Ties considered in determining residency status

If you leave Canada to settle in another country, the Canada Revenue Agency (CRA) could still consider you a resident for the purposes of the Income Tax Act since the notion of residence is a question of fact. In addition to analyzing the taxpayer’s purpose and intent, the CRA pays particular attention to the primary and secondary ties maintained by the taxpayer in order to draw a conclusion. Among the primary ties, we find:

  • a residence in Canada;
  • a spouse or common-law partner in Canada;
  • dependents in Canada.

As for the secondary ties, note:

  • economic ties to Canada (for example, Canadian credit cards or bank accounts);
  • a Canadian driver’s license;
  • a Canadian passport;
  • health insurance;
  • personal property in Canada, such as a car or furniture;
  • social ties in Canada.

Tax treaties

Although the Canadian tax authorities may be tempted to keep you as a tax resident of Canada, the tax treaties concluded between Canada and the various signatory countries generally make it easier to decide the question of residency. Indeed, a specific article addressing the tie-breaking rules is provided for when a person is presumed to be a resident of two countries.

Fortunately, Canada has signed double taxation avoidance agreements called “tax treaties” with many countries. As tax treaties generally take precedence over domestic laws, they will normally allow this type of situation to be resolved. You can consult all the tax treaties in force signed by Canada on the Web.

Do not hesitate to contact us and make an appointment with one of our tax experts. We are used to analyzing tax treaties and addressing changes of residency so that everything is done properly and without any ambiguity!

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About the author

Olivier Custeau, tax expert, B.A.A., M. Fisc., EA

Holder of a bachelor's degree in business administration (B.B.A) from Université Laval and a master's degree in taxation (M. Fisc.) from the Université de Sherbrooke, Olivier has developed expertise in American and international taxation by working in a renowned firm. Over the years, he has developed a keen interest in US taxation. In fact, he was awarded Enrolled Agent status in 2019, the highest level a professional can attain to represent clients to the Internal Revenue Service (IRS). Recognized for his rigorous, dynamic and human approach, Olivier is an asset to the team.