How to file your taxes while living abroad
It's true! You might not need to file a Canadian tax return outside of Canada. Let's take a look at how to file your taxes while living abroad because the requirements vary. Your residency status and types of income make a big difference.Generally, you are an emigrant the year you break ties with Canada. For the following years, you are a non-resident of Canada.See also 'Filing Tax as a Non-Resident'
Factual Residents of Canada
- Living outside Canada temporarily makes you a factual resident.
- Factual residents have ties to Canada, like homes, families, or businesses. And usually, you spend at least 183 days a year in Canada.
- So, you file a tax return like normal. And you report all your income, both from Canada and the rest of the world. If you pay tax in the other country, you claim credit for it on your Canadian return.
Sometimes, you can spend over 183 days outside Canada and still be a factual resident. For example, if you are a student and attend school outside of Canada. You maintain residential ties, regardless of how many days you spend out of the country.See also 'Filing Tax as an International Resident/Emigrant'
Non-Residents of Canada
Living abroad permanently with no residential ties to Canada, likely makes you a non-resident of Canada.
- So, you don't report your world income to the CRA.
- But if you have Canadian income like a pension or if you sell property in Canada, you do report your Canadian income.
Plus, your last year in Canada, file a final return. Report as usual, but only claim benefits and credits from the part of the year you were in Canada.
Sometimes, you break residential ties with Canada, move abroad and yet still are a deemed resident. A missionary, member of the Canadian Services or a government employee, you are a deemed resident.So, you have the same tax obligations as residents.
- Report all of your Canadian and world income. But claim all applicable federal deductions and credits.
- Don't claim provincial or territorial credits or benefits. But you don't pay provincial or territorial tax. Unfortunately, there is a federal surtax.
An Example – deemed resident
George is an industrial engineer. After retirement, we went to work in Hong Kong for a year. His wife and children stay at the family home in Ontario while he is gone. The CRA considers George a factual resident of Canada for tax purposes because he has substantial residential ties to Canada.When George files his Canadian tax return, he reports his income from all sources inside and outside Canada. He includes his Canadian pension and his employment income from Hong Kong. Plus, he claims all deductions that apply to him, both federal and provincial. George pays both federal tax and the Ontario provincial tax. He reduces his federal and provincial taxes by claiming the non-refundable tax credits that apply to him.
Rarely, factual residents are deemed non-resident. Tax treaties create the rules for these deemed non-residents.It can be hard to determine your residency status on your own. If you wonder, file Form NR73, Determination of Residency Status (Leaving Canada).
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