Will CRA Still Consider You a Canadian Tax Resident After You Leave?
As you make up your mind and decide to leave Canada, after doing thorough research on your destination country, and planned your move, the next thing to consider would be the tax implications. The key question is then whether you are considered a Canadian tax residency case, which determines whether Canada taxes your worldwide income or only Canadian-source income.
This isn’t just an academic question, as your residency status determines whether Canada taxes your worldwide income or only your Canadian-source income. The difference can amount to hundreds of thousands of dollars over your lifetime, particularly if you’re a business owner or high-income professional.
Nevertheless, what makes it challenging is that Canada doesn’t offer a simple form that automatically makes you a non-resident as CRA examines your factual ties to Canada, where you spend your time, and whether you’ve truly established yourself elsewhere.
This Canadian Tax Residency Rules guide explains how CRA makes these determinations and what you need to know before you leave.
How Canada’s Residency-Based Tax System Works
First on foremost, Canadian taxes are based on residency, and not citizenship.
If CRA considers you a Canadian tax resident, you pay Canadian tax on your worldwide income. This means every dollar earned in Portugal, Dubai, or anywhere else still gets taxed by Canada.
If you’re a non-resident, you only pay Canadian tax on specific types of Canadian-source income, such as rental income from Canadian properties, certain pension payments, and income from employment in Canada.
Interestingly, whilst the Income Tax Act establishes the aforementioned framework, it doesn’t provide a specific detailed definition of “resident.” Thereas, these very principles that the CRA follow today is derived from decades of court cases over the years.
Factual Residency: How CRA Actually Makes the Determination
CRA uses ‘factual residency‘ to examine all the facts in your situation and determine your Canadian tax residency. The courts have described residency. as the place where you’re settled and have established your roots, so it all boils down to the degree to which you’ve established yourself in a certain location.
As CRA examines and looks into your residential ties to Canada, these residential ties fall into two categories: primary ties and secondary ties.
Primary Residential Ties: What Carries the Most Weight
Primary residential ties are the ties that matter the most. Maintain any of these, and CRA will likely continue to consider you a Canadian resident, even if you live abroad.
Your Home in Canada
Owning or renting a home in Canada creates one of the strongest indicators of Canadian residency. This can be a house, an apartment, a condo, or even a room or basement in someone else’s home that remains available for your use.
It is important to note that CRA doesn’t just look at property ownership, instead they examine whether you have a dwelling available to you.
Hypothetically, if there is a business owner from Vancouver who moves to Greece but keeps his Vancouver house “just in case.” Even if he rents it out, CRA may still argue that he maintained a home available for his return if he tenancy agreement allows him to repossess the property on short notice.
Courts have since made it clear that maintaining a Canadian home while claiming non-residency would create serious problems for your case.
Your Spouse or Common-Law Partner
If your spouse or common-law partner remains in Canada, CRA will almost certainly consider you a Canadian resident, even if you’re living abroad, which often creates difficult decisions for families.
Suppose that an executive from Toronto accepts a position in Singapore, yet his wife remains in Canada to care for her aging parents. Although he could be living in Singapore most of the time, he could still be considered to still be a Canadian resident because his spouse is in Canada.
It is important not to fabricate a separation or make false claims just to bypass this rule. Some couples try to claim that they are separated to avoid proving this primary tie but the CRA investigates these claims closely to determine whether the separation is genuine or only on paper for tax purposes.
Dependents in Canada
Another primary tie that could be established is if your children or other dependents remain in Canada, which often arises when children continue to attend school or university in Canada, or where one parent leaves Canada, to work elsewhere, such as Spain or the U.S., whilst leaving the rest of the family in Canada.
Henceforth, a business owner from Montreal may still face an uphill battle claiming non-residence, even if he decides to move to Dubai to work but leaves his teenage children to continue their studies in private school in Canada.
Secondary Residential Ties: The Supporting Factors
Whilst secondary ties generally carry less weight on their own, when examining these secondary ties altogether, they provide a strong indication to the CRA as to where your life is truly centered and based. When there are several secondary ties, such as still keeping your personal property, memberships and provincial health insurance in Canada, the CRA could still deem you as a Canadian resident even in the absence of primary ties like your spouse or dependents remaining in Canada.
Personal Property in Canada
Keeping personal belongings, and household accessories such as furniture, cars, clothing, and other miscellaneous items in Canada could imply that you intend to eventually return to Canada. So, if you do wish to sever your ties in Canada, and decide to move abroad while leaving your entire home furnished and your vehicle in the garage, it could appear to the CRA you’re your plans of leaving are simply temporary, and not permanent relocation.
Social and Economic Connections
CRA also examines your social and economic connections within Canada, such as memberships in Canadian organizations through professional associations, clubs, religious groups, where your professional network is based, banking relationships and credit cards, as well as investment accounts.
In the scenario where a physician from Calgary moves to the Caribbean, while maintaining his College of Physicians membership, keeping his Canadian bank accounts and investment portfolio with a Canadian advisor and continues to return quarterly for continuing medical education in Canada, the physician could be seen as someone who hasn’t truly severed ties with Canada.
Provincial Health Insurance
Maintaining provincial health coverage such as OHIP and MSP are also strong indicators of Canadian residency, especially as most provinces require you to cancel your health card when you leave, keeping it active suggests you still consider yourself a resident who might still relies on the Canadian medical system for healthcare.
Driver’s License and Vehicle Registration
Whilst maintaining a Canadian driver’s license or vehicle registered in Canada may seem rather minor on their own, collectively these various secondary ties could also indicate to the CRA that you are still a factual Canadian resident, despite being abroad.
Financial Ties
Whilst continuing to hold Canadian RRSPs, TFSAs, brokerage accounts, and other financial accounts do not automatically make you a Canadian resident for tax purposes. CRA often considers them as factors, especially if you maintain extensive financial relationships with Canadian institutions even when you are away.
The 183-Day Rule: When Physical Presence Creates Residency
Spending 183 days or more in Canada during a calendar year can make you a deemed resident for tax purposes, even if you do not have significant primary or secondary residential ties.
Therefore, even if an entrepreneur has sold his business and cut most ties to Canada and has started traveling without establishing a permanent home anywhere. If he spends 183 days or more in Canada visiting family and friends, CRA may still consider him a Canadian resident for that year.
It is hence important to note that the 183-day rule uses calendar years, not 12-month periods, and days are counted if any part of the day is spent in Canada, so if you arrived on a flight at 11:00 PM, it would still count as a full day.
Nevertheless some exceptions could apply, if you are considered a resident of another country under a tax treaty between that country and Canada, the 183-day rule may not apply but this exception does require that you actually be a tax resident of that other country, and paying taxes in that country, and not staying there as a temporary visitor.
What “Ordinarily Resident” Means
Canadian tax law also recognizes another concept of being “ordinarily resident” in Canada, which applies when someone has left Canada but hasn’t clearly settled permanently anywhere else.
When the courts look to define ‘ordinary residence’, they often look at your customary mode of life, describing it as the place where “in the settled routine of your life, you regularly, normally or customarily live.” This concept catches people who become “permanent travelers”, spending time in multiple countries without establishing clear residency anywhere.
This means that if Canada was your home base before you started traveling, and you haven’t established a home elsewhere, CRA may consider you as an ordinarily resident in Canada, regardless of your extensive travels.
What Factors CRA Weighs Most Heavily
Taking all things above into account, it is clear that evaluating your Canadian tax residency is based on the totality of your personal and financial ties to Canada, rather than a strict formula. to determine whether you are a tax resident. Summarizing the above:
Factors that carry significant weight:
- A Canadian home available for your use
- Spouse or dependents in Canada
- The permanence of your departure (did you truly leave, or are you testing the waters?)
- Whether you’ve established genuine residency elsewhere
Factors that matter less:
- Maintaining Canadian bank accounts
- Owning Canadian investments
- Occasional visits to Canada
The overall picture matters more to CRA than individual factors, so someone who has continued to maintain several secondary ties such as Canadian bank accounts or investments while keeping a home in Canada presents a very different picture than someone who severed all ties, sold their home, and established clear residency abroad.
Common Pitfalls When Trying to Establish Non-Residency
Keeping “Options Open”
One of the biggest mistakes that you could potentially make is leaving without fully committing to non-residency. Keeping your house “just in case,” maintaining all your Canadian accounts “for convenience,” and telling people you might return “in a few years.” all could potentially undermine your non-resident status.
Courts have since repeatedly stated that residency is about where you have settled, and not where you might settle in the future, as such half-measures don’t work.
Misunderstanding the 183-Day Rule
Many believe they can spend up to 182 days in Canada each year and remain non-residents which isn’t true if you maintain other residential ties.
It is important to note that the 183-day rule only determines deemed residency, and factual residency based on ties is a separate test.
Therein, you could be a factual resident while spending zero days in Canada if you maintain sufficient ties, whilst you could also be a deemed resident if you spend 183 days in Canada even with minimal ties.
Not Establishing Clear Residency Elsewhere
Leaving Canada alone isn’t sufficient, most importantly, you need to establish clear residency somewhere else. Moving to a low-tax or no-tax jurisdiction without establishing real ties there would hence create problems, as CRA may argue that you remain as an ordinarily resident in Canada if you’re drifting without a new home base.
You don’t need citizenship in the new country but you should have:
- A home where you actually live
- Substantial time spent there
- Local banking and business relationships
- Community connections and involvement
- Evidence that this new location is now where you are living
Inadequate Documentation
When the CRA reviews your residency status, your ability to prove non-residency depends on your records, as many people don’t keep records proving when they left Canada, where they established residency, and how they severed ties, they might not be able to prove their case when CRA questions their status years later.
Assuming Non-Residency Is Automatic
Establishing residency elsewhere does not automatically makes them non-residents for Canadian tax purposes. If you maintain significant ties to Canada, the CRA can argue that you remain a Canadian factual resident despite living abroad.
Relying on Tax Treaties Without Understanding Them
Tax treaties provide tie-breaker rules for dual residents, when both countries you live in might consider you a resident.
However, the treaty wouldn’t apply if you haven’t established genuine residency in the other country. Henceforth, you cannot just rent an apartment in Portugal, visit occasionally, and expect the treaty to make you a non-resident of Canada if you’ve continued to maintain significant Canadian ties, such as the ones listed above in Canada.
Documenting Your Departure and Non-Resident Status
We always recommend that you document your records and keep evidence, in case CRA questions your ties to Canada and your residency status. As such, take photos of your new home abroad, keep emails and correspondence showing you’ve established yourself in your new location and document professional connections in your new country.
Keep records of:
- When you left Canada (flight records, moving company invoices)
- How you severed each tie (home sale documents, lease termination, letters canceling memberships)
- Where you established residency (rental agreements or property purchases abroad, utility bills, employment contracts)
- Time spent in each location (travel records, calendar entries)
- Your intentions when you left (dated letters to advisors, emails to family explaining your plans)
All these documents and records will become your proof of departure and non-resident status if CRA audits you or challenges your non-resident status.
Should You File Form NR73?
The CRA’s Form NR73, “Determination of Residency Status (Leaving Canada)” asks detailed questions about your ties to Canada and your residential situation abroad. After you submit the form to CRA, they will issue a determination of your residency status.
Filing the Form NR73 is optional and there are both advantages and disadvantages to file. If you do decide to file, you would be able to get CRA’s determination in writing, which would provide certainty and protection, if the CRA confirms that you are a non-resident in Canada (though it might still not be completely binding if facts later show otherwise. However, if CRA determines that you are still a resident, this means you have an official record that could be used against you, where the form’s detailed questions and your answers could expose inconsistencies and used against you later in the future.
Many tax lawyers advise against filing NR73 unless your situation clearly demonstrates non-residency. As such, we do recommend that you consult a tax lawyer or professional before submitting and filing the Form NR73, to ensure you are answering the questions correctly.
How Tax Treaties Factor Into Residency Determinations
Canada has tax treaties with many countries. These treaties often include “tie-breaker rules” that help determine which country has the right to tax you as a resident when both countries consider you a resident under their domestic laws.
The tie-breaker tests typically examine:
- Where you have a permanent home available
- Where your personal and economic relations are closer (centre of vital interests)
- Where you have a habitual abode
- Your citizenship (as a last resort)
These tests require you to have actually established yourself in the other country.
It is important to note that these treaties only apply if you are a resident of both countries under their domestic laws. So, if you haven’t established genuine residency in the other country, the treaty won’t help you.
When Your Residency Status Changes During the Year
You can be a part-year resident, which means you are a Canadian resident for part of a tax year and a non-resident for the remainder, this happens when you leave Canada during the year or return during the year. CRA determines the specific date your residency status changed by examining when you severed your ties to Canada and established residency elsewhere. This date matters as it determines how much of your income Canada can tax.
Part-year residents file a Canadian tax return reporting:
- Worldwide income for the period they were residents
- Only Canadian-source income for the period they were non-residents
What Business Owners Need to Know
If you own a Canadian business, residency planning becomes more complex as your personal residency status affects whether you trigger departure tax on your shares and also affects ongoing taxation of the corporation and your ability to claim treaty benefits.
Business owners need to coordinate their personal residency planning with their corporate structure, which often requires establishing substance in the new jurisdiction, actual operations, employees, or activities there and not just moving yourself while the business remains entirely Canadian.
When You Need Legal Advice
Tax residency determinations vary from case to case, so it is important to keep in mind that what works for someone else may not work for your situation and case, and the decisions you make before leaving Canada could affect your tax situation for years or decades.
A tax lawyer/ professional can:
- Analyze your specific situation and identify problematic ties
- Develop a plan to sever ties properly
- Advise whether to file Form NR73
- Coordinate with advisors in your destination country
- Structure your affairs to withstand CRA scrutiny
- Help you document everything properly
The cost of this advice is small compared to the cost of getting your residency status wrong.
Someone could owe years of back taxes, interest, and potentially penalties, if they leave Canada on the assumption that they are non-resident, and stops filing Canadian tax returns and gets reassessed by CRA years later for failing to report their worldwide income, which in fact happens more often than you’d expect.
Getting Your Residency Status Right
Leaving Canada and properly managing your Canadian tax residency status requires careful planning, documentation, and expert guidance. It is not just about deemed residency alone, but rather a combination of many different factors, and are very fact-specific. As such, you may not be able to avoid Canadian taxation simply by keeping one foot in Canada while living abroad.
The process starts with first understanding what CRA examines, then to sever the ties that matter, establish genuine residency elsewhere, and document everything.
The steps you take before you leave determine whether CRA will accept your non-resident status or challenge it years later when the financial consequences are much larger.
For a complete guide to leaving Canada, including departure tax implications and other legal requirements, visit our complete legal exit guide.
To understand all the steps involved in the departure process, see our guide on leaving Canada permanently.
How Harvey Law Group Can Help
Harvey Law Group brings over 32 years of immigration expertise with offices in 20 countries globally, including major hubs like Hong Kong, Paris, Miami, and Montreal and specialized knowledge in European Golden Visa and Caribbean Citizenship by Investment programs.
Our services cover the entire process, from exit planning and investment selection to document preparation, submission, and renewals. Whether your goal is Schengen access, eventual EU citizenship, or an immediate second citizenship and portfolio diversification, HLG ensures a smooth and compliant process.
Contact our experts for a personalized program comparison and more information about which program is best suited to your needs, whether you are eligible and how to get started.
Your Canadian Tax residency status is the foundation of your entire exit strategy. Get it right for clarity and peace of mind to avoid potentially facing years of tax problems that could have been avoided with proper planning.
