If you’re a Canadian citizen living abroad, you may still have to pay taxes in Canada. It might be difficult to determine whether you need to file a tax return based on your income sources and residency status, but you’ll find out in this guide. 

We’ll cover how Canadian tax residency works, the impact of working abroad, tax filing requirements, and how to pay your taxes using Chexy Tax. 

How Long Can a Canadian Citizen Stay Out of Canada?

There’s no limit to how long you can stay outside Canada–you will always maintain Canadian citizenship. However, the amount of time you spend abroad can affect your healthcare and tax residency status. 

If you stay connected to Canada through significant residential ties (can include a home, spouse, or dependents), you may still be considered a tax resident. 

Resident vs Non-Resident Status in Canada

There are two main types of residency status in Canada: resident and non-resident. Here are the different tax rules that apply to each: 

Resident Status

You have resident status if you maintain significant residential ties to Canada. In this case, you’ll pay income tax on income you earn anywhere in the world. Even if you spend time working outside the country, you’ll still need to pay federal and provincial taxes–this amount depends on how much you earn. 

As a Canadian resident, you’ll need to file an income tax return, called a T1 tax return, which covers your income and expenses from January 1 to December 31 each year. The deadline for filing your taxes is April 30th for regular tax returns and June 15th for self-employed individuals. 

You’ll need to declare any income earned outside the country when filing your tax return. It will be taxed, but if you already paid tax outside Canada, you can claim it as a foreign tax credit. 

What is a Factual Resident of Canada?

Factual residents have significant residential ties with Canada, even when traveling abroad. For example, the CRA considers you a factual resident if you work abroad for five months out of the year and then spend the rest of your time in Canada. 

As a factual resident, your income is taxed as if you remained in Canada. You’ll still need to report all income received from taxes both inside and outside the country and claim all deductions that apply to you. You can also claim any refundable tax credits, and you are eligible to apply for the GST/HST credit and the Canada Child Benefit. 

What is a Deemed Resident of Canada?

Deemed residents have lived in Canada for more than 183 days in a tax year but don’t meet full residency requirements; however, they are not residents of another country that has tax treaties with Canada. 

As a deemed resident, you pay federal taxes but may be exempt from provincial or territorial taxes. 

Non-Resident Status 

If you live abroad and have severed most residential ties (i.e., you don’t own a home or your spouse has left Canada), you are not considered a resident. As a non-resident, you’ll still have to pay withholding tax from any income in Canada (e.g., OAS, CPP, or investment income).

If you sell all Canadian assets, you’ll likely have to pay a departure tax, called the exit fee. You’ll also have to file the T1243 or departure tax return form.

Exit Fee: What Happens When You Leave Canada?

Anyone who leaves Canada to live in another country and severs residential ties with Canada is considered an emigrant.  

You still need to file an income tax return if you owe taxes or want to receive a refund. Use the income tax package for the province you lived in when you left Canada. 

If you become a non-resident for tax purposes, you may have to pay an exit or departure tax. Here are a few key things you need to know:

• This tax applies to unrealized capital gains on certain properties (real estate investments, stocks, etc.). 

• Some assets, like Canadian real estate, are exempt from this tax. 

• You must file Form T1243 Deemed Disposition of Property when declaring yourself as a non-resident. 

What if You Are Working for a Canadian Company Outside of Canada?

If you are a Canadian citizen living abroad but working for a Canadian company, you will have to pay both Canadian and foreign taxes. To avoid double taxation, Canada has tax treaties with many countries that allow you to claim tax credits or exemptions. 

Here are a few other things you need to know:

• If you are a non-resident, you won’t owe Canadian taxes on income earned outside Canada. 

• If you are a factual resident, you must still report and pay Canadian taxes. 

• Your employer may withhold CPP/EI contributions and/or taxes, depending on your residency status. 

How to Determine Taxes as a Canadian Working in the US

If you’re a Canadian citizen working in the US but maintaining Canadian residency, you need to file taxes in both countries. You may need to file Form 1040 (US tax return) and T1 (Canadian tax return). Don’t worry, though; Canada and the US have a tax treaty to prevent double taxation. 

Tax obligations may differ depending on the time you spend in the US. Assuming you began working in the US three years ago, here’s how you can calculate the amount of taxes you owe:

• Each day you spend in the US during your 1st year counts as ⅙ of a full day.

• Each day you spend in the US during your 2nd year counts as ⅓ of a full day.

• Each day you spend in the US during your 3rd or current year counts as one full day.

Suppose you spent 120 days in the US this year, 150 days last year, and 180 days the year before. The Substantial Presence Test calculates your US residency status as follows:

• Current year: Each day counts as 1 full day → 120 days

• Last year: Each day counts as 1/3 of a day → 150 ÷ 3 = 50 days

• Two years ago: Each day counts as 1/6 of a day → 180 ÷ 6 = 30 days

Added up, the 200 days is more than 183 days. Since you’ve spent at least 31 days in the current year, you would be considered a US resident for tax purposes, so you’d need to pay US taxes. 

Do You Still Receive Benefits While Living Abroad?

If you live abroad, you may not be eligible for many Canadian benefits. Here are a few provincial benefits and their eligibility requirements: 

• Canada Child Benefit (CCB): Only for factual residents (see eligibility here). 

• Old Age Security (OAS): Available if you meet residency requirements (see here). 

• Employment Insurance (EI): Only available if you have enough insurable hours before leaving Canada (see eligibility here). 

How to Pay Taxes in Canada While Living Abroad 

There are two steps to doing your Canadian taxes, much the same as if you were filing from within Canada. First, file your income tax return, then pay your taxes owed (if any). 

Follow these steps to file your Canadian income tax return:

1. Determine your residency status (factual resident, deemed resident, or non-resident).

2. Gather necessary tax forms (i.e., the T1 Income Tax Return form and Form T1135 Foreign Income Verification Statement).

3. Report non-Canadian income (if needed).

4. Claim foreign tax credits to avoid double taxation.

5. Submit your tax return via CRA My Account or using tax software. 

Ensure you meet the tax return deadlines: April 30th for regular tax returns and June 15th for those who are self-employed. 

Here’s an easy way to pay your Canadian income taxes from abroad:  

If you owe any taxes to the CRA or Revenu Quebec, you can use Chexy Tax to pay your taxes with a credit card and earn rewards while avoiding complicated banking fees or international wire transfers. 

With only a 1.75% fee, you can easily pay taxes with a credit card and earn rewards points or cashback on an otherwise annoying payment. 

Just make sure you use a Canadian credit card that earns you more than 1.75% in rewards! The Scotia Momentum Visa Infinite card, TD Aeroplan Visa Infinite Privilege Card†, and American Express Aeroplan Reserve Card are some of our faves. 

Learn more about Chexy Tax and how it works in this article. 

Get started with Chexy today and earn rewards on what’s likely your biggest yearly expense. 

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