There are many tax implications of becoming a non-resident of Canada. Canadian income received by a non-resident is subject to Part XIII tax or Part I tax.
For Part XIII tax, we have the following income sources in Canada;
- Dividends
- Rental and royalty payments
- Pension payments and CPP/QPP benefits
- Old age security
- Retiring allowances
- RRSP
- RRIF
- Annuity payments
- Management fees
For Part I tax, we have the following income sources in Canada;
- Employment income in Canada or income from a business carried on in Canada
- Employment income from a Canadian resident for your employment in another country
- Certain income from employment outside Canada, if you were a resident of Canada when the duties were performed
- The taxable part of Canadian scholarships, fellowships, bursaries, and research grants
- Taxable capital gains from disposing of certain Canadian property
- Income from providing services in Canada other than in the course of regular and continuous employment
How important is to communicate the ‘RESIDENCY STATUS’ to Canadian Payers?
It is important for a non-resident to share the information with Canadian payers regarding the residency status and the current country of residence so that the correct tax amount is deducted.
If any individual doesn’t have significant residential ties in Canada and live outside the country throughout the tax year or the stay in Canada is less than 183 days, that individual may be considered as a non-resident of Canada.
Is it obligatory for a non-resident to file income tax return on the Canadian income?
If the payer deducts Part I tax from any of the abovementioned income sources or you pay an amount of tax during the year, you may also have to file a Canadian income tax return to calculate your final tax obligation to Canada.
If an individual pays Part XIII tax on the Canadian income, there is no need to file income tax return as the tax obligation is already met. Remember, Part XIII tax is not refundable which means that you may not be able to claim a refund.
There are two situations in which a non-resident can elect to file a Canadian income tax return for income from which Part XIII tax was deducted and may be able to claim refund for part or all of the Part XIII tax deducted:
- When you receive Canadian rental income real or immovable properties or timber royalties
- When you receive certain Canadian pension income
If you receive rental income, you will be elected under section 216 and if you receive pension income, you will be elected under section 217 of the Income Tax Act. In both cases, there is no need to file a general T1.
Role of GTA Accounting
GTA Accounting can help you file your non-resident tax return in both Part XIII and Part I tax cases by filing Section 216 and Section 217. If you are a non-resident looking to file your non-resident income tax return or looking to become a non-resident for tax purposes, then feel free to reach out to us.