Canada, with its stunning landscapes, vibrant cities, and high quality of life, is an attractive destination for digital nomads, expats, and location-independent workers. If you're considering making Canada your tax home, here’s a step-by-step guide to help you navigate the process of obtaining tax residency in Canada.
Determine Residential Ties
To establish tax residency in Canada, the primary factor is the extent of your residential ties to the country. Residential ties include owning or leasing a home, having a spouse or common-law partner and dependents who move to Canada with you, and personal property in Canada. Secondary ties include having Canadian bank accounts or credit cards, a Canadian driver’s license, or health insurance with a Canadian province.
Spend Time in Canada
You are generally considered a resident for tax purposes if you spend 183 days or more in Canada within a calendar year. This is known as the 'sojourner rule.' Even if you do not establish significant residential ties, spending this amount of time in Canada can result in being deemed a resident.
Apply for a Social Insurance Number (SIN)
Once you establish that you have significant residential ties or meet the sojourner rule, you need to apply for a Social Insurance Number (SIN). This is a nine-digit number required to work in Canada or to have access to government programs and benefits. You can apply for a SIN at a Service Canada office or online.
File a Canadian Tax Return
As a tax resident, you are required to file a Canadian income tax return for any year you are considered a resident. You must report worldwide income from all sources both inside and outside Canada. The deadline for filing your tax return is April 30 of the following year.
Declare Foreign Assets
If you are a tax resident in Canada and own foreign property valued at more than CAD 100,000, you are required to declare these assets to the Canada Revenue Agency (CRA) by filing Form T1135, Foreign Income Verification Statement. This is to ensure transparency and proper taxation of global income and assets.
Understand Tax Treaties
Canada has tax treaties with many countries to prevent double taxation and to determine how much tax should be paid to which country. Review any tax treaties Canada has with your home country to understand your tax obligations better. These treaties can affect how you file your taxes and the amount of tax you’ll owe.
Legal References
- Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))
- Canada Revenue Agency (CRA) Guidelines
- Form T1135 - Foreign Income Verification Statement Instructions
- Social Insurance Number (SIN) Application Guidelines
- Canada's Tax Treaties Information
Useful Links
- Canada Revenue Agency - Residency status
- Government of Canada - Determining your residency status
- Canada Revenue Agency - International and non-resident taxes
