Tax residency status in first year

[prash42]

Hello, my family and I became PRs last year. We plan to move permanently to Canada in late July this year, so I will be physically present in Canada LESS than 183 days.

When filing 2016 returns, will I be considered a tax resident of Canada? Specifically:
1. For 2016, will I be taxed on Canadian income only, or entire global income (including investment income)?
2. Will I be taxed for salary earned outside Canada from Jan to Jul 2016? What about end-of-service benefits, last salary, etc which may be received in my account after I land in Canada?

Appreciate any insights.

 

[spyfy]

In your tax return, you can specify a certain date when you became a resident of Canada. Let's say that date is August 1, 2016

Then:
- For the income that occurred until July 31, 2016, you only report and pay Canadian taxes on the parts that are from a Canadian source (like Canadian investment accounts, job with a Canadian company,...)
- For the income that occurred after August 1, 2016, you report and pay Canadian taxes on ALL your income, no matter from what source it is. If some of that income is also taxed in a foreign country, you might get some of that tax back (foreign tax credits) but that depends on the kind of income, the country and if there is a double taxation agreement between Canada and that country.

 

[Thinkin]

In your tax return, you can specify a certain date when you became a resident of Canada. Let's say that date is August 1, 2016

Then:
- For the income that occurred until July 31, 2016, you only report and pay Canadian taxes on the parts that are from a Canadian source (like Canadian investment accounts, job with a Canadian company,...)
- For the income that occurred after August 1, 2016, you report and pay Canadian taxes on ALL your income, no matter from what source it is. If some of that income is also taxed in a foreign country, you might get some of that tax back (foreign tax credits) but that depends on the kind of income, the country and if there is a double taxation agreement between Canada and that country.

So suppose the person was moving into Canada in May 31, 2016 (where he would be non-resident from CRA tax perspective as staying in Canada for more than 183 days in a year). Then also the same rules apply i.e. until May 31, 2016, you only report and pay Canadian taxes on the parts that are from a Canadian source (like Canadian investment accounts, job with a Canadian company,...)? For the income that occurred after June 1, 2016, you report and pay Canadian taxes on ALL your income, no matter from what source it is?

 

[torontosm]

So suppose the person was moving into Canada in May 31, 2016 (where he would be non-resident from CRA tax perspective as staying in Canada for more than 183 days in a year). Then also the same rules apply i.e. until May 31, 2016, you only report and pay Canadian taxes on the parts that are from a Canadian source (like Canadian investment accounts, job with a Canadian company,...)? For the income that occurred after June 1, 2016, you report and pay Canadian taxes on ALL your income, no matter from what source it is?

That's correct. Once you become a resident of Canada (for tax purposes, you pay Canadian income tax on all your income, regardless of where it was earned. That said, Canada does have a number of tax treaties that prevent against double taxation.

 

[Thinkin]

That's correct. Once you become a resident of Canada (for tax purposes, you pay Canadian income tax on all your income, regardless of where it was earned. That said, Canada does have a number of tax treaties that prevent against double taxation.

Sorry made a mistake in my initial post. If moving to Canada in May 31st, 2016 (and assuming living there for rest of the year), the person would actually considered a resident for tax returns from a CRA perspective. Even with this being the case you are saying that any world wide income outside Canada before May 31st, 2016 would be taxed as non-resident (i.e. will not have to pay taxes on these) even though he is spending more than 183 days in Canada in 2016? Sorry for repeating but just wanted to make sure I understand.

 

[torontosm]

Sorry made a mistake in my initial post. If moving to Canada in May 31st, 2016 (and assuming living there for rest of the year), the person would actually considered a resident for tax returns from a CRA perspective. Even with this being the case you are saying that any world wide income outside Canada before May 31st, 2016 would be taxed as non-resident (i.e. will not have to pay taxes on these) even though he is spending more than 183 days in Canada in 2016? Sorry for repeating but just wanted to make sure I understand.

So if you move on May 31st, you are taxed on your global income from June 1st onwards. Prior to May 31st, you only pay tax on your Canadian income.