183-Day Rule in Canadian Tax Residency

When tax time comes around in Canada, you may be wondering how your tax residency is defined. Under Canadian law, the threshold for tax residency is 183 days spent in this country. At least, that’s what many people believe. It’s not quite as simple as that and in this article MB Property Law explains why.

What Is The 183-Day Rule For Residency In Canada?

If you have ‘sojourned’ in Canada for more than 183 days in the course of a year, you’re considered a Canadian resident for tax purposes. In total, 183 days is the equivalent to 6 months. Of these 183 days, each day that you were in Canada for only part of the day counts. This includes the following:

• All days worked in Canada.
• All days spent on vacation in Canada, including day trips and weekend trips.
• All days attending a Canadian university or college.

Please note, if you live in the United States and commute to work in Canada, these commuting days are not included in the 183-day calculation.

What Determines Tax Residency In Canada?

The 183-day rule does not necessarily determine tax residency in Canada. For example, a U.S. citizen may own a Canadian home but they no longer live here. That would still classify them as a resident for tax purposes, however.

Let’s say you’ve travelled to several countries this year, such as the England or the United States. Canada and those countries have residency rules and tax treaties that define residency. In many cases, this is determined by where an individual owns a home or has a ‘permanent home’ available. If someone has a home in each country, it is then based on where their personal and economic relations are closest. This is an example where of the 183-day rule being circumvented.

Who Is A Deemed Resident of Canada For Tax Purposes?

If you are deemed a resident of Canada you must file a tax return in this country for the year in question.

You are a deemed resident if you are a Canadian citizen and lived outside of Canada during the tax year or if you are a government employee, a member of the Canadian Forces, or are working under the Global Affairs Canada assistance program.

You are a deemed resident of Canada under the 183-day rule if the following applies:

• You stayed in Canada for 183 days or more during the tax year.
• You do not have significant residential ties with Canada.
• You are not considered a resident of another country under the terms of a tax treaty between Canada and said country.

If you would be considered a deemed resident of Canada but also have residential ties with a country that Canada has a tax treaty with and that country considers you a resident, for tax purposes, you may be considered a deemed non-resident of Canada.

What Are My Tax Obligations For The 183-Day Rule?

If you are a deemed resident of Canada, you are obligated to fulfill the following:

• You must report all income worldwide, including any earned inside and outside of Canada.
• You are permitted to claim all available deductions and non-refundable tax credits that apply to you.
• You are subject to paying federal tax, in addition to a federal surtax in place of the provincial or territory tax that a resident would normally have to pay.
• You can claim all federal tax credits available to you but are not permitted to claim provincial or territory tax credits.
• You are eligible to apply for the goods and services tax/harmonized sales tax (GST/HST) credit when applicable.

Tax issues can be complicated at the best of times. The Government of Canada offers advice for non-residents and deemed residents here.