Types of Residents for Canadian Tax Purposes

For Canadian income tax purposes, an individual's residency status determines how their income is taxed. Depending on their circumstances, an individual can generally be classified as one of the following:

• Full-year resident
• Part-year resident
• Non-resident
• Deemed resident

Understanding your residency status is important because it determines whether you are required to report your worldwide income or only certain Canadian-source income.

For more information, visit: Individuals – Leaving or entering Canada and non-residents (opens in a new tab)

Full-Year Resident

A full-year resident is an individual who resides in Canada for the entire tax year.

Full-year residents are taxed on their worldwide income and are required to report all income earned globally on their Canadian tax return.

Example: Ronald's Residency Status

Ronald has been living in Canada for the past five years. Every year, he takes two weeks off for an overseas vacation. What is his residency status?

Answer: Ronald is a full-year resident for tax purposes. His temporary absences from Canada, such as vacations, do not affect his residency status.

Part-Year Resident

An individual may be considered a part-year resident when they:

• Enter Canada during the year (immigrants); or
• Leave Canada during the year (emigrants).

A part-year resident is an individual who resides in Canada for only part of the year and establishes residential ties during that period.

For tax purposes, part-year residents are generally required to report their worldwide income earned during the period they were considered residents of Canada.

Newcomers to Canada

The Canada Revenue Agency (CRA) considers an individual a newcomer to Canada during their first year of residency in Canada.

Newcomers to Canada may include:

• Permanent residents, including individuals who have received approval-in-principle from Immigration, Refugees and Citizenship Canada to remain in Canada.
• Refugees (protected persons).
• Temporary residents, including students, workers, or temporary resident permit holders.

You become a resident of Canada for income tax purposes when you establish sufficient residential ties with Canada. Generally, residential ties are established on the day you arrive in Canada.

Temporary Residents and Canadian Taxation

Temporary residents in Canada are subject to specific taxation rules. Their tax obligations depend on whether they are considered residents or non-residents for tax purposes.

Residency Status

For tax purposes, temporary residents are categorized as either:

• Residents of Canada; or
• Non-residents of Canada.

The determination depends on various factors, including:

• Length of stay in Canada.
• Residential ties maintained in Canada.
• Nature of employment or studies in Canada.

Resident Status

If a temporary resident is considered a resident of Canada for tax purposes, they are generally required to pay Canadian income tax on their worldwide income.

This means they must report income earned both inside and outside Canada.

Non-Resident Status

Non-residents of Canada are generally taxed only on their Canadian-source income.

Canadian-source income may include:

• Employment income earned in Canada.
• Rental income from Canadian properties.
• Other types of Canadian-source income.

Non-residents are generally not required to pay Canadian tax on their foreign income.

Tax Treaties and Double Taxation

Canada has tax treaties with many countries to help prevent double taxation and provide relief to individuals who may be considered residents of both Canada and another country.

These treaties may provide exemptions or reduced tax rates for certain types of income depending on the specific provisions of the agreement.

Tax Filing Requirements

Temporary residents, whether classified as residents or non-residents, may be required to file a Canadian tax return if they:

• Earn income in Canada; or
• Want to claim a refund for taxes withheld from Canadian income.

The tax return must generally be filed by the deadline, which is usually April 30 of the following year.

Social Insurance Number (SIN)

Temporary residents who earn employment income in Canada are generally required to obtain a Social Insurance Number (SIN) from Service Canada.

The SIN is used for tax purposes and allows employers and individuals to report income information to the Canada Revenue Agency (CRA).

Canada Child Benefit Eligibility for Temporary Residents

Temporary residents must meet specific requirements before applying for the Canada Child Benefit (CCB) and related provincial or territorial programs.

A temporary resident must:

• Live in Canada for 18 consecutive months; and
• Have a valid permit during the 19th month of living in Canada.

Once these conditions are met, they may become eligible to apply for the Canada Child Benefit and related programs.

Important Reminder

Canadian tax laws and regulations can be complex and may change over time. Temporary residents and newcomers should consult the Canada Revenue Agency (CRA) or a qualified tax professional for guidance based on their specific situation.