Tax Residency Determinations

Most, but not all, immigrants to Canada become tax residents. Some immigrants can legally avoid paying income taxes provided they have minimal ties with Canada or have stronger economic and social ties to some other country.

Of course, such persons (if they are immigrants but not yet citizens) need to consider how non-payment of tax might impact their ability to keep their immigration status.

Who is a tax resident?

Canada’s Income Tax Act does not make reference to citizenship or immigration status. It simply states that Canadian tax “residents” are bound annually to pay tax on their worldwide income and to declare the existence of substantial foreign assets located outside Canada. This latter obligation is called “foreign asset disclosure.”

A person is tax resident if they spend more than 183 days in any calendar year in Canada.
Even if that time is not met, people whose home base — in terms of social connections and economic ties — is Canada will usually be regarded as tax residents even if they live elsewhere most of the time. Time is not the critical factor.

Sometimes, immigrants to Canada, especially wealthy ones who retain substantial economic and social ties in their countries of origin and who come from countries that have a tax treaty with Canada, can legally avoid becoming tax residents.

This is particularly the case for individuals from China. Under the Canada-China Tax Treaty, an individual can only be resident in either Canada or China, not both.

Our Service – Determining if You are Tax Resident

This is a particularly complex matter where expert advice should be obtained before making any decisions as to how to report taxes in Canada.

Careful planning supported by professional advice can help a new immigrant walk the line between tax, immigration and citizenship status without jeopardizing one form of residency or the other.