CRA Still Treats You as a Resident After You Moved Abroad

Why does the CRA still think I'm a resident after moving abroad?

The CRA keeps treating you as resident until its records show a departure date, and until your ties to Canada support one. Moving away does not update the CRA by itself. The CRA's Leaving Canada page asks you to tell it the date you leave, enter that date on page 1 of your return, and tell Canadian payers and financial institutions you are no longer resident.

The usual causes, and the fix for each:

Your case is not simple if the CRA has already reassessed you, if your spouse, children or home stayed in Canada, or if your new country has no tax treaty with Canada. Gather your move date, foreign lease or deed, residence permit, proof your family moved, and what happened to your Canadian home before you contact the CRA.

What does it cost to be treated as a Canadian resident?

A Canadian resident is taxed in Canada on world income, so your foreign salary, rent and investment income go on the Canadian return. A non-resident is generally taxed in Canada only on certain Canadian-source income.

The federal foreign tax credit only partly offsets this. For each country, it is generally the lesser of the foreign income tax you paid and the Canadian tax on your net income from that country. If your new country taxes your salary lightly or not at all, most of the Canadian tax remains. Benefits paid while you were not entitled can also be clawed back later.

Is it a records problem or a real residency dispute?

It is a records problem when your ties left with you and the CRA simply was not told. It is a real dispute when significant ties stayed in Canada, because residency turns on facts, not on what the CRA's file says.

The CRA weighs all ties together: significant ties (a home, a spouse or common-law partner, dependants in Canada) and secondary ties such as a car, memberships and provincial health coverage; see Canadian tax residency. If you lived in the new country before coming to Canada and are going back, the residency folio says you generally become non-resident the day you leave, even if your family stays briefly to finish a school year or sell the home. To pick the date for any other staged move, see the date you become a non-resident.

To ask the CRA for an opinion first, see Form NR73.

How do I get the CRA to change my residency status?

Report the departure date on a return, update your address, and tell every payer and benefit program. No form switches your status: Form NR73 only gets the CRA's opinion. The CRA acts on the date on your return and the facts behind it.

1. Departure date. File the return for the year you left with your departure date on page 1 (Leaving Canada). That return also reports the deemed sale of certain property on the day you left (departure tax); see leaving Canada before you file. For later years, see non-resident returns and catch-up.
2. Address. Change it in your CRA account (fastest), by phone, or with Form RC325 by mail. From outside Canada and the US, the CRA takes collect calls through an operator (Change your address). If you cannot sign in from abroad, see CRA My Account from outside Canada.
3. Payers. Tell each bank, pension plan and employer that you are not resident, so they issue non-resident (NR4) slips and withhold where non-resident tax applies; ordinary arm's-length interest has none (section 212(1)(b)).
4. Benefits. Non-residents generally cannot receive the Canada child benefit or the Canada Groceries and Essentials Benefit; the CRA says to contact it right away if payments continue.
5. Past resident returns. Correct them; see filed resident returns after leaving.

For who else to notify, see telling the CRA you are leaving. If the CRA has sent residency questions, see answering a CRA residency questionnaire.

The CRA assessed me as a resident: how do I object, and by when?

File a notice of objection by the later of 1 year after the return's filing deadline and 90 days after the date of the notice of assessment or reassessment (P148). File through "Register my formal dispute" in your CRA account, on Form T400A, or by signed letter setting out the facts and reasons. If the notice went to your old Canadian address, the deadline still runs from the notice date; see a CRA letter while living abroad.

If you missed the deadline, you can ask for an extension, no later than one year after the date the objection was due. You must show you could not act or meant to object, that granting it is fair, and that you applied as soon as you could. The CRA normally postpones collecting the disputed amount until 90 days after its decision, but interest keeps running.

An objection is a legal dispute about facts and ties, and a missed date can close it. Send evidence of when your ties ended, not just a statement that you moved.

Both countries say I'm resident: how does the treaty tie-breaker work?

When you are resident under both countries' laws, the residence article of the tax treaty decides which one taxes you as a resident. Canada then follows the result: section 250(5) of the Income Tax Act deems you not resident in Canada if the treaty makes you resident only in the other country. That applies for all purposes of the Act, so the date the treaty puts you abroad is also your departure date for the deemed sale of property (departure tax); see leaving Canada.

The residency folio says tie-breakers usually test first where you have a permanent home available to you. If you have one in both countries, most treaties next test your centre of vital interests: your personal and economic ties to each country. Later tests vary by treaty, so read your country's treaty on Finance Canada's list. Country guides such as the UK, Hong Kong and the UAE explain each test in plain words.

If both tax authorities still claim you, ask for competent authority help: the two tax authorities negotiate your case under the treaty's mutual agreement article. IC71-17R6 lists dual residency as a case for this help, and says to ask the authority of the country where you claim to be resident. Most treaties allow two years from when you were first notified of the action, so check yours. Even on time, Canada can generally give relief only for years it can still reassess. The circular makes you responsible for keeping those years open, with a waiver (Form T2029) or a protective notice of objection. The circular says you can file a notice of objection and ask that it be held while the authorities talk, which keeps your Canadian rights open.

What if my new country has no tax treaty with Canada?

Without a treaty there is no tie-breaker, so section 250(5) cannot apply and only the Canadian ties test decides. If your ties remain, you can be resident in both countries, with the foreign tax credit as the main relief. There is also no treaty to ask for competent authority help.

Check the treaties in force before assuming either way. Without a treaty, cutting your Canadian ties cleanly matters more.

What evidence settles where I live?

Evidence that your significant ties moved carries the most weight: where your home, spouse and dependants are. The CRA weighs all the facts together, so gather documents with dates.

• Lease or purchase of a home abroad, and residence permit or visa
• Proof your spouse and children moved: their leases, school enrolment, permits
• Sale of your Canadian home, or a lease to an unrelated tenant at market rent
• End of provincial health coverage
• Car sold, Canadian memberships ended, Canadian accounts updated to non-resident
• Employment contract abroad and foreign tax returns or residence certificates

Example

These examples are illustrative; figures are in Canadian dollars.

Engineer in Dubai, resident returns by mistake

An engineer moved to Dubai with his family and sold his Calgary condo. A T4 from his last Canadian employer arrived, so he filed a resident return, and kept filing them. He reported C$180,000 of foreign salary each year and paid Canadian tax on it; with little or no foreign income tax paid, the foreign tax credit offset almost none of it. On these facts this looks like a records problem: he can ask the CRA to correct his departure-year return to show his move date and to adjust the later years, sending the condo sale, his Dubai lease and his family's move. See moving from Canada to the UAE for what Canada still taxes.

Nurse in the UK, spouse still in Toronto

A nurse works in the UK. Her Toronto house is rented out, but her spouse still lives in Canada. Her spouse is a significant tie, so the CRA's view may be right. If both countries treat her as resident, the Canada–UK treaty tie-breaker decides, starting with where she has a permanent home available. If the CRA reassesses her as resident, she can object on time and, if both countries still claim her, ask for competent authority help.

Retiree in Mexico, stale address and bank records

A retiree moved to Mexico. His CRA address is still his old Ottawa home, and his bank still issues him resident tax slips for C$4,000 of interest a year. He has no ties left in Canada. On these facts this looks like a records problem: he can report his departure date, change his CRA address, and tell the bank he is non-resident so it issues non-resident slips.

Different for you?

• You moved to the US: see left Canada without telling the CRA.
• Your spouse, children or home stayed in Canada: check the residency ties test and get individual tax help before you answer the CRA.
• The CRA already reassessed you, or both countries claim you: object on time and get individual tax help with the treaty position.
• Your new country has no tax treaty with Canada and ties remain here: only the ties test decides; get individual tax help before you answer the CRA.
• You filed resident returns for several years after leaving: see filed resident returns after leaving.
• You never filed a departure return: see leaving Canada and non-resident returns and catch-up.
• The CRA opened a review or audit: see CRA reviews and audits.
• Benefits kept arriving: see benefits after leaving Canada.