Who pays the tax in Canada and on what income?

Who pays the tax in Canada and on what income?

In Canada who pays the tax and on what income is based on the RESIDENCY status and not on the citizenship status

Income Tax Act (ITA) “DIVISION A” define the Liability for Tax:-

1. Tax payable by resident: resident pay tax on their Worldwide Income
2. Tax payable by non-resident persons: non-resident pay taxes on the income generated inside Canada.

How is residency determined by CRA/Courts?

CRA and courts use the following factors to determine if a person is a resident of Canada

• Significant (primary) residential ties 
  • a home in Canada
  • a spouse or common-law partner in Canada
  • dependents in Canada

• Secondary residential ties, such as
  • personal property in Canada, such as a car or furniture
  • social ties in Canada, such as memberships in Canadian recreational or religious organizations
  • economic ties in Canada, such as Canadian bank accounts or credit cards
  • a Canadian driver’s license.
  • a Canadian passport
  • health insurance with a Canadian province or territory

To decide one’s residence status, all the relevant facts in each case are considered, including residential ties with Canada and length of time, object, intent, and continuity while living inside and outside Canada. As per CRA, 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. However, if significant ties are not conclusive CRA will also look for the secondary ties.

If you have question, please feel free to contact Source Accounting Professional Corporation, Chartered Professional Accountants

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Disclaimer: The above contents are provided for general guidance only, based on information believed to be accurate and complete, but we cannot guarantee its accuracy or completeness. It does not provide legal advice, nor can it or should it be relied upon. Please contact/consult a qualified tax professional specific to your case.