Sunday, 15 March 2020

The Top Questions You May Have for Tax Residency in Canada

The tax season is here, and if your tax situation isn’t simple, we are sure you have a few questions. Irrespective of how long you stayed in the country, Canada requires the person to pay a certain tax. You are taxed depending on the tax residency status. If you are having a tax residency in Canada, you will be taxed on your worldwide income.

So, are you a resident for tax purposes? Here is a list of the few things that you need to know.

How long have you been living in Canada?
Tax residency is often determined based on the number of days you spent in Canada amongst many other factors. Even if you do not have significant ties with Canada, you can still be considered a deemed resident of Canada based on the number of days you spent in Canada. Read here more about the tax issued for the deemed residents of Canada.

Are you planning to move to Canada?
Your first question to determine is whether or not you will be living in Canada. If you are landing as a permanent resident of Canada but no intentions to reside in Canada yet, you should not establish certain residential ties to avoid becoming a tax resident of Canada. Read more about income tax issues for newcomers (immigrants) to Canada.

Part-Year Residents of Canada and Their Taxation
As stated above, Canada taxes the individual based on the resident's worldwide income. Even the Non-Residents are taxed based on type of Canadian source of income. Discussion related to part-year tax residency in Canada can be found here.

How is tax residency determined in Canada?
This is surely one of the most prominent and important questions to consider whether you are moving to or out of Canada. Different factors will eventually have an effect on the individual's tax residence status in Canada. The mover will only become a resident if they have developed ties with Canada. Two factors will eventually depend on determining the residency determination purpose

    • Primary/Significant Residential Ties
    • Secondary Residential Ties

What is the Date of Change of Residency Status for Tax purposes in Canada?
The Canadian taxation law will eventually vary for the new as well as the old residents. Apart from the residency status, the change in the date of residency should also be taken into consideration.

An individual can be a resident for tax purposes, even when they do not have permanent resident status. All the leavers need to ensure that they serve all residential status, they may be the factual resident of Canada.
A great resource to understand income tax for new commers, leavers and non-residents in Canada is here.

Tax Treaties of Canada and other countries
Canada has tax treaties with many countries of the world which help avoidance of double taxation. These provide information regarding the residents as well as Non-Residents of everyone connected to the respective counties. Tax treaties varies from countries to countries, you should always contact a professional individual tax preparation services, or tax advisor in Canada who specialize in residency issues.

Whether you are moving in or out of Canada, being aware of the tax residency status will help you determine how much you will need to pay.

United States and Canada has a tax treaty which helps resolving lot of residency issues between the residents of both countries.

Maroof HS CPA Professional Corporation is a CPA firm registered with CPA Ontario in Canada. It provides income tax services to individuals having complex tax residency issues, US income taxes for Canadians, US and Canadian taxes for US citizens and persons in Canada, tax advice for tax residents of Canada and other countries, corporate tax planning and return preparation in Canada and the United States.

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