Under Canada’s income tax system, an individual’s liability for income tax is based on his/her status as a resident or a non-resident of Canada. A resident in Canada during the tax year pays taxes on the worldwide income while a non-resident is liable to income tax only on their Canadian sources of income. Since residency status plays an important role in Canadian taxation, AG Tax has prepared a brief summary on the forms involved in determining your residency status in Canada.
Generally, a resident is considered ‘ordinarily resident’ if the person is settled in Canada or ‘deemed resident’ if he/she has been in Canada for 183 or more days during a tax year. However, individuals who have recently relocated to Canada or are leaving Canada can contact the Canada Revenue Agency (CRA) for an official determination.
Determining Residency Status – Forms NR73 and NR74
The CRA provides Form NR73 and Form NR74 to determine the residency status. Taxpayers who plan to leave or have left Canada (permanently or temporarily) should consider filing Form NR73 (Determination of Residency Status on Leaving Canada), and those who have entered or moved to Canada during the year should consider filing Form NR74, (Determination of Residency Status – Entering Canada).
Required Information for Forms NR73 and NR74
Some of the common items that need to be provided are as follows:
Form NR73: A departing Canadian needs to fill in their contact address in the other country, duration of stay, reason for leaving Canada, employment details pertaining to the new country of residence, income tax policies of the country (taxes worldwide income or not, etc.), and whether it has any tax treaty with Canada.
Additionally, they will be required to provide details of the ties that they will maintain both in Canada and the new country. These include but are not limited to:
• Dependents in Canada or moving with them to the new country (spouse, children, others eligible by CRA) and their details (name, age, citizenship, address)
• Residential property (rented or owned) and whether it will be let out or sublet in your absence
• Personal assets, such as: vehicles, investments, real estate, bank accounts, etc.
• Whether or not a Canadian passport, driving license, and vehicles registration will be maintained
Form NR74: An individual who has recently moved to Canada would need to provide details of their Canadian contact address, reason for coming to Canada, and all of the information for their previous country as required for Form NR73.
As a new Canadian resident, the individual will also need to provide details of:
• Dependent(s) in their previous country of residence who will continue to stay there
• Other ties with your previous country, such as a permanent residence
• Personal assets, such as: bank accounts, property, business, credit cards, etc.
The completed form (NR73 or NR74) would be submitted to the CRA. Often the CRA will provide its opinion regarding a taxpayer’s residence status from the information recorded. However, the CRA could ask for a future in-depth review, and may request additional supporting documentation.
Details concerning a person’s residential ties with Canada and the new foreign country are equally critical, and special care should be taken to ensure accurate information is provided to the CRA as an error in completing such forms may change your residency status.
AG Tax LLP Can Help
Our AG Tax professionals are ready in case you need any assistance completing these forms, or have certain questions regarding your residency status. Our international tax professionals can assist in this process, conduct tax planning, and manager your annual tax filings.
If you have any tax-related queries, need assistance with tax planning or filing your tax returns please contact us. Our team comprises of highly experienced tax professionals with extensive knowledge of U.S. and Canadian tax laws as well as cross-border compliance
Furthermore, as a full service accounting firm, AG Tax assures complete assistance with even your most complex tax needs.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- U.S. Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- State Sales Tax & E-commerce Taxation
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
