Canada Taxes. Resident or non-resident?
This very confusing question comes up on the Canadian tax return – Under the IEC work permit, am I resident or non-resident in Canada? Unfortunately, this question is not as easy to answer. The tax situation depends on many different factors.
It is important to know that an IEC work permit does not automatically make you a non-resident. “Resident for tax purposes” should not be confused with “permanent resident” or even with “citizenship”. No tax situation can be compared to that of a friend or with other IEC participants. There is no all-size fits all.
Resident for tax purposes
Determining tax residency is not an easy task. If you want to knock yourself out with the “Income Tax Folio” >> here you go <<. On this short info page will try to explain it as simple as possible for IEC participants.
When trying to determine the tax situation for IEC participants as “resident for tax purposes” it depends on the residential ties you build during your stay in Canada. The following ties have a positive effect on the classification as resident. The more you have, the more likely you are considered to be a resident for tax purposes. I split the residential ties into three categories for better understanding.
The strongest ties that make you a "resident"
- Family (spouse and children) goes with you to Canada,
- own or rent a house or apartment with a rental contract (no shared flat, or no staff accommodation)
The two strongest ties to Canada, and thus also the most important (“significant residential ties”) are family members (spouse and children) and your own home. In the country where they are, you are a “resident for tax purposes”.
If you have lived with your partner for at least 12 months, you are a common law in Canada and it counts as family member. Then you have to file a joint tax return as residents and as “common law”.
Very good ties that can make you a "resident" if you have several of them
Those are called “secondary residential ties” and must be looked at collectively. The more you have, the most likely you are considered a resident.
- length of stay (in the tax year longer than 183 days in Canada),
- Canadian health insurance from a province (health care card),
- a work permit
- an employer-specific work permit, for example a Young Professional or LMIA work permit
- Canadian bank account, credit card, savings account
- Car registered and insured on your name in Canada
- Canadian driver’s license
- social ties with Canada (such as memberships in Canadian recreational or religious organizations)
A very strong tie, in my opinion, is a health care card from a province. Canadian health insurance is hard to get because you must meet certain residency requirements.
In addition to these listed points, the intention in Canada also weighs heavily for the classification as “resident”. If you come to Canada to settle for a longer period of time, e.g. with the intention of applying for a second IEC participation, another work permit, or for permanent residency, you build closer ties with Canada.
Very weak ties that can't make you a "resident" if you only have those
If you only have these two ties in Canada and no other from the list above, you can assume that you are a “non-resident”. Because you can also have these two things as a visitor/tourist.
- Canadian bank account,
- Canadian SIM card or mobile phone contract
Non-resident for tax purposes
When trying to evaluate a tax situation of an IEC participant, I will check
- which of the above ties you had in Canada.
- how long you were in Canada.
- whether you were only travelling, i.e. only a few weeks/months in each province.
- whether you only camped in the car, slept in hostels or staff accommodation.
- whether you have been on road trips outside of Canada very often.
- whether you were only employed by the same employer for a short time.
- whether you have worked for several employers in different provinces.
This is the world of a typical work and traveller. Being a backpacker and travelling is not bad, and it is certainly the greatest time of your stay in Canada, but it affects the tax situation.
Here are a few examples where you are non-resident:
- If you have none of the above ties to Canada at all.
- If the family members (spouse and / or children) stayed in your home country.
- If you still have a home in your home country. You are automatically non-resident in Canada because home ownership is the most important factor and negates all other factors.
- If you were in Canada for less than 183 days in the tax year and only stayed in hostels or camped in a car.
- If you were in Canada for more than 183 days in the tax year, but only worked briefly in several provinces and slept in hostels, staff accommodation or in the car. So a typical backpacker on a road trip.
- If you only do a paid internship in Canada for a few months.
- If you only come to work on a farm for a few months.
- If you only come for a few months to work as an Au pair with a family.
- If you have both entered and left the country in the tax year, e.g. entry in April 2022 and exited in August 2022.
- If you entered the country in November or December of the tax year and first lived in a hostel or Airbnb until you found a home and exchanged your drivers licence.
To file your tax return as a non-resident, you have to use completely different tax forms and you cannot file your tax return online or via software. The tax return as a non-resident must be sent in paper form by regular snail mail.
If you were in Canada under an IEC work permit, left Canada permanently or are a non-resident,
I can help you with your Canadian tax return.
Do you have questions to Canada Taxes?
Here you can find general Canada Taxback FAQ's
Disclaimer: The information provided on this page is intended to provide general information to the tax situation of International Experience Canada participants. The information does not take into account your personal situation and it is recommendable to additionally consult accounting and financial professionals. canada-taxback.com will not be held liable for any problems that arise from the use of the information provided on this page.