Canada taxes residents, and residents are defined by ties
If you are a resident of Canada for tax purposes you are taxed on your worldwide income, wherever you earn it. A digital nomad visa abroad does not change that by itself. The Canada Revenue Agency (CRA) looks first at whether you keep significant residential ties with Canada — above all a home in Canada, a spouse or common-law partner in Canada, and dependants in Canada — and then at secondary ties.
The CRA's working assumption is blunt: if you leave but keep residential ties, you are usually still a factual resident and not an emigrant. Unless you sever your significant ties when you go, you remain taxable in Canada on everything you earn abroad.
The most common mistake — Keeping the family home "for when we come back" while the family travels with you can be enough, on its own, to keep you resident. If you lease it to a third party on arm's-length terms, the CRA looks at all the circumstances and may decide the home is not a significant tie on its own — except when taken together with other ties.
Deemed residents and deemed non-residents
Significant residential ties maintained in Canada — taxed on worldwide income even while living abroad.
No significant ties, but you stayed in Canada for 183 days or more in the year.
Resident in Canada under its own rules but also resident in a treaty country that wins the treaty tie-breaker.
Taxed in Canada only on certain Canadian-source income.
If you want certainty, the CRA offers an opinion on your status through Form NR73, Determination of Residency Status (leaving Canada). The CRA suggests that anyone leaving Canada, permanently or temporarily, consider completing it; the opinion depends on the facts you report.
The secondary ties the CRA looks at
Once the big three — home, partner, dependants — are dealt with, the CRA looks at secondary residential ties, and it looks at them collectively rather than one by one. Its folio on residence status lists, among others:
- personal property in Canada, such as furniture, clothing, cars and recreational vehicles;
- social ties, such as memberships in Canadian recreational or religious organisations;
- economic ties, such as employment with a Canadian employer, active involvement in a Canadian business, and Canadian bank accounts, retirement savings plans, credit cards and securities accounts;
- provincial or territorial hospital and medical insurance coverage, a provincial driver's licence and a vehicle registered in a province;
- a seasonal dwelling or a leased dwelling in Canada, a Canadian passport, and memberships in Canadian unions or professional bodies.
No single secondary tie decides the question, but several together can. And if the facts show you always planned to come back, the CRA gives more weight to whatever ties you left in place.
A note on the 183-day rule: the CRA does not count every day you are physically in Canada as "sojourning" automatically. To sojourn means to make a temporary stay in the sense of establishing a temporary residence, even a very short one, and each stay is assessed separately.
When you become a non-resident
For the CRA you become a non-resident on the latest of three dates: the day you leave Canada, the day your spouse or common-law partner and dependants leave, and the day you become a resident of your new country. For a nomad who moves from place to place without becoming resident anywhere, that last date needs thought — a treaty residence somewhere, or clearly severed ties, is what makes the break visible.
The departure tax
When you emigrate, you are treated as having sold certain property at its fair market value on the day you leave and bought it back immediately — the deemed disposition, often called departure tax. Any resulting capital gain goes on your final return as a resident.
| Not deemed disposed of | Deemed disposed of |
|---|---|
| Canadian real or immovable property, Canadian resource and timber resource property | Shares, bonds and mutual funds |
| Canadian business property used through a permanent establishment in Canada | Rental property outside Canada |
| Pension plans, annuities, RRSPs, RRIFs, RESPs, RDSPs, TFSAs, deferred profit-sharing plans and similar plans | Personal-use property worth more than $10,000 |
- Form T1161 — list your properties if the fair market value of all the property you owned when you left was more than $25,000.
- Form T1243 — works out the deemed disposition.
- Form T1244 — lets you elect to defer paying the departure tax, whatever the amount, by April 30 of the year after you emigrate. If the deferred federal tax is more than $16,500 (more than $13,777.50 for former residents of Quebec), you must provide adequate security.
How Canada taxes you once you are non-resident
- Part XIII tax. Canadian payers withhold a flat 25% on many kinds of income paid to non-residents — dividends, rent, pensions, RRSP and RRIF payments, annuities, royalties and others. Tax treaties often reduce the rate, and interest paid by an arm's-length payer is generally exempt.
- Part I tax. If you earn employment income in Canada or carry on a business through a permanent establishment in Canada, you file a Canadian return and pay tax on that income in the ordinary way.
- Section 217 election. Non-residents receiving certain pension and benefit income can elect to file a return and possibly recover part of the tax withheld.
- Benefits. As a non-resident you are generally no longer eligible for the Canada child benefit or, according to the CRA, the Canada Groceries and Essentials Benefit.
How this meets the nomad visas
Many nomad visas assume you pay tax somewhere. If a country such as Spain or Portugal makes you resident while Canada still sees you as a factual resident, the tax treaty between them decides where you are resident and which country gives credit. If you choose a programme that does not make you tax resident locally — for example a short stay such as Japan's six-month status — assume Canada remains your tax home unless you have severed your ties.
Checklist
Decide whether you are really leaving
Home, partner and dependants are the ties that count most. Partial moves usually mean you remain a factual resident.
Fix your departure date
It is the latest of your departure, your family's departure and your new residence.
Value your property
Work out the deemed disposition and file T1161 if everything you own is worth more than $25,000.
Consider deferral
Elect with T1244 by April 30 of the following year; post security above $16,500 of deferred tax.
Tell your payers
Banks, tenants and pension plans must apply non-resident withholding once you have left.
Optional: ask the CRA
Form NR73 gives you the CRA's opinion on your status.
Related guides: U.S. taxes, United Kingdom, Australia, Italy, from nomad visa to permanent residence.