Navigate non-resident individual tax challenges with ease
Ensure the proper severance of your tax residential ties with Canada.
Obtain a comprehensive valuation of all your assets since a deemed disposition may apply.
Plan a strategy for any future income generated and assess potential tax implications.
If you own a Canadian corporation, be aware that your residency status may change, which could necessitate filing requirements.
Consider the need to register a non-resident (NR) account if you will earn rental or other investment income earned in Canada.
Your residency status is determined by factors like the number of days you are physically present in Canada, residential ties, location of your primary home and direct family. Also, you can file a NR73 or NR 74 forms with the CRA for them to determine your residential status.
The main difference is that residents are taxed on their worldwide income, while non-residents are generally only taxed on their Canadian-sourced income.
Common types of taxable income for non-residents include employment income, business income, rental income, pension income, and taxable capital gains realized from Canadian sources.
Depending on the type of income, non-residents may claim certain deductions and tax credits, but they are typically more limited compared to residents.
It’s essential to retain records such as pay stubs, rental income statements, tax receipts, and any correspondence related to your Canadian tax affairs. Keeping organized records can help support your tax return in the potential case of CRA audit.
Penalties can apply if you fail to file your tax return on time or if you provide inaccurate information. Penalties are assessed on a case-by-case basis and can include fines and interest on overdue taxes.
Non-residents of Canada are subject to tax on income received from sources in Canada. The specific tax treatment can vary based on the type of income. Generally, the Canadian income is subject to Part XIII tax (through withholding) or Part I tax (filing income tax return).
International investors are subject to Part XIII (withholding) tax on common types of Canadian income such as dividends, rental income, pension payments, registered retirement savings plan payments and management fees. Generally, interest income is exempt from Part XIII tax if the payer is not related to you. The amount of Part XIII that the payer will withhold from your income is typically 25% of the income. However, a tax treaty between Canada and your home country can reduce the rate. The withholding tax is considered the final tax obligation and no Canadian income tax return is required.
Canada has tax treaties with many countries, and these treaties often reduce the Part XIII tax. The specific rates can vary based on your home country. For example, if you are an international investor who is a US tax resident, then your Canadian dividend income can benefit from a lower (15%) withholding tax rate.
International investors may be eligible to claim a foreign tax credit in their home country for taxes paid in Canada to avoid double taxation.
Non-residents need to pay Part I tax on certain types of Canadian income, where they have to file a Canadian income tax return to calculate the final tax obligation to Canada. Common types of income subject to Part I tax are employment income in Canada, business income in Canada, and taxable capital gains from selling Canadian real estate property.
Without planning, the Canadian payer will withhold 25% from the gross rent and remit to Revenue Canada. However, by filing the NR6 undertaking and sec 216 elective return, you can effectively pay tax on net rental income earned in Canada.
