Tax regime in Canada: How non-citizen residents can get most out of it?
The tax regime or the tax system in Canada is mostly supervised by the Income Tax Act and, as well as sales tax, corporate tax and others. In Canada, your tax obligation is determined by your residency status. In the case of residents of Canada, they are subject to tax based on their total worldwide income; but the non-residents only have to pay tax for the income they made in Canada. In the taxation year, a non-citizen resident who carried out business in Canada is liable to pay tax on the Canadian source of income. Moreover, the disposition of ‘taxable Canadian Property’ may trigger a tax source for the non-resident being.
Non-residency
The Canada Revenue Agency has come up with the term “ non-residency” for an individual in case of specific tax purposes. CRA says that individuals who normally, customarily, or routinely live in another country, and are not considered a resident of Canada, may be classified as non-residents. If you normally live in another country, you are automatically considered a non-resident. If you live partly in Canada and in another country, you are considered a non-resident as long as you live in Canada for less than 183 days of the year.
There are certain criteria and factors determining if you are a resident or not. Such as:
- Time duration spent in Canada
- Location of the native home
- Individual’s owned properties in Canada
- Additional ties including club memberships, medical cards, bank accounts.
Now, if you are still classified as a non-resident, you are only obligated to pay tax based on the income made from the sources only in Canada. This includes Part XIII tax, such as:
- Rental & Royalty payments
- Pension Payments
- Dividends
- Old Age Security Pension
- Retiring Allowances
- RRSP Payments
- Annuity Payments
- Management Fees
- Registered Retirement Income Fund Payments
- Canada and Quebec Pension Plan Benefits
Canada has entered jurisdictions over 85 income tax treaties. The business profits of a non-resident of Canada are generally initiated by these treaties. In other words, a resident of another jurisdiction is not subject to tax under the Income Tax Act, except to the extent that the profits and benefits are indicating a permanent establishment of the non-resident of Canada. These tax treaties mostly reduce the withholding tax rate imposed under the Income Tax Act and the branch-profits tax rate.
For a new resident or a non-resident, tax may be an unorganised pile of work and there the use of the Canadian Tax Consulting Service comes into being. For more information on the taxes, accounting and payroll, contact a personal tax consultancy service in Toronto. To know more about the International Tax consultants in Toronto, US Tax consultants in Toronto, click on the following link: The Accounting and Tax Company.
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