Deemed Resident of Canada: Forces, Government Staff and 183 Days

Who is a deemed resident of Canada?

A deemed resident of Canada is someone the law treats as resident for the whole year (or, if a posting ends mid-year, the part before it ends), whatever their ties, because they fit one of the groups in Income Tax Act section 250(1). Deemed status only matters if you are not already a factual resident: keeping a home or family in Canada makes you a factual resident instead: you file your province's return and pay provincial tax, not the federal surtax.

A treaty can override all of this: a person who is resident of another country under a tax treaty is deemed not resident in Canada (section 250(5)). What makes a case not simple: a spouse or home left in Canada, a posting that starts or ends mid-year, a Quebec connection, or a second country also taxing you.

Gather the posting or appointment letter with start and end dates, your address history, records of any home, spouse or dependants in Canada, slips from Canadian and foreign payers, and foreign tax paid.

Factual or deemed resident: why ties in Canada change your return

A government employee or Forces member who keeps significant residential ties in Canada, such as a home, a spouse or dependants, is a factual resident and files the package for the province or territory of those ties, paying provincial tax (CRA). One who has no significant ties left, and meets the condition for their group, is a deemed resident: still taxed on world income, but with the federal surtax instead of provincial tax. Because you stay resident, a posting abroad is not leaving Canada for tax: there is no departure tax when it starts (section 128.1(4)).

How ties are weighed, and when a treaty makes you a deemed non-resident, is covered in Canadian tax residency. If you want the CRA's view, see asking the CRA to decide your residency.

How is a deemed resident's tax calculated?

A deemed resident pays federal tax on world income for the full year, plus a federal surtax of 48% of basic federal tax instead of provincial or territorial tax (section 120(1); CRA). You can claim all federal non-refundable credits that apply to you, but no provincial or territorial credits (Guide 5013-G).

Section 120 charges the surtax on the share of income not earned in a province. A deemed resident living abroad resides in no province on December 31, so only business income from a permanent establishment in a province counts as earned there (Regulation 2601(3)). Employment income, rent, interest and dividends therefore bear the surtax; business income from a permanent establishment in a province bears that province's tax instead, and Form T2203 splits the two (Guide 5013-G).

Foreign tax paid on the same income may be claimed as a foreign tax credit; see foreign income on a Canadian return.

Which tax package do you use, and when is the return due?

Deemed residents use the Income Tax Package for Non-Residents and Deemed Residents of Canada, which holds return 5013-R and guide 5013-G (CRA), unless your only income is from a business with a permanent establishment in a province: then you use that province's package (Guide 5013-G). Factual residents posted abroad use their province's package instead.

Source: CRA, Deemed residents of Canada. A deemed resident who receives the Canada child benefit has to file a return each year so the CRA can calculate it, even with no tax owing.

Are your spouse and children deemed residents too?

Children can be; a spouse is not deemed resident just by being married to you. A child dependent on a Forces member, government officer, aid worker or overseas school staff member is a deemed resident if the child's net world income for the year does not exceed the federal basic personal amount ($16,452) (section 250(1)(f)).

A spouse or common-law partner's status turns on their own facts: factual resident if they keep ties, deemed resident if they fit a group in their own right, otherwise non-resident. A spouse can also be deemed resident in their own right: if, as family of a Canadian resident, the spouse is exempt from host-country income tax under an international agreement, such as a diplomatic convention, the spouse is deemed resident, unless all or substantially all of their income was not exempt, for example a spouse taxed locally on their own job (section 250(1)(g)). A spouse who is a factual or deemed resident must file a return each year (CRA). If your family stays home while you work abroad, see family stays in Canada while you work abroad.

Child benefit and GST/HST credit while posted abroad

A deemed resident keeps receiving the Canada child benefit if otherwise eligible, but not the related provincial or territorial benefits, and can get the GST/HST credit, now called the Canada Groceries and Essentials Benefit (CRA, deemed residents; CRA, government employees).

To keep payments flowing:

• File your return every year.
• If your spouse or common-law partner is a non-resident, they file Form CTB9 each year to report their income.
• For a child born abroad, apply for the child benefit with Form RC66.

When you stop qualifying, benefits may have to be repaid; see benefits after leaving Canada.

Spent 183 days in Canada without ties: what the return looks like

Someone with no significant ties who is present in Canada for 183 days or more in a calendar year is deemed resident for the entire year: they file the Non-Residents and Deemed Residents package, report world income for the whole year, and pay federal tax plus the federal surtax instead of provincial tax (Folio S5-F1-C1, ¶1.32). The CRA counts any part of a day as a day, and separate visits add up; days commuting into Canada for work and going home each night are not sojourning and do not count (¶1.33).

Three conditions flip the answer:

• Your home country has a tax treaty with Canada. Check this first. If you remain its resident under the treaty's tie-breaker, usually because your permanent home is there, you are a deemed non-resident of Canada: you do not file the deemed-resident return, and Canada taxes you only as a non-resident (section 250(5); Guide 5013-G). How the tie-breaker works is in Canadian tax residency; for the US, see the treaty tie-breaker.
• You moved in or out during the year. A person factually resident for part of the year is a part-year resident taxed on world income only for that part, not a 183-day deemed resident (¶1.32).
• You have significant residential ties. You are then usually a factual resident, and provincial tax applies.

Keep travel records, such as entry and exit stamps and tickets, that show your day count.

Deemed resident of Quebec as well: avoiding the surtax and Quebec tax on the same income

If you lived in Quebec before leaving and Quebec also treats you as its deemed resident, you may owe Quebec income tax on top of the federal surtax. To ask for relief from the federal surtax, attach a note to your federal return saying you are subject to Quebec income tax, that you are filing a Quebec return, and that you request relief from the federal surtax (CRA). If you file a Quebec return, your federal return also gives the refundable Quebec abatement of 16.5% of basic federal tax (line 44000), and you can transfer up to 45% of the tax on slips from payers outside Quebec to Quebec (line 43800) (Guide 5013-G). Quebec also grants its own relief to some Forces members and federal officers who are deemed residents of both; ask Revenu Québec (Guide 5013-G). The Quebec return itself is covered in leaving Quebec.

When the posting ends: the part year before, and leaving government service abroad

When a Forces member, government officer or aid worker stops being in that group during the year, they are deemed resident only for the part of the year before that date; the same applies to their deemed-resident children (section 250(2); Folio ¶1.36). What follows depends on where you go:

A posting that ends mid-year often needs professional judgment: the year splits into a deemed-resident part and a factual or non-resident part, and becoming a non-resident can trigger departure rules.

Example

All figures are illustrative, in Canadian dollars.

Diplomat who sold her home

A foreign service officer living in Ottawa is posted to Nairobi, sells her home and takes her family. She is a deemed resident. She reports her C$110,000 salary and C$5,000 of Canadian interest, pays federal tax plus the federal surtax instead of Ontario tax, and claims no Ontario credits. Her children with little income are deemed residents too.

Forces member whose family stayed in Kingston

A Canadian Forces member serves overseas while his spouse and children stay in their Kingston home. Those ties make him a factual resident. He files the Ontario package, pays Ontario tax on his C$95,000 and keeps the provincial benefits.

Visitor who stayed 200 days

A person with no home, spouse or dependants in Canada, from a country without a tax treaty with Canada, spends 200 days visiting relatives here. She is deemed resident for the whole year and reports her C$60,000 of world income, paying federal tax plus the surtax. Had her country had a treaty with Canada that made her its resident, she would be a deemed non-resident instead.

Different for you?

• Your posting ended mid-year, or you left government service while abroad: the year splits; read leaving Canada and get individual tax help.
• You lived in Quebec before the posting: check the surtax note and the Quebec side, then get individual tax help.
• You are unsure whether your ties make you factual or deemed resident: see Canadian tax residency and get individual tax help.
• You stayed 183 days or more visiting relatives, and your home is in another country: check the treaty first; if you are unsure which country you are resident in, get individual tax help.
• The US or another country also treats you as resident: see the treaty tie-breaker and get individual tax help.
• Foreign tax was withheld on your income: see foreign income on a Canadian return.
• You missed returns while abroad: see catching up on non-resident returns and get individual tax help.