Tax Guide for Non-Residents of Canada: A Comprehensive Guide!

by | Dec 9, 2022

Around three million Canadians live in countries other than Canada. But non-residents of Canada come with their fair share of tax obligations. So, this is a complicated process.

In Canada, the tax system depends on residency. You may have to file a Canadian Income Tax Return even if you are not a Canadian citizen or resident. The CRA defines residence as “where an individual resides on any given day.

This cannot be very clear, and Yogi & Associates can help simplify it! With this guide, you will know why you are facing tax issues even if you are a non-resident.

1. Residency Status in Canada:

The CRA considers you a resident of Canada:

1. If you own a house or a property in Canada.
2. If you have a family living in Canada.
3. If you have spent a significant amount of time in Canada.
4. If you have plans in Canada.
5. If you have a driver’s license, health insurance, and bank accounts in Canada.

2. Five Categories of Residency Status:

1. Non-Resident.
2. Dual Resident.
3. Factual Resident.
4. Deemed Resident.
5. Deemed Non-Resident.

Non-Resident:

As a non-resident of Canada, one must leave and cut significant ties with Canada. In most cases, they will likely live outside the country for an extended time.

Dual Resident:

A dual resident is someone who lives partly in two different countries. Dual residents have a home in more than one country. Also, dual resident is liable for tax in both their native land and the country where they live.

Factual Resident:

Even if you do not live in Canada, you are still considered a factual resident of Canada. The reason is you have significant residential ties to the country. This means you can visit Canada, send money to your family back home, and make business trips to Canada for work.

You are a factual resident if:

  • You are working somewhere else for a short period.
  • You are a student outside Canada.
  • If you are teaching somewhere outside Canada.
  • You are on holiday outside Canada.
  • You have been living for some time in the U.S.

Deemed Resident:

You are a deemed resident:

  • If you have fewer than 183 days of residential ties to Canada in the current year.
  • You are an employee subject to the Income Tax Act. This includes a public servant or a member of the Canadian Forces.
  • You are not classified as a citizen of any other country under Canada’s tax agreement with that country.

Note:

You must report all income you receive. This includes income from the property and other assets abroad. You have to declare the help you have because this information may be required in connection with your application for a permanent house.

Deemed Non-Resident:

You are deemed non-resident if you have been a resident of another country in the last three calendar years. This category is for individuals who do not follow their Canadian tax obligations.

3. Five Factors to Determine your Residency Status:

These are the essential factors to consider and determine if you are a resident of Canada:

1. Where is your home?
2. Which place are you working in?
3. Where does your family live?
4. Where is your driver’s license issued?
5. Where are your personal property and belongings?

4. Do Non-Residents have to Pay Taxes?

If you are a non-resident and get income in Canadian dollars, you have to pay either Part I tax or Part XIII tax.

Part I Tax:

It is generally paid by the one who pays you.

Part XIII Tax:

It is imposed on certain types of salary and wages. This includes wages from employment or other forms of payment.

5. How much does a Non-Resident have to Pay Tax?

If you’re a non-resident, you pay the same taxes as Canadian residents. Non-residents in Canada pay 25% of income earned from business sources plus a surtax of 48% of the federal tax. You have to pay taxes on such gains:

Important:

Inform your Canadian provider that you are a non-resident of Canada. Also, provide your place of the house so that the applied tax can deducts from your salary.

6. Tax Rates for Non-Residents:

The CRA must receive the non-income resident’s tax filing. The same rates that apply to residents determine the income tax. In addition, they must submit taxes on the following sorts of Canadian-sourced income:

  • Employment earnings.
  • Business earnings.
  • Profits related to the sale of “Taxable Canadian Property.”

Additional Information:

 The same tax rates apply to residents and non-residents. Federal, provincial, and territorial taxes are among them. On income that is not allocated to a province or territory, non-residents must pay tax. In some circumstances, you also owe extra taxes at 48 percent of the standard federal rate. One of them is those involving international investment income.

7. How to Submit Taxes as a Non-Resident?

1. You should have your SIN. If you don’t have one, get one from an Individual Tax Number using Form T1261. It’s an application for a CRA ITN for Non-Resident.
2. Get the Income Tax and Benefit Package for Non-Residents and Deemed Residents of Canada for 2020 for all the forms.
3. To file your income tax return using NETFILE, you must collect an Individual Tax Number from the CRA.
4. Send each person’s tax form if you are filing multiple tax returns. Yet, if you are filing many years of tax returns for the same person, you can put them all in the same folder.

8. How to Open an Account for a Non-Registrant?

Online registration is the most straightforward approach to opening a non-resident tax account.

1. Go to the CRA website and create an account.
2. Choose “Open a non-resident tax account” from the menu after logging in.
3. Open your account Through My Account, My Business Account, or Represent a Client.
4. Choose “Open a non-resident tax account” from the menu after logging in.
5. Call 1-855-284-5946 if you need further information.

Important:

A non-resident social insurance number is essential to open a non-resident tax account. Open an account through Represent a Client. You can also file a written request to the Sudbury Tax Centre if you don’t already have one.

9. How to Submit the First Remittance?

The CRA will inform you that your tax account is open and that you must send your first Remittance. But, if you still need to finish the first year of payment, you can write the CRA a letter. This should include the following information:

  • Your name.
  • Your location.
  •  Call-in number.
  • The year and month you wish to send the money.

Note:

The CRA will give you Form NR76, Non-resident Tax Statement of Account. This form includes a non-resident tax remittance receipt. You can use it with your next transfer.

10. Bookkeeping Maintainance:

Taxes and Bookkeeping allow you to track your earnings and expenses. You can solve all financial problems only by keeping your Bookkeeping up to date. You can get an idea of your earnings and taxes with up-to-date Bookkeeping.

So, this is the service for you if you need a comprehensive bookkeeping service. We provide the most effective bookkeeping solutions and services in Canada.

The Bottom Line:

The rules governing residency have evolved. Their definition is still growing. Non-resident taxes in Canada can be complex if you are a non-resident.

Contact Yogi & Associates if you need help with your financial affairs! We’re here to help you understand these rules and keep every penny you earn.

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