Expats in Canada: Tax Obligations for Residents and Non-Residents

Your tax obligations in Canada will depend on your residency position and whether you are considered a resident or non-resident taxpayer.

Like most countries, your tax obligations in Canada will depend on your residency position and whether you are considered a resident or non-resident taxpayer.

The dual federal and provincial system also means your exact liabilities will vary between regions, with a considerable difference in localised tax rates, payable in addition to the federal tax bands.

It’s important to note that your residency status for tax purposes is not the same as your residency position in terms of visas, permits or other travel authorisations. You may be treated as a resident taxpayer on a long-stay work visa, for example, provided you meet the Canada Revenue Agency criteria.

Tax Treatments for Resident and Non-Resident Expats in Canada

The immediate contrast in tax obligations between resident and non-resident taxpayers in Canada is as follows:

• Canadian tax residents are subject to tax on all worldwide income from any location.
• Non-residents must still pay tax on their income originating from within Canada, but other earnings are not liable.

As a non-resident, you pay Canadian taxes on domestic employment earnings, business revenues and capital gains linked to the sale of a Canadian property.

However, there are several complexities, such as the new legislation introduced in 2022, which levies an annual 1% tax charge for residential housing owned by non-residents where the property is vacant or classified as 'underused’.

Expats who are considered partially resident for only a proportion of the tax year remain liable as above, but their obligations are apportioned, so they are normally taxed on worldwide income only for the duration of the residency.

Canadian Personal Income Tax for Residents

Income taxes, as we’ve mentioned, vary between provinces, but all resident taxpayers must remit federal tax against their worldwide income as follows – these are the updated rates for the 2023 tax period, all in CAD.

Income	Canadian Federal Tax
Up to $53,359	15%
$53,359 - $106,717	20.5%
$106,717 - $165,430	26%
$165,430 - $235,675	29%
Above $235,675	33%

Quebec has the highest local tax rates among the ten provinces and three territories. In contrast, Alberta and the Northern Territories to the far north of the country have far lower income taxes. Provincial income tax rates for Quebec and Alberta are as follows.

Income	Provincial Income Tax in Quebec
Up to $49,275	15%
$49,275 - $98,540	20%
$98,540 - $119,910	24%
Over $119,910	25.75%

Income	Provincial Income Tax in Alberta
Up to $142,292	10%
$142,292 - $170,751	12%
$170,751 - $227,668	13%
$227,668 - $341,502	14%
Over $341,502	15%

Most territories and provinces base local taxes on the income declared to the federal government. Quebec has a separate personal tax system, and a different calculation is required to report your taxable income.

Because of the high provincial rates, and the need to file returns through the dual system, the Canadian government levies a 16.5% reduction in basic federal income tax liabilities for residents in Quebec.

Top marginal tax rates are set annually, including federal, territorial and provincial taxes and the additional surtaxes charged by two provinces. However, it is clear that the overall tax obligation a resident taxpayer is exposed to can vary significantly between areas.

Provincial Canadian Income Tax for Non-Residents

Expats who are treated as non-residents in Canada do not pay provincial income tax rates on taxable income that arises outside of a province or territory but pay a higher 48% federal tax after exemptions, allowances and deductions.

Otherwise, non-residents pay the provincial or territorial tax rate on all employment income arising from inside the jurisdiction.

Dual Taxation for Expats in Canada

There are scenarios where a foreign national living abroad as an expat is considered a resident in two places, often because they have strong links to a country that indicates tax residency, even if their primary home is overseas.

The UK and Canada have a double tax treaty in place, which provides relief from dual taxation, and means that expats who are liable to pay residential tax rates in both countries can claim foreign tax credits or deductions against their tax liability to account for taxes paid overseas on income arising from outside of Canada.

Determining Your Tax Residency Status in Canada

Your position as a resident or non-resident taxpayer can substantially affect your tax liabilities. Particularly for expats living in the provinces with the highest localised tax regimes, it can influence whether you are liable to pay the top marginal rates on all worldwide income.

Therefore, evaluating your residency and ensuring you apply the criteria correctly is essential.

The below criteria normally mean that you are considered a tax resident:

• You have lived in Canada within the tax year for 183 days (six months) or more.
• You have a 'continuing relationship,' which could include owning a business, having a family, living in the country as your main residence or any other activities that signify that Canada is your central home.
• You own a residential home, which is your only or principal accommodation, or you own or rent a home where your spouse or children live as a fixed abode.

Other factors can also be considered if the above criteria haven’t produced an obvious decision. They might include having links to other property, such as commercial or rental buildings, membership of religious groups or clubs, holding a Canadian driving licence, owning a vehicle registered in Canada, and holding medical insurance.

There are also tie breakers, applied where it still needs to be clarified whether a person is a resident or non-resident or when an individual is classified as a tax resident in two countries for the same period.

The tax treaties include provisions which override the general terms of residency to reach a conclusion and indicate which jurisdiction the individual has closer ties to, economically and personally.

If you are unsure whether you qualify as a resident or non-resident for tax purposes, we recommend contacting Chase Buchanan Independent Financial Advisers in Canada for further guidance and professional expat tax advice on evaluating your position to apply the correct tax treatment.

You can also submit an NR74 Determination of Residency Status form to the Canada Revenue Agency, which the tax office will use to assess your circumstances.

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About Chase Buchanan Private Wealth Management

Chase Buchanan is a highly regulated wealth management company who specialises in providing global finance solutions for those with a global lifestyle. We are global financial advisers, supporting expatriates around the world from our regulated European headquarters, and local offices across Belgium, Canada, Canary Islands, Cyprus, Malta, Portugal, Spain, UK and the USA.

Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15.

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