Who Pays Tax in Canada Based on Residency? 

In Canada, the determination of who is liable to pay tax and on which income is primarily based on one’s residency status, rather than their citizenship status. 

Liability for Tax as per the Income Tax Act (ITA) “DIVISION A”: 

• Residents: Residents are required to pay tax on their worldwide income. 
• Non-residents: Non-residents are only taxed on the income they generate within Canada. 

How is Residency Determined by CRA/Courts? 

The Canada Revenue Agency (CRA) and the courts utilize various factors to ascertain whether an individual qualifies as a resident of Canada: 

• Primary Residential Ties: These include: 
• Owning a home in Canada. 
• Having a spouse or common-law partner in Canada. 
• Having dependents in Canada. 

• Secondary Residential Ties: These encompass: 
• Personal property in Canada, like cars or furniture. 
• Social affiliations in Canada, such as memberships in Canadian recreational or religious organizations. 
• Economic connections in Canada, like Canadian bank accounts, credit cards, a Canadian driver’s license, a Canadian passport, and health insurance with a Canadian province or territory. 

To determine one’s residency status, all pertinent facts of each case are evaluated. This includes residential ties with Canada and the duration, purpose, intent, and continuity of one’s stay both inside and outside of Canada. According to the CRA, you are deemed a factual resident of Canada for tax purposes if you maintain significant residential ties in Canada, even if you are living or traveling outside the country. If primary ties are not definitive, the CRA will also consider secondary ties.