Tax Return Preparation for Non-Residents in Canada

Allan Madan, CA
 Aug 8, 2010
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Non-residents that have any connection (business, employment, investment, real estate) with Canada should be aware of their Canadian tax reporting requirements and liability for tax in Canada.

This short article summarizes the most common situations that cause a liability for tax in Canada for non residents or or that cause a non-resident to file a Canadian tax return.

While this article is helpful, you should still consult an Accountant for Non Resident Canada Tax Return Preparation for advice.

Factual Resident of Canada – tax

Residents of Canada are subject to tax in Canada on their world wide income.

Ties that establish Canadian residency in fact include:

  • Principal residence (i.e. house) in Canada;
  • Children and/or a spouse in Canada;
  • Personal assets in Canada, including a vehicle, furniture, major appliances, etc.;
  • Communal ties in Canada, e.g. membership in clubs, participation in Canadian organizations;
  • Driver’s license in Canada; and
  • Bank accounts at a Canadian financial institution, and/or credit cards from Canadian credit card companies.

Deemed Resident of Canada – tax

You are deemed to be a resident of Canada if you resided in Canada for 183 days or more in a given year.

Deemed residents are also subject to tax in Canada on their world wide income.

When are non-residents liable for tax in Canada?

If you are not a factual resident of Canada or a deemed resident of Canada, then you are considered to be a non resident of Canada. Non-residents of Canada only need to pay Canadian income tax in limited circumstances.

Non residents are liable for tax in Canada if they:

  1. Were employed in Canada
  2. Carried on business in Canada
  3. Disposed of taxable Canadian property (e.g. Canadian real estate)

If any of these 3 situations apply, you should consult an accountant experienced in Non-Resident Canada Tax Return Preparation.  

Upon emigration of Canada as a non-resident, you must also disclose all of your Canadian assets or you may be hit with tax implications.  For more information on this and additional tax implications for non-residents of Canada, please see our article on becoming a non-resident of Canada.

­Non resident Canada tax return preparation – EMPLOYED

Non residents that earned employment income in Canada must pay Canadian income tax on that employment income. Canadian employment income is subject to tax to a graduated tax, where the rate of tax increases as the employment income received increases. For Canadian personal income tax rates and Canadian tax brackets, please see Canadian personal income tax rates.

Non-resident Canada tax return preparation – BUSINESS CANADA

Non residents that are carrying on business in Canada must file a Canadian tax return. If the non-resident business also has a permanent establishment in Canada, then the non-resident business must pay tax on the profits earned through the Canadian permanent establishment. For more information on the tax implications for non-residents carrying on business in Canada, please see Permanent Establishment in Canada

Non-resident Canada tax return preparation – Real Estate

Non residents that dispose of Canadian real estate are liable for tax in Canada on the profits realized on the disposition / sale of that real estate.

Investment in Canada is taxed favorably. As such, only half of the profit (i.e. capital gain) realized on the sale of real estate in Canada is taxable. To determine the tax rate applicable on the taxable portion of the gain, please see Canadian personal income tax rates

Personal tax credits available for non residents

Non-resident tax return preparation involves determining the tax credits that non-residents can claim on their Canadian tax return.

Nonresident individuals that earned 90% or more of their world wide income in Canada are allowed to claim all personal tax credits available to them (just as if they were a Canadian resident). Please see Personal Tax Credits – CRA for all of the available tax credits.

Where less that 90% of a non-resident’s world-wide income is from Canada, a non-resident can only claim the following personal tax credits:

– Disability amount

– Interest paid on student loans

– Tuition paid

– Donations and gifts

Non-residents entering Canada – tax return preparation

Non residents that immigrate to Canada must file a personal income tax return for the part of the year the year that they were resident in Canada. In addition, they must report all of their world wide income (i.e. income earned inside Canada and income in other countries) on their personal tax return.

When preparing tax returns for non-residents immigrating to Canada, personal tax credits are prorated by the number of days that the non-resident resided in Canada for the year. For example, if a person arrived in Canada in October, he would only be entitled for 3/12ths of any personal tax credits available.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 27

  1. Hi Sima,

    As a non resident Canadian, you can gift money to your daughter in Canada, so that she can purchase a property in Canada. Your daughter will not be required to pay income tax on the gift received. However, you should speak with an accountant in your country of residence to see if there are any tax implications in your home country.

    The source of funds should also be very clear, so that the Canada Revenue Agency does not mistake the gift as income. Therefore, you should keep a copy of your bank statement to show where the money originated from, as well as copies of tax returns to prove that you had the financial capacity to make the gift.

    If your daughter will be on title to the property, she will be required to report the rental income from the property on her tax return, if any. For further information on this, please see http://madanca.com/how-to-prepare-tax-returns-for-rental-properties-in-canada

    Allan

  2. I had employment in Canada from January to April 2012, and had income tax deducted for that time period. I didn’t plan to leave Canada until I got a job offer from the States the end of April, and I moved out of Canada in May. I bought some RRSP earlier in March. Should I call the financial institution to cancel my RRSP contribution to year 2012? Or those can be used to reduce my income tax? May I get some advice please?

    1. Hi Jasmine,

      Thanks for the inquiry!

      There are various situations you need to consider before making that decision. First of all, based on the limited information, you were a part-year resident and it will be able to use the RRSP as a deduction in order to reduce your income tax (or receive a larger refund).

      However, in order to answer whether you should cancel it or not, we would need to know more on what your future plans are in terms of coming back to Canada (and/or possibly retiring here since that is the goal of the RRSPs). You can keep RRSPs as a non-resident so that’s not a problem but if you don’t plan on returning to Canada, there is no reason to continue contributing to your RRSP when you can easily contribute to an equivalent US 401(k) account.

      – The team at Madan CA

  3. Hi would like to know is there any obligation for a non-resident to bring a high-value gift into canada? (and also into USA too, for that matter). Thanks very much for your help.

    1. Hi Jason.

      You can import gifts for friends into Canada duty- and tax-free as long as each gift is valued at CAN$60 or less. If the gift is worth more than CAN$60, you will have to pay duty and taxes on the excess amount. You cannot claim alcoholic beverages, tobacco products or business-related material as gifts.

      Goods that exceed the limit will be subject to duties. The term duties may include excise taxes and Goods and Services Tax/Harmonized Sales Tax (GST/HST). It does not include provincial or territorial sales tax. However, the CBSA may also collect provincial and territorial taxes, levies, and fees. Duty rates vary according to the goods you are importing, the country where the goods were made, and the country from which you are importing them.

      -Allan and his team.

  4. If I was a non-resident director of a Canadian company and only receive C$750 for attending a director meeting in Canada during a year, do I need to file return and pay tax as I am not entitled to any deduction or personal credits?

    1. Hi May,

      If you were a non resident and received directorship fees for $750, then you would not have to file a Canadian tax return, since you would not have any taxes owing. This is assuming that your employer correctly deducted taxes from the directors fees paid to you.

      Thanks,

      Allan Madan, CPA, CA
      Tel: 905-268-0150

  5. If i am a non-resident (i am also a Disabled Person) and had worked in vancouver, british columbia (Canada). Do i need to file and pay tax? is there any claim income tax refund if i am a Disabled Person? Please advice

    1. Hi Zheng,

      Thank you for your question. The answer to your question is as follows:

      If your Canadian-sourced income is equal to 90% or more of your net world income, you will be able to claim all federal non-refundable tax credits. However, if it less than 90%, you will still be able to claim your disability tax credit, but only 15% of the credit.

      To find out if the person with the disability may be eligible, answer the questions here: http://www.cra-arc.gc.ca/tx/ndvdls/sgmnts/dsblts/dtc/qstns/q1-eng.html. To be eligible for the Disability Tax Credit, a T2201 form must be filled out and a certified/qualified practitioner has to complete and certify that the taxpayer has severe and prolonged impairments and effects.

      The CRA will validate the certificate and deem eligibility.

      The taxpayer can possibly enroll in a Registered Disability Savings Plan.

      Regards,

  6. Hi Allan,
    I see you’ve kept answering questions regardless of the fact that you posted this a few years ago so I will try my luck.
    My father lives in Saudi Arabia where there are no tax laws. He has been supporting me for the past few years, but can these amounts be considered as a gift and not be taxable and therefore not make me a dependent? What is the difference between a gift and financial support? How can he go about giving me an allowance if he is a non-resident Canadian? Would it be better if an aunt who does not have the nationality to send it? Eventually, we would like to buy a house. When the sum is transferred to me, would I be taxed on it as if it is income?
    Thank you, really appreciate your help,
    Nathalie

  7. May I know how much you charge to process the tax filing for real estate transaction for non canadian resident?
    I am not familiar with the process and I have a friend who need that service.

    Santoso

  8. I am a non-resident Canadian. You stated “If your Canadian-sourced income is equal to 90% or more of your net world income, you will be able to claim all federal non-refundable tax credits.”

    Would this also apply to Provincial non-refundable tax credits. In other words would I be able to claim the $11,138.00 personal exemption amount on line 300 ?

    1. Hi Steven,

      Thanks for your question. Yes, this also applies to to provincial tax credits for most provinces. Line 300 on Schedule 1 is for the Federal Basic Personal Amount. See form 428 for the provincial equivalent.

  9. “Question : can a non resident, non citizen convert a RSSP to RRIF
    and pay withholding tax based on the relevant tax treaty.”

  10. Hi Alan,
    I have been deemed a non-resident in 2016 and during that time received a lump sum pension payout the first week of December 2016 from a former employer. I was taxed over 30%. I’m wondering if I can recoup some of the tax paid? If so how do I go about doing it? I was a resident of a treaty country (Turkey) and had no other Canadian income for the year but did work in Turkey.

  11. Thanks very much for your response Alan, it’s very helpful. One last question.. Is it okay to file a section 217 return even if I’ve already filed my 2016 tax return?

    1. Hi Kimberley, the section 217 return is prepared for non-residents of Canada. It would not make sense to have two tax filings for the same year, unless there is a valid reason.

  12. Hi Madam:
    I’m a non resident of Canada for tax purposes since July 2016 (I already got a paper from CRA about that).

    In 2017; I made 2 RSRP withdrawals (one as non resident with 25%. And the second with 5% withholds) therefore I got 2 forms T4-RSP and NR4.
    Beside I got also a t5 for dividends earning (I didn’t inform the dividend payer about my residency status yet).
    Shall I file tax for 2017 incomes especially T4-RSP and t5? Or no need?
    Thanks.

    1. Hi Mohammed, since you are a non-resident of Canada, you do not need to file a non-resident tax return to report RRSP withdrawals or Canadian interest income received. Contact your financial institution because they should not have issued a T4-RSP, but should have issued a NR4 slip. Likewise, your financial institution should have issued a NR4 slip instead of a T5 slip.

  13. Hi Alan
    Thanks for a very informative article.
    I am a non resident of Canada and last year I was working for three months for a company in Quebec and then returned to the UK. I was paid and taxed as if I was working a full year. I am now back in Canada this time working in Vancouver for the same company and I find that I have to send in a tax return. Given my tax was taken out of my pay at source last year can I expect a refund?
    Thanks
    Richard

  14. Hi Allan,

    thank you for your article. I have already received my Notice of Assessment and then Notice of Reassessment, but the thing is that for me as a non-resident they charged me federal tax + surtax of 48% of that federal tax instead of a combination of federal tax + provincial tax (I declared that all my income for 2017 came from Canada). My question is should I ask for another reassessment given that I found the information “When a non-resident or deemed resident files a Canadian tax return, they are taxed at the current federal tax rates, plus a surtax of 48% of the federal tax, unless income was earned from a business with a permanent establishment in Canada. In this case, provincial or territorial tax is paid on that income.”?) Can I claim non-refundable PROVINCIAL tax credits even though I am a non-resident? I worked for a Canadian company in BC.

    Thank you!

  15. Hi Allan,

    thank you for your article. I have already received my Notice of Assessment and then Notice of Reassessment, but the thing is that for me as a non-resident they charged me federal tax + surtax of 48% of that federal tax instead of a combination of federal tax + provincial tax (I declared that all my income for 2017 came from Canada). My question is should I ask for another reassessment given that I found the information “When a non-resident or deemed resident files a Canadian tax return, they are taxed at the current federal tax rates, plus a surtax of 48% of the federal tax, unless income was earned from a business with a permanent establishment in Canada. In this case, provincial or territorial tax is paid on that income.”?) Can I claim non-refundable PROVINCIAL tax credits even though I am a non-resident? I worked for a Canadian company in BC.

    Thank you!

    1. Hello,

      If you are a non-resident who worked for a company in BC and received a T4 slip (employment income slip), then you should pay federal and provincial (BC) income tax. The 48% surtax does not apply in your situation.

      File a T1 adjustment and report the province of employment as BC to fix this error. I can help you with this if you require.

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