Factual residents - Temporarily outside of Canada

This page offers information for Canadians who are temporarily outside of Canada.

Topics

  • Residency status  
    Residential ties and situations where you are considered a factual resident
  • Your tax obligations  
    Reporting income, claiming deductions, eligibility for certain credits, and What happens to your residency status if your situation changes?
  • Entitlements to benefits and credits  
    Canada child tax benefit, universal child care benefit, foreign tax credit, and overseas employment tax credit

Residency status

You are a factual resident of Canada for tax purposes if you keep significant residential ties in Canada while living or travelling outside the country.

The term factual resident means that, although you left Canada, you are still considered to be a resident of Canada for income tax purposes.

Notes

If you have established ties in a country that Canada has a tax treaty with and you are considered to be a resident of that country, but you are otherwise a factual resident of Canada, meaning you maintain significant residential ties with Canada, you may be considered a deemed non-resident of Canada for tax purposes.

You become a deemed non-resident of Canada when your ties with the other country become such that, under the tax treaty that Canada has with the other country, you would be considered a resident of that other country. As a deemed non-resident, the same rules apply to you as a non-resident of Canada.

Situations where you could be considered a factual resident

You may be considered a factual resident of Canada if you are:

  • working temporarily outside Canada;
  • teaching or attending school in another country;
  • commuting (going back and forth daily or weekly) from Canada to your place of work in the United States (U.S.);
  • vacationing outside Canada; or
  • if you spent part of the year in the U.S., for example, for health reasons or on vacation.

Note

If you are a missionary in another country and you meet certain requirements, you can choose to be considered a factual resident even if you do not keep residential ties in Canada. To make this choice, you must satisfy all of the following requirements:

  • be a Canadian citizen or a permanent resident of Canada;
  • be in the service of a religious organization that has its national ministry office in Canada;
  • be sent out of Canada for five years or less; and
  • file an income tax and benefit return and report all income you receive from sources inside and outside Canada for each year you are absent from Canada.

In this case, contact us for more information.

Your tax obligations

As a factual resident, your income is taxed as if you never left Canada. As such, you will continue to:

  • report all income you receive from sources inside and outside Canada for the year and claim all deductions that apply to you;
  • claim all federal and provincial or territorial non-refundable tax credits that apply to you;
  • pay federal tax and provincial or territorial tax for the province or territory where you keep residential ties;
  • claim any federal and provincial or territorial refundable tax credits that apply to you; and
  • be eligible to apply for the GST/HST credit (goods and services tax/harmonized sales tax), Canada child tax benefit, and the universal child care benefit.

Example

Tim is an industrial designer. His employer has sent him to work in Hong Kong for 18 months. His spouse and children stay at the family home in Saskatchewan during his absence. We consider Tim to be a factual resident of Canada for tax purposes because of his residential ties in Canada. When Tim files his Canadian return, he will report his income from all sources both inside and outside Canada, and he can claim all deductions that apply to him. Tim will pay federal tax and Saskatchewan provincial tax. He can reduce both federal and provincial taxes by claiming all federal and provincial non-refundable tax credits that apply to him.

Which tax package should you use?

For each tax year that you're a factual resident of Canada for tax purposes, use the General Income Tax package for the province or territory where you keep residential ties. Generally, this is the province or territory where you lived before you left Canada.

Filing due date

Generally, your income tax return must be filed on or before:

  • April 30 of the year after the tax year; or
  • if you or your spouse or common-law partner carried on a business in Canada (other than a business whose expenditures are mainly in connection with a tax shelter), the return must be filed on or before June 15 of the year after the tax year.

Note

A balance of tax owing must be paid on or before April 30 of the year after the tax year, regardless of the due date of the tax return.

What happens to your residency status if your situation changes?

If your circumstances change, you may no longer be a factual resident of Canada for income tax purposes. This could happen, for example, if you:

  • decide to stay permanently in the country where you are working;
  • sell your house in Canada; or
  • move your spouse or common-law partner and dependent children with you to your new country.

Generally, you are considered to be an emigrant in the year that you sever your ties with Canada. For all following years, you will be considered a non-resident of Canada.

If you think your residency status for tax purposes may have changed, see Determining your residency status for more information.

Entitlements to benefits and credits

Canada child tax benefit

If you are eligible to receive the Canada child tax benefit (CCTB), you will continue to receive it and any related provincial or territorial benefits you are eligible for during your absence from Canada. However, you will have to file a return each year so we can calculate your CCTB. If you have a spouse or common-law partner, he or she will also have to file a return each year. If your spouse or common-law partner is a non-resident of Canada, he or she will have to file Form CTB9, Canada Child Tax Benefit - Statement of Income.

If you have a child while outside Canada, you can apply for the CCTB by sending us a completed Form RC66, Canada Child Benefits Application. For more information, see Booklet T4114, Canada Child Benefits.

Universal child care benefit

If you are eligible to receive the universal child care benefit (UCCB), you will continue to receive it during your absence from Canada. The UCCB payments are usually taxable to the spouse or common-law partner with the lower net income.

Foreign tax credit

You may be able to claim a foreign tax credit (FTC) on your Canadian income tax return if you paid tax on income or profits to a foreign country on income from that country that you report on your Canadian return.

The FTC may reduce the federal and provincial/territorial tax you have to pay on the foreign income.

In most cases, the FTC you can claim for each foreign country is the lower of the following two amounts:

  • the foreign income tax you paid; or
  • the tax otherwise due in Canada on your net income from that country.

Note

You generally cannot claim a foreign tax credit for taxes you paid to a foreign country on income you earned in Canada.

To claim this credit, complete Form T2209, Federal Foreign Tax Credits, and attach it to your return.

For more information on how to calculate the foreign tax credit, see Line 405 - Federal foreign tax credit or Income Tax Folio S5-F2-C1, Foreign Tax Credit.

Overseas employment tax credit

You may be able to claim an overseas employment tax credit if you meet all of these requirements:

  • You work outside Canada for a period of more than six consecutive months, and the six-month period began before the end of the tax year and includes part of the tax year for which you're claiming the credit.
  • You are employed throughout that period by one of the following:
    • a person who is a resident of Canada;
    • a partnership in which Canadian residents or Canadian-controlled corporations own more than 10% of the fair market value of all interests in the partnership; or
    • a corporation that's a foreign affiliate of a person who is a resident of Canada.
  • You work during all or most of the six-month period to get a contract for your employer or in connection with a contract your employer entered into.
  • The contract relates to one of the following:
    • exploring for or exploiting petroleum, natural gas, minerals, or similar resources;
    • construction, installation, agricultural, or engineering activities; or
    • an activity performed under contract with the United Nations.

Note

If you are employed under an assistance program sponsored by the Canadian International Development Agency (CIDA), you do not qualify for this credit.

To claim this credit, both you and your employer must jointly complete Form T626, Overseas Employment Tax Credit and attach it to your income tax return.

For more information, see Line 426 - Overseas employment tax credit or Interpretation Bulletin IT-497, Overseas Employment Tax Credit.

Forms and publications

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