Last Updated on 9th January 2025
Living in Canada as a resident expatriate can be a significant change, as a country that offers ample career opportunities, high standards of living and a diverse range of places to live, from vibrant, multicultural cities to expansive rural areas that provide the ultimate in peace and tranquillity.
As with all international relocations, understanding how taxation in Canada works is key, particularly if you remain liable for some tax levies at home and are reliant on double tax treaties to claim the necessary credits to avoid an excessively high tax bill.
In this article, we’ll work through an overview of how taxes in Canada apply to expatriates, the processes for claiming against double tax treaties, and why understanding the available allowances or exemptions is essential to accurate budgeting.
Budgeting for Tax Obligations as a Foreign National Canadian Resident
Like many countries, the core aspect that determines the taxes you’ll pay in Canada is your residence status. If, for example, you live in Canada most of the year and are treated as a tax resident, you will be liable to pay domestic taxes on your worldwide income.
However, if you are a non-resident and have a principal home in another country, you’ll likely only pay Canadian taxes on the incomes that arise within the country.
Canadian taxpayers are expected to complete a self-assessment return every year and to submit tax declarations as individuals, without an option for spouses to file a joint submission. This applies equally to non-residents working in Canada who need to file an income tax return to either confirm they have paid the correct taxes or to claim exemptions where applicable.
Anybody living and earning an income in Canada, whether as a tax resident or non-resident, will usually need to apply to the Canada Revenue Agency (CRA) for a Social Insurance Number (SIN). Those who are not eligible can instead apply for an Individual Tax Number (ITN) – you’ll need one of these registrations to be able to file a return before the deadlines.
It is usually advisable to file a return regardless of whether you believe your income or earnings are exempt from Canadian taxes or outside of the scope of the tax system.
Understanding the Main Tax Categories for Canadian Residents
Taxable employment income includes salaries, fees and employment benefits, including the use of a company car and subsidised or free accommodation. The general income tax bands and rates for the 2025 tax year are as follows:
However, Canadian provinces and territories can also apply local income taxes over and above the federal income tax rates. Most provinces, excluding Quebec, use the same basis for calculating taxable income but apply separate tax rates and brackets. They may also have different tax credits, some refundable, some not.
All taxpayers have a basic personal amount, or BPA, which is deductible before their income becomes subject to tax, which for 2025 is set at $16,129. For non-residents with taxable income that isn’t allocated to a specific province, a standardised tax based on 48% of the federal rate is applied.
A positive aspect is that both federal and provincial taxes, again, with the exception of Quebec, are administered by the CRA, which means taxpayers can submit one return. Those living in Quebec, however, need to file a federal return and a separate submission within Quebec.
Claiming Foreign Tax Relief as an Expat in Canada
Expatriates may receive income or earnings that have already been subject to foreign tax, such as when taxes are deducted at source. In this case, foreign tax credit relief may be available, which reduces the impacts of duplicate taxation against the same income or event.
The maximum foreign tax credit is equivalent to the tax charge arising in Canada, although in some cases, overseas tax paid above this amount can be claimed as a deduction.
Canadian provinces also apply localised tax credits, which are usually limited to either the tax bill payable within the province or the deductions permitted against the taxpayer’s federal income tax bill to account for the foreign tax paid above the allowable credit.
This system can become complex and may not always be beneficial for tax residents earning income from overseas, especially if the equivalent tax in Canada would be lower than that paid at source.
Therefore, claiming all applicable allowances and exemptions and ensuring you apply double taxation treaties correctly are essential to remaining compliant and using all the tax efficiencies available.
Clarifying Your Residency Status for Tax Purposes in Canada
Unlike the system in some countries, the Canadian tax statutes do not have a specific definition of a place of residence. This means an expat or foreign national living all or some of the time in Canada may be considered a tax resident based on where they, their spouse or dependents live, the location of their property, social ties, and economic interests.
Generally, anybody who is a non-resident but remains in Canada for 183 days or more in one calendar year is categorised as a resident for the entirety of that year unless a tax treaty applies that defines them as having non-resident status.
During the year in which an expat becomes a Canadian tax resident, they may also be treated as a partial resident, which means being subject to Canadian taxes on their worldwide income only for a proportion of the year.
As we’ve illustrated, taxation for foreign nationals in Canada is far from straightforward, and knowing which tax reliefs, credits, and exemptions you can claim and how they may impact your overall tax position is key.
For further advice specific to your circumstances or intended place of residence, please contact the Chase Buchanan team based in Toronto or get in touch with our UK Administration Centre.
*Information correct as at December 2024