Last Updated on 7th February 2026
Any foreign national who becomes long-term or permanently resident in Canada might assume they will automatically be treated as a tax resident. In effect, that would make them subject to local taxes on their worldwide income and assets.
However, misunderstandings about your Canadian residency status are both common and potentially serious, especially if there is a risk of omitting mandatory tax declarations or failing to apply double tax treaties, which can lead to you paying more tax than you need to.
Let us clarify how the Canadian federal government categorises non-Canadian residents for tax purposes, and some of the many criteria you may need to meet to be deemed a factual or deemed resident.
Why Understanding Your Canadian Tax Residency Position Matters
The Canada Revenue Agency (CRA) is the tax authority in Canada. Regardless of whether you are a resident or non-resident for tax purposes, you must know what your obligations are, declare your income and assets correctly, and pay the resulting tax charges. Generally:
- Non-residents are expected to declare and pay tax on income arising in Canada, such as employment income.
- Tax residents pay Canadian taxes on all of their earnings and assets irrespective of where they originate.
- Expats who are deemed residents for part of the tax year will be subject to full taxation for that proportion.
You’ll need to submit a Canadian tax return if you’re living, working or retiring in Canada for any length of time, but making mistakes, failing to report a taxable event or income source, or not claiming tax credits or allowances you’re entitled to can be an expensive mistake.
Tax offices don’t consider ‘not knowing’ a justification for non-compliance, which means either HMRC or the CRA could levy fines, penalties and interest even if you’ve made an error inadvertently.
Aspects That Determine Whether British Expats Are Canadian Tax Residents
A complication specific to Canada is that, when you’re determining residency status, there are two potential ‘categories’ of tax residents.
Factual residents are typically Canadian citizens or permanent residents and are treated as tax residents even if they spend part of their time overseas.
You could also be classified as a factual resident if you have a home, common law partner, children or spouse in Canada, own Canadian property, are employed by a Canadian business, or hold a domestic driving license.
If you’re a factual resident, you’ll need to declare all income from any jurisdiction and remain entitled to all federal and provincial refundable and non-refundable tax credits.
Deemed residents are a little different, and the contrast is that you’ll need to submit a tax return using an alternative form called the 5013-G, which is designed for non-residents and deemed residents. You might become a deemed resident if, for example, you spend 183 days a year or more in the country but don’t meet the factual residence criteria.
While these classifications might sound very similar, they are meaningful. Deemed residents still report their worldwide income and can claim tax credits, but pay a federal surcharge rather than provincial taxes because they are not permitted to claim localised tax credits.
The Rules for Establishing Canadian Tax Residency as a Foreign National
We’ve summarised some of the criteria above. Still, the main thing to be aware of is that you won’t automatically become a factual tax resident solely by spending time in Canada or being present for 183 days or more, because the CRA will analyse your residential ties and economic interests.
The following may all be factors in whether you are classified as a factual resident, a deemed resident, or a non-resident:
- The location of your main residential home
- Where your immediate family members live
- Your employment status and location
Common complications arise for expats with personal property or bank accounts in both Canada and the UK, who divide their time equally, who have a partner in one country and children in another, or have complex taxable events, often related to dividend income or capital gains that are treated differently between the two countries.
This is why it is advisable to speak with a tax professional with an in-depth knowledge of the Canadian tax system and tax residency assessment process if there is any ambiguity, and especially before submitting the NR74 form, which the CRA requires to verify your status.
Impacts of Canadian Tax Residency on Taxation Exposure
There are numerous differences between British and Canadian tax rules, as well as in how certain events or income is taxed. These include elements like Tax-Free Savings Accounts, which, as the name suggests, are tax-free for Canadian residents but could be taxable elsewhere if you are classed a UK tax resident.
Likewise, non-residents may be subject to withholding taxes on transactions such as withdrawals from certain Canadian retirement products, depending on whether double taxation treaties apply.
In addition, any foreign national relocating to Canada who is likely or certain to be categorised as a factual or deemed resident must disclose any foreign assets they hold and establish a reliable cost or valuation basis that the CRA will use when calculating their tax liabilities.
Issues can also arise when expats who were previously Canadian tax residents change status, potentially because their living arrangements or income sources change. The CRA might determine that a tax charge is payable on certain assets, including real estate, even if the asset hasn’t been sold.
This can result in an unexpected capital gains tax charge based on the asset’s assessed market value, also referred to as a ‘departure tax.’
How to Ensure You Have Clarity Over Your Tax Residency Status in Canada
Tax residency can be complex, and working through the criteria, your circumstances, and the relevant thresholds is a key part of a smooth, tax-efficient move to Canada, particularly given the varying tax brackets, allowances, and rates applied in each Canadian province.
The best advice is to work with a qualified professional to ensure you avoid unnecessary double taxation and know exactly where your tax responsibilities lie, creating plans with a complete understanding of the tax implications.
Should you require more information about becoming a Canadian tax resident, or need help determining your current tax residency status, you are welcome to contact Chase Buchanan Private Wealth Management to organise a convenient time to talk.
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Chase Buchanan Insurance Services, Agents & Advisors is authorised and regulated by the Cyprus Insurance Companies Control Service with License No 6883 and offers services in the EU on a cross-border basis as per the provisions of the Insurance Distribution Directive (IDD).
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*Information correct as at February 2026
