Residential Ties With Canada

Factual Residence – Leaving Canada

If your objective is to become a non-resident of Canada for tax purposes, you need to severe your ties to Canada.  Residential ties fall into categories..Significant, Secondary and Other. You generally will be considered a resident of Canada if you have any of the Significant Ties.

Residential Ties in Canada

The most important factor to be considered in determining whether an individual leaving Canada remains resident in Canada for tax purposes is whether the individual maintains residential ties with Canada while abroad. While the residence status of an individual can only be determined on a case by case basis after taking into consideration all of the relevant facts, generally, unless an individual severs all significant residential ties with Canada upon leaving Canada, the individual will continue to be a factual resident of Canada and subject to Canadian tax on his or her worldwide income.

Significant Residential Ties

The residential ties of an individual that will almost always be significant residential ties for the purpose of determining residence status are the individual's:

  • dwelling place (or places); that is, do you have a home in Canada? Remember that a cottage may be considered a home in some circumstances.
  • spouse or common-law partner. Your partner needs to leave too.
  • dependants. Any minor-aged children need to go with you.

Where an individual who leaves Canada keeps a home in Canada (whether owned or leased), available for his or her occupation, that dwelling place will be considered to be a significant tie with Canada. However, if an individual leases their home in Canada to a third party on arm's-length terms and conditions, CRA will take into account all of the circumstances of the situation (including the relationship between the individual and the third party, the real estate market at the time of the individual's departure from Canada, and the purpose of the stay abroad), and may consider the dwelling place not to be a significant residential tie with Canada except when taken together with other residential ties.

If an individual who is married or cohabiting with a common-law partner leaves Canada, but his or her spouse or common-law partner remains in Canada, then that spouse or common-law partner will usually be a significant residential tie with Canada. Where an individual was living separate and apart from his or her spouse or common-law partner prior to leaving Canada, by reason of a breakdown of their marriage or common-law partnership, that spouse or common-law partner will not be considered to be a significant tie with Canada.

Similarly, if an individual with dependants leaves Canada, but his or her dependants remain behind, then those dependants will usually be considered to be a significant residential tie with Canada while the individual is abroad. So, you can't leave you children in Canada to finish the school year, for example.

Secondary Residential Ties

Generally, secondary residential ties must be looked at collectively in order to evaluate the significance of any one such tie. For this reason, it would be unusual for a single secondary residential tie with Canada to be sufficient on its own to lead to a determination that an individual is factually resident in Canada while abroad. Secondary residential ties that will be taken into account in determining the residence status of an individual while outside Canada are:

  • personal property in Canada (such as furniture, clothing, automobiles, boats and recreational vehicles);
  • social ties with Canada (such as memberships in Canadian recreational or religious organizations); your address on record should be your foreign address, not a Canadian address.
  • economic ties with Canada (such as employment with a Canadian employer and active involvement in a Canadian business, and Canadian bank accounts, retirement savings plans, credit cards, and securities accounts); Many of these can be reorganized to accommodate non-residency, but please get advice.
  • landed immigrant status or appropriate work permits in Canada;
  • hospitalization and medical insurance coverage from a province or territory of Canada;
  • a driver's license from a province or territory of Canada;
  • a vehicle registered in a province or territory of Canada;
  • a seasonal dwelling place in Canada or a leased dwelling as described above;
  • a Canadian passport; and
  • memberships in Canadian unions or professional organizations.

Other Residential Ties

Other residential ties that the Courts have considered in determining the residence status of an individual while outside Canada, and which may be taken into account by the CRA, include the retention of a Canadian mailing address, post office box, or safety deposit box, personal stationery (including business cards) showing a Canadian address, telephone listings in Canada, and local (Canadian) newspaper and magazine subscriptions. These residential ties are generally of limited importance except when taken together with other residential ties, or with other factors such as how long you intend to live outside of Canada, how often you visit Canada and so on.

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