Moving abroad is exciting, but before you start dreaming about sunny beaches or historic cobblestone streets, there’s a key question every Canadian expat needs to answer: What’s your residency status for tax purposes?
It’s not just a formality; your residency status determines how the Canada Revenue Agency (CRA) taxes your income, both at home and abroad. Understanding these rules can save you from costly mistakes and unexpected tax bills.
At Accounting Montreal, we help Canadians abroad navigate these rules so they can stay compliant, avoid double taxation, and focus on enjoying their international adventures.
Understanding Canadian Tax Residency
The CRA doesn’t go by your passport stamp. Instead, it looks at your ties to Canada, such as property, bank accounts, family, and social connections, to decide if you are:
- Resident: You have significant ties to Canada and must report worldwide income.
- Non-resident: You’ve cut most ties, and you’re taxed only on certain Canadian-sourced income.
- Deemed resident: You’re outside Canada temporarily but meet certain criteria (e.g., in a country with no tax treaty and present in Canada for 183+ days in the year).
Tip: The CRA uses a case-by-case approach, so even small details can change your status.
Why Residency Status Matters
Your residency status affects:
- What income must you report
- Which deductions and credits can you claim
- Whether the departure tax applies
- If you can keep contributing to RRSP or TFSA accounts
Real-Life Example
Imagine Sarah, a Montreal-based consultant who moved to France for a new job but kept her Canadian condo and bank accounts. The CRA might still consider her a factual resident, meaning she owes Canadian tax on her French salary and any Canadian income. Without planning, she risks double taxation, something a tax treaty could help avoid.
How to Determine Your Status
The CRA offers a Residency Determination service, but navigating it on your own can be tricky. Factors include:
- Primary ties: Home, spouse/partner, dependants in Canada
- Secondary ties: Bank accounts, memberships, driver’s license, health card
- Length and purpose of your stay abroad
Reference: CRA – Determining your residency status
Common Misunderstandings About Residency
- “If I’m out of Canada for over 6 months, I’m automatically a non-resident.” Not necessarily true.
- “Closing my Canadian bank account means I’m off the hook.” Cutting one tie isn’t enough.
- “I don’t need to file if I have no Canadian income.” Even non-residents must sometimes file.
How Accounting Montreal Helps
We can:
- Assess your residency status before or after your move
- Plan departure strategies to reduce taxes
- Advise on keeping or severing Canadian ties
- Coordinate with tax treaty rules to prevent double taxation
Residency status is the foundation of your tax obligations as a Canadian expat. The earlier you confirm your status, the better you can plan for your financial future abroad.
Call Accounting Montreal today for a personalized residency status review and tax planning session so that you can enjoy your new chapter without tax surprises.
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