2.9 How are non-residents taxed in Canada?

Ritesh Dhall

ITA 2(3)(a) “Persons” non-resident in Canada are required to pay tax on their “Canadian Source Income”, which is income earned/generated in Canada. (1)

Non-residents of Canada are Taxed if. Image description available..
Taxation of non-residents [Image Description]

CRA assess residency based on a variety of factors such as the location of dwelling, where the taxpayer’s dependents and the spouse resides, and other personal property and social ties of the taxpayer to the country amongst others.

Example 2.9.1

Assume Ritesh lives in India with his wife and children and generated $10,000 in the year from working in India. He comes to Canada by himself to work temporarily from March 15th to May 15th and, earns $2,000 from Canadian employment during that time. On May 16th Ritesh returns home to India. As Ritesh’s dwelling, spouse and dependents were are in India he would likely be considered a non- resident of Canada and would only be taxable in Canada on the $2,000 employment income earned in Canada. Ritesh would not be taxable in Canada on his employment income from India.

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Author: Ritesh Dhall, March 2019

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Note: In the scenario in the bottom left corner of the image above, the individual would likely fall under the ‘sojourner rule’ and therefore, while the Canadian source income would be taxable in Canada, the individual would likely be considered a ‘resident’, rather than a ‘non-resident’ as discussed in the question itself.  That is why it is considered ‘incorrect’.

Author: Rumabel Mateo, June 2019

References and Resources

 

Image Description

Taxation of non-residents: The image has a blue background with the title “Non-Residents of Canada Will be Taxed If:” on the left. Below the title, there are three bullet points: “Employment income is earned in Canada,” “Business income is earned in Canada,” and “Gains from real estate sold in Canada.” On the right side of the image, there is a world map with illustrations of six people standing on different continents, each holding a large green coin with a dollar sign on it.. [Return to Taxation of non-residents]

“How are non-residents taxed in Canada?” from Introductory Canadian Tax Copyright © 2021 by Ritesh Dhall is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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Tax and Tax Planning Copyright © 2021 by Ritesh Dhall is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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