed resident.”

Expat Tax Liabilities

Once you have determined your non-resident status, the next question is: Do you have to pay Canadian taxes?

This is a complex question that depends on a number of factors, including the type of income and the details of your tax treaties.

Taxation of Canadian Immigrants

What taxes do Canadian immigrants have to pay? It depends on the type of income you earn in Canada. Let's talk about the details:

Part I Taxes. Return

You must file a return if you have income subject to Part I taxation, including:

- Wages from employment in Canada.
- Income from running a business in Canada.
- Taxable portions of scholarships and grants.
- Benefits from COVID-19 relief measures.
- Gains from the sale of taxable real estate in Canada.

Filing a return can reduce your taxable income and allow you to claim deductions. You can also claim a refund of previously withheld tax, and tax treaties may offer additional benefits.

Part XIII Taxes. Withholding tax for non-residents

Your taxable income may be reduced by Part XIII withholding taxes, which are deductible before you remit the funds.

These taxes apply to income such as interest, dividends, rental payments and pension payments, generally at a rate of 25%, but tax treaties may reduce the rate.

This withholding will usually end your tax liability on that income unless special circumstances require otherwise.

Avoiding double taxation

Residing abroad can create double taxation risks. However, tax treaties and foreign tax credits can help avoid this, although you must carefully document all data to obtain them.

Tax-Free Countries for Expats

Some countries do not tax personal income, but Canadian immigrants with Canadian-source income are subject to Canadian tax obligations.

Filing a Canadian Tax Return