The proximity of the US to Canada means that individuals move between both countries often. Reasons for a move vary, but include opportunities for work, healthcare and even escaping a political climate for some. If you remain in Canada for an extended time or increase your ties there, you may need to answer this fundamental tax question. When did my Canadian residency begin?
General Approach to Determining Start of Canadian Residency
In general, Canadian residency is determined based on:
- the date you enter Canada;
- the date you terminate your residency with another country; and
- the date your family enters Canada.
It’s therefore important to keep track of your days to be able to more accurately prepare a tax return.
Part-year Canadian Residents
In the year of entry to Canada, an individual is generally categorized as a part-year resident for tax purposes – non-resident for the period prior to entry into Canada and resident from the date of the move onwards. The tax impacts for these periods vary. With proper planning and consideration of the tax impacts, it may be possible to avoid certain tax pitfalls.
Taxation as a Resident in Canada
During the period of residence in Canada, an individual is taxed on their worldwide income. This starts on the date your residency period begins. All wages, dividends, interest and rental income will be subject to Canadian income taxation, even if earned outside of Canada. Fortunately, it may be possible to claim foreign tax credits on income earned outside of Canada.
Taxation as a Non-resident of Canada
As a non-resident of Canada, the tax treatment differs. Generally, non-residents are taxable in Canada on their income sourced to Canada. For example, if you are employed in Canada or sell real estate located in Canada, you may be subject to Canadian taxation as a non-resident.
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Karlene J. Mulraine, EA, CPA, CA, CPA (NH) is the President of Cross-Border Financial Professional Corporation. Follow us on Linkedin and Twitter, or hang out on Facebook.
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The views expressed in this article are those of the author and should not be relied on to make decisions. Consider discussing your specific circumstances with an appropriate specialist.