Myths

Myths and misconceptions about Canadian Tax

 

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(1)  I was told I need to contact the Canada Revenue Agency (“CRA”) to get approval to become a non-resident.​

There’s no such requirement from the CRA. Whether you are a non-resident or not is by facts, not by application.

Generally speaking you are a non-resident for Canadian tax purposes if you:​

• normally or routinely live in another country.

• do not have significant residential ties in Canada, you live outside Canada throughout the tax year.

• you stay in Canada for less than 183 days in the tax year.​

Some people wrongly think that they have to file form NR73, which is a request for determination of their residency status, before being considered a non-resident. This is certainly not the case. In fact, most tax professionals who’re actively engaged in tax advice would normally suggest you not to submit such form to the CRA if they can avoid it.​

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(2)  Canadian citizens have to report their worldwide income to the CRA.​

Unlike the American, Canadians are not taxed based on citizenship, but residency status. A Canadian citizen can certainly be a non-resident (for more details, see “Am I a non-resident?”), and as long as he/she does not have income from Canadian source, you don’t need to pay any tax to the CRA. And on a side note, you certainly do not need to give up your passport or citizenship to be considered a non-resident.​

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(3)  Canadian citizens must give up all residential ties to be considered a non-resident.​

If you could, having zero residential ties would be your ideal case. However, as a Canadian, it’s totally unreasonable to have absolutely zero residential ties. After all, it’s a free country. One may maintain some degree of ties to Canada and still become a factual non-resident. For example, if you only have a valid driver’s license, it's would be pretty unreasonable for the CRA to deem you as a resident. Therefore, you shouldn't need to worry about anything. However, if you add on top of that with some other than "ties", say you maintain a home, a car, provincial health card and a whole bunch of other things, the situation could become tricky! Basically, there is no hard and fast rule.​

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(4)  I stayed in Canada for less than 183 days last year, so it means I would not be considered a (tax) resident for Canadian income tax purposes, right?​

If a person has visited or stayed in Canada for 183 days or more, that would deem him or her a resident in Canada. However, the converse is not necessarily true. The fact that a person was in Canada for less than 183 days in the year, does not mean he or she was a non-resident for that year.​

To determine residence status, the CRA considers all of the relevant facts on a case by case basis, including residential ties with Canada and length of time, object, intent, and continuity while living inside and outside Canada.  Read more: "Am I a non-resident?"​

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(5)  Common Reporting Standard ("CRS") does not concern me?​

If you are currently a non-resident, the CRS might not concern you right away. However, your residential status could have changed even though you might still be living in another country (please go to the relevant material in determining one's residency status). If you find out your non-resident status in fact has changed, the CRS does concern you.

And it's worth to mention that whenever you need to file a Canadian income tax return as a resident, you're now required to answer this question on the return "Did you own or hold specified foreign property where the total cost amount of all such property, at any time during the year, was more than CAN$100,000?". Therefore, you should always keep track of the values of your properties so that when you do need to answer that question, you have proper supporting documents, and/or it can be used for tax planning purposes.